Buffett and Munger

Berkshire Hathaway Vice Chairman Charlie Munger has known Warren Buffett since 1959, when Buffett was operating pre-Berkshire investment partnerships and Munger was an attorney.

Tren Griffin’s new book about Charlie Munger focuses not on the man but on his ways of thinking.

It’s a topic Griffin believes can help people make better decisions, not only in investing but in other aspects of life, too.

“The book is really about what Charlie taught me,” Griffin, a Microsoft executive from Seattle, said in a telephone interview. “It’s made a huge difference in my life.”

“Charlie Munger: The Complete Investor” joins other books written about the man who is vice chairman of Berkshire Hathaway Inc. and, for more than 50 years, the alter-ego of Berkshire Chairman Warren Buffett.

Others include Janet Lowe’s “Damn Right” biography; “Seeking Wisdom: From Darwin to Munger” by Peter Bevelin; and “Poor Charlie’s Almanack,” a compilation of Munger’s speeches and writings.

Griffin, 61, said Munger’s background is widely known to followers of Berkshire.

Now 91 years old, the Omaha native began his career as a real estate attorney in Southern California, where he still resides, after graduating from Harvard Law School. He switched to investments after meeting Buffett in 1959 while in Omaha to wrap up his late father’s law practice.

Once he connected with Buffett, the two men began exchanging investment ideas. After running his own investment partnership, Munger joined Berkshire and for decades has been Buffett’s closest financial adviser, bringing his own ideas and reacting to Buffett’s proposals.

He is known to attendees of Berkshire’s annual shareholder meetings, where his pithy answers to questions cut to the heart of issues that shareholders raise. Some investors also travel to California to attend corporate meetings where Munger speaks without Buffett alongside.

But Griffin said Munger’s ways of thinking and making decisions are less widely known. The book aims to explain those concepts, especially to people who are “financially literate” and will understand Munger’s ideas.

Griffin wrote the book in his spare time, away from his duties as senior director of strategy, competitive analysis and business development for Microsoft.

Although his job puts him in a world close to Munger — his first boss was the father of Bill Gates, who is a close Buffett confidant and fellow member of Berkshire’s board of directors — Griffin has never met Munger in person.

And he wanted to keep it that way.

“If you write a biography, it gets personal,” he said. “I think he deserves his privacy. ... I sort of have him on a pedestal, and I’d like to keep him there. I’ve read everything he’s written. I almost feel like I can channel him.”

Buffett has said Munger is “both smarter and wiser” than he is and is the perfect business partner: He won’t flout his superiority, will put up his own money, will work for peanuts and won’t second-guess you or sulk when you make mistakes — “someone who will constantly add to the fun as you travel a long road together.”

“He comes equipped for rationality, and he applies it in business,” Buffett once said. “That’s made him a huge business success.”

George Morgan, an investment instructor at the University of Nebraska at Omaha, said Munger’s disciplined approach sets him apart.

“He looks at the core elements,” Morgan said. “That means his decisions are made on the things that are really important — rational, not emotional. He understands the issues and can do it quickly.”

Griffin’s book first lays out the investment ideas of Benjamin Graham, who taught Buffett in graduate school and whose concepts were the groundwork for Buffett and Munger in their early investing days.

It discusses Munger’s concept of “worldly wisdom,” which says people should understand the “big ideas” mankind has discovered over the years and use them “routinely” when thinking about life’s decisions.

A chapter on “the psychology of human misjudgment” explores Munger’s belief that people make bad decisions because they are influenced by natural human tendencies, such as denial, envy, excessive optimism or faulty reasoning. The book lists 25 tendencies as Munger defines them and says being aware of the tendencies can help people avoid bad decisions.

Griffin explains Munger’s ideas on positive human traits, such as being patient, frugal, disciplined, honest, confident and studious.

Chapters explain how Munger and Buffett determine the value of companies, including a chapter titled “Berkshire Math.”

Griffin said he discovered the power of Munger’s thinking in 1999. As a partner in the private equity firm Eagle River, he was invested heavily in high-tech stocks with rapidly increasing prices but was uncertain about the future.

“It was nuts,” he said. “Everybody was rich, and it didn’t seem real. There’s this pursuit of wealth out there that makes everybody nuts, but you’re worried about missing out on things. I didn’t know what to do.”

So he took a boat to the middle of Puget Sound and spent a week reading about Warren Buffett.

“This guy Munger kept coming up,” Griffin said. “He really gave me the right answer. If I have a comfortable retirement, I kind of owe it to him and his ideas about making decisions and about life and everything.”

After the session in the boat, Griffin sold half of his high-tech stocks, cashing that portion out before the “tech bubble” burst the next year.

Especially important, he said, is Munger’s “two-track” system for making decisions.

First, you make a decision based on everything you know, being as rational as possible. Second, you go back over the decision and look for mistakes in your reasoning, keeping in mind the tendencies that might cause you to make a bad decision.

“You’re making sure you’re not convincing yourself you’re rational when you’re really not,” Griffin said. It’s a thinking process that works on all kinds of decisions.

He said many people would come away from the book realizing their best bet is to invest in a low-cost mutual fund based on a broad stock index, rather than trying to select individual stocks to buy.

“They don’t want to work nearly as hard as Charlie,” he said. “It’s sort of like a test.”

At Berkshire Hathaway’s annual shareholder meetings in Omaha, which Griffin has attended, Munger frequently gets the biggest laughs after making pithy and sometimes biting comments during the five-hour Q&A session he shares with Buffett.

Griffin said he was intrigued by the laughter.

“Humor is essentially, at its core, truth,” he said. “What he says is full of truth, and that’s so rare today. He’s unrestrained and willing to say anything. He truly doesn’t care what other people think. ... It’s because he said something out loud that’s truth, and people laugh when they hear the truth.”

Griffin said the book is a tribute to Munger, whose ideas deserve a wide audience. A final question he poses for his readers to consider when making decisions:

“What would Charlie do?”

The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.

Contact the writer: 402-444-1080, steve.jordon@owh.com

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