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.
Charlie Munger died on November 28, just 33 days before his 100th birthday.
“Charlie Munger, for decades my partner in managing Berkshire, viewed this obligation identically and would expect me to communicate with you this year in the regular manner. He and I were of one mind regarding our responsibilities to Berkshire shareholders” says Warren Buffett in his Annual Letter 2024.
Charlie Munger’s Words of Wisdom
- “In my whole life, I have known no wise people … who didn’t read all the time. … You’d be amazed at how much Warren reads, at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
- “If you want to understand science, you have to understand math. … The good thing about business is that you don’t have to know any higher math.”
- “Whenever you think something or some person is ruining your life, it’s you. A victimization mentality is so debilitating.”
- “Knowing what you don’t know is more useful than being brilliant.”
- “Those of us who have been very fortunate have a duty to give back. Whether one gives a lot as one goes along as I do, or a little and then a lot as Warren [plans to], is a matter of personal preference.”
- “Anytime anybody offers you anything with a big commission and a 200-page prospectus, don’t buy it. Occasionally, you’ll be wrong if you adopt ‘Munger’s Rule.’ However, over a lifetime, you’ll be a long way ahead, and you will miss a lot of unhappy experiences.”
- “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”
- “In my life there are not that many questions I can’t properly deal with using my $40 adding machine and dog-eared compound interest table.”
- Mimicking the herd invites regression to the mean.”
Nuggets from the 2024 Annual Letter
So sanctified, this worse-than-useless “net income” figure quickly gets transmitted throughout the world via the internet and media. All parties believe they have done their job – and, legally, they have. We, however, are left uncomfortable. At Berkshire, our view is that “earnings” should be a sensible concept that Bertie will find somewhat useful – but only as a starting point – in evaluating a business. Accordingly, Berkshire also reports to Bertie and you what we call “operating earnings.”
Here is the story they tell: $27.6 billion for 2021; $30.9 billion for 2022 and $37.4 billion for 2023.
The primary difference between the mandated figures and the ones Berkshire prefers is that we exclude unrealized capital gains or losses that at times can exceed $5 billion a day. Ironically, our preference was pretty much the rule until 2018, when the “improvement” was mandated. Galileo’s experience, several centuries ago, should have taught us not to mess with mandates from on high. But, at Berkshire, we can be stubborn.
Hedge funds perform no better than the S&P 500 index fund. So an investor is better off investing for himself in an index fund (Vanguard 500 Index Fund) than lose money on high fees to hedge fund managers! Buffett actually challenged the fund mangers on this and won on record (see the annual report for the numbers) (2017 Annual Letter)
S&P 500 ETF VOO – (my) return on investment is > 33% in about an year.
BRK/B (my) return on investment in over 2 years is > 40%
Buffett’s Favorites: Cherry Coke (12 Oz can), Dairy Queen Vanilla-Orange bars, DQ Cheese Cake, DQ Triple Truffle Blizzard, Peanut Brittle, Brooks running shoes, Diet Coke (Charlie Munger’s)
Long Live Charlie in the Investor’s Minds for ever!