The Wit and Wisdom of Charlie Munger

Berkshire’s vice chair Charlie Munger spoke at Stanford Law School this morning, and Eric Savitz has highlights. I’m particularly fond of these two :

  • On the interaction between government and business: “We’re here at an institution [Stanford] founded by a man [Leland Stanford] who bribed Congress to get his railroad franchises…I’m not constantly bewailing the failures of government — it’s not our main problem at all.”
  • On the influence of hedge funds: You ask a heard hedge fund operator why the charge 2 and 20, and they say because I can’t get 3 and 30, he says. “[For hedge funds], it’s not about thinking what is fair and right — but merely how much can I get. It’s a ghastly culture … there will be terrible scandal in due course”

Mind you, there is something surprisingly honest about Warren Buffett in the following Munger comment:

  • On Berkshire Hathaway Chairman Warren Buffett’s decision to donate most of his fortune to the Bill and Melinda Gates foundation: “Is anyone really surprised that Warren, who is the ultimate embodiment of concentrated decision-making power, picked somebody who he thinks is like him in many important ways? It was a noble and sensible decision.”

Related posts:

  1. Hedge Fund Registration for All?
  2. Burton Malkiel vs. The Hedge Fund Industry
  3. Hedge Funds as the Next VCs
  4. The Not-So-Wisdom of Analyst Crowds
  5. The Hedge Fund Chimera

Comments

  1. Brent Buckner says:

    Funny comment about hedge funds, as Buffett used to run one.
    I’m also sure that Munger wants businesses in the Berkshire fold to maximize shareholder value, which may involve pricing at “what the market will bear”.

  2. mj says:

    Buffett didn’t run a hedge fund. he ran an investment partnership. the comp structures were totally different. Buff didn’t take 2% and his fee came from profits only after his clients made a certain amount of money. c & m have every right to blast the comp structures of hedge funds. someday people will wonder why they give half of the market return to these people.
    regards

  3. Brent Buckner says:

    mj, the term hedge fund has no canonical definition, but is usually taken to mean a pooled investment structure that is able to employ leverage, is able to go long or short, and has a fee structure involving participation in profits.
    (cf. http://en.wikipedia.org/wiki/Hedge_fund )
    Buffett Partnership Limited had those characteristics. Having a highwater mark and a hurdle rate do not mean a structure is not a hedge fund.

  4. bb says:

    Much of what Munger says is refreshingly honest and insightful. However, it is very odd to me that he has amassed $1.7B (per Forbes) as an officer of a public company, but he thinks it’s “damn stupid” that Lee Raymond walked away with $400M upon retirement from Exxon.
    On the same note — it’s odd that Warren Buffett and the Gates family are leading and vocal proponent of maintaining the inheritance tax when, by putting their money into foundations, they have no intention of paying it themselves. I guess that paying for stuff like wars and social programs is for the “little people,” while the big boys get to do cool, feel-good stuff like cure diseases and fight 3rd world poverty.
    Thanks for listening
    bb

  5. 2L says:

    Munger didn’t amass 1.7 BB “as an officer.” He amassed it as a shareholder.

  6. tim says:

    bb – you said:
    “On the same note � it�s odd that Warren Buffett and the Gates family are leading and vocal proponent of maintaining the inheritance tax when, by putting their money into foundations, they have no intention of paying it themselves.”
    you obviously don’t get it, do you? they are proponents of keeping the inheritance tax to encourage people to give their money to foundations rather than let the tax man have it. when rich people know that half their money will be stolen by the government when they die, they often choose to do more useful things with their money: like give 85% of it to charitable foundations. i’m sick of hearing about people saying buffett had some evil intent? where does this come from? he is an honest man who did the right thing.

  7. bb says:

    2l: Your point is well taken, but I still think it’s odd that a billionaire thinks that he’s a good spokesman for what does or doesn’t constitute excessive wealth or compensation.
    tim: Your point is less well taken. The truth is that people like me (an probably you) will pay a far greater proportion of the money that we earn during our lifetimes in taxes vs. Gates, Buffett, the Rockefellers, Howard Hughes, the Gettys, and most of the ultra-rich (past & present). Our tax system is set up to benefit a handful of people at the very top of the pyramid — who use foundations as a way to maintain control of their wealth (through generations) while avoiding paying their fair share of taxes. The taxes that they aren’t paying (primarily income, but also inheritance) are being paid by the rest of us — i.e. we pay for wars, bureaucracy, farm subsidies, social programs, etc.
    The financial security of kids, grandkids, and greatgrandkids of the handful of multibillionaires is not really at issue — it’s obvious that only a fraction of their wealth is necessary to take care of that nothwithstanding foundations, taxes, or whatever. For many of us, however, financial security of our family IS impacted by inheritance tax.
    I never said that anyone has “evil intent” — but billionaires who have opted out of the inheritance tax system are inappropriate spokespeople for the issue of whether there should be one.
    bb