Humility and tons of gratitude: The Buffet-Munger bond was/is truly inspirational

Humility goes before honour

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Warren Buffett in the latest annual report of Berkshire Hathaway Inc which was released on Feb 24, 2024, expressed his tribute to his friend for 65 years, Mr Charlie Munger who died on Nov 28 at age 99.

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At a time where even top leaders are reluctant to give due credits to those who have helped and guided in their accomplishments, the lesson one learn from Warren Buffet, the most successful investor of our times, is without any parallel.

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Warren Buffet says in his letter to shareholders :

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“Charlie was the “architect” of the present Berkshire,? and I acted as the “general contractor” to carry out the day-by-day construction of his vision”.? Charlie never sought to take credit for his role as creator, but instead let me take the bows and receive the accolades.? In a way, his relationship with me was part older brother, part loving father. Even when he knew he was right, he gave me the reins, and when I blundered, he never – never-? reminded me of my mistake.

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"In the physical world, great buildings are linked to their architect while those who had poured the concrete or installed the windows are soon forgotten. Berkshire has become a great company. Though I have long been in charge of the construction crew; Charlie should forever be credited with being the architect

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"Over the years, Berkshire has attracted an unusual number of such “lifetime” shareholders and their heirs. We cherish their presence and believe they are entitled to hear every year both the good and bad news, delivered directly from their CEO and not? from an investor-relations officer or communications consultant forever serving up optimism and syrupy mush.

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"In visualizing the owners that Berkshire seeks, I am lucky to have the perfect mental model, my sister, Bertie. Let me introduce her. For openers, Bertie is smart, wise and likes to challenge my thinking. We have never, however, had a shouting match or anything close to a ruptured relationship. We never will. Furthermore, Bertie, and her three daughters as well, have a large portion of their savings in Berkshire shares. Their ownership spans decades, and every year Bertie will read what I have to say. My job is to anticipate her questions and give her honest answers”

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Then he goes on presenting Annual Report for you and me to understand just the way ?Bertie would!!

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At a time when the corporate veil is getting thicker and wider, here is an example for transparency, honesty and truthfulness!

I remember the last year’s letter of Warren Buffet to shareholders, when Charlie Munger was handholding him. I wrote about that in a post earlier. Reproducing my observations below.

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Letter to shareholders is issued by chief executives of public companies annually to inform the shareholders about the previous year's results, highlights of the key decisions, strategies based on the vision and past experience etc.

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Warren Buffet,? Chairman of the Board, Berkshire Hathway Inc. always make it a point to write letter to the shareholders in a simple, unique and interesting style. It is not necessary to be a share investor to get a liking for the content. I am not one. Still I read year after year, his letters to shareholders.

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I am reproducing a few extracts below from his 10 page letter released on Feb 25, 2023. In the letter he has quoted extensively from the podcast of Charlie Munger, his 'partner and friend', who? is the vice Chairman of the Company. I liked the most, this sentence >>: "Early on, write your desired obituary – and then behave accordingly".

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Please see the excerpts below, selected as per my interest from the letter:

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"..........A common belief is that people choose to save when young, expecting thereby to maintain their living standards after retirement. Any assets that remain at death, this theory says, will usually be left to their families or, possibly, to friends and philanthropy.

"Our experience has differed. We believe Berkshire’s individual holders largely to be of the once-a-saver, always-a-saver variety. Though these people live well, they eventually dispense most of their funds to philanthropic organizations. These, in turn, redistribute the funds by expenditures intended to improve the lives of a great many people who are unrelated to the original benefactor. Sometimes, the results have been spectacular.

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'The disposition of money unmasks humans. Charlie and I watch with pleasure the vast flow of Berkshire-generated funds to public needs and, alongside, the infrequency with which our shareholders opt for look-at-me assets and dynasty-building. Who wouldn’t enjoy working for shareholders like ours?

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"When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive).

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"Finally, an important warning: Even the operating earnings figure that we favor can easily be manipulated by managers who wish to do so. Such tampering is often thought of as sophisticated by CEOs, directors and their advisors. Reporters and analysts embrace its existence as well. Beating “expectations” is heralded as a managerial triumph. That activity is disgusting. It requires no talent to manipulate numbers: Only a deep desire to deceive is required. “Bold imaginative accounting,” as a CEO once described his deception to me, has become one of the shames of capitalism.

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"Charlie and I think pretty much alike. But what it takes me a page to explain, he sums up in a sentence.? His version, moreover, is always more clearly reasoned and also more artfully – some might add bluntly – stated.

Here are a few of his thoughts, many lifted from a very recent podcast:

? The world is full of foolish gamblers, and they will not do as well as the patient investor.

? If you don’t see the world the way it is, it’s like judging something through a distorted lens.

? All I want to know is where I’m going to die, so I’ll never go there.

And a related thought:

Early on, write your desired obituary – and then behave accordingly.

? If you don’t care whether you are rational or not, you won’t work on it. Then you will stay irrational and get lousy results.

? Patience can be learned. Having a long attention span and the ability to concentrate on one thing for a long time is a huge advantage.

? You can learn a lot from dead people. Read of the deceased you admire and detest.

? Don’t bail away in a sinking boat if you can swim to one that is seaworthy.

? A great company keeps working after you are not; a mediocre company won’t do that.

? Warren and I don’t focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time.

? Ben Graham said, “Day to day, the stock market is a voting machine; in the long term it’s a weighing machine.” If you keep making something more valuable, then some wise person is going to notice it and start buying.

? There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count on getting rich twice.

? You don’t, however, need to own a lot of things in order to get rich.

? You have to keep learning if you want to become a great investor. When the world changes, you must change.

? Warren and I hated railroad stocks for decades, but the world changed and finally the country had four huge railroads of vital importance to the American economy. We were slow to recognize the change, but better late than never.

? Finally, I will add two short sentences by Charlie that have been his decision-clinchers for decades: “Warren, think more about it. You’re smart and I’m right.”

And so it goes. I never have a phone call with Charlie without learning something. And, while he makes me think, he also makes me laugh."

"I will add to Charlie’s list a rule of my own: Find a very smart high-grade partner – preferably slightly older than you – and then listen very carefully to what he says."

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You can read the letters in full in https://www.berkshirehathaway.com/

(C) Sibichen K Mathew