- Warren Buffett and Charlie Munger appeared in a CNBC interview that aired Tuesday night.
- Billionaire investors criticized Robinhood and Archegos and reflected on their friendship.
- Buffett and Munger also discussed remote working and the lessons they learned from the pandemic.
- See more articles on Insider’s company page.
Warren Buffett and Charlie Munger discussed their iconic friendship, their approach to business and how they built Berkshire Hathaway in “Buffett & Munger: a wealth of wisdom,” a CNBC show filmed shortly after the Berkshire annual reunion in May and aired Tuesday night.
Berkshire Hathaway chairman and vice chairman also criticized Robinhood, calling for tighter regulations after the Archegos Capital fiasco, discussing the trend towards remote working and sharing what they have learned from the pandemic.
Buffett, 90, and Munger, 97, met over 60 years ago. The pair went on to build one of America’s largest conglomerates, which owns companies such as Geico, See’s Candies, and BNSF Railway, and has multi-billion dollar stakes in Apple, American Express, Bank of America, Coca-Cola. , Kraft Heinz, and other state-owned companies.
Here are the highlights of the interview:
The first snippet of Buffett and Munger’s interview focused on the collapse of Archegos Capital earlier this year and the loose lending standards among the banks that allowed this to happen.
Munger called Credit Suisse “the biggest fool of all” and lamented that it took the financial crisis to spur regulators to tighten the rules and crack down on risky practices the last time around.
âThink how extremely stupid that was,â Munger said of Archegos taking tens of billions of dollars of leverage and blowing himself up. “It was the lure of the really easy money the idiot was paying you – being the first broker for a jerk.”
Munger added that the banks should have known not to lend to Bill Hwang, given that the fund manager had pleaded guilty to insider trading in the past. âYou can’t make a good deal with a bad person, forget it,â Buffett said.
âRegulators need to change the laws,â Munger said. “But of course, if you run a gambling hall, you want the big guys to play more furiously.”
“We don’t want to draw people into the game more than they can afford,” he added.
Buffett added that regulators have a very difficult job because to tackle the biggest problems you have to attack the financial hub of huge institutions.
The couple also opened up about Robinhood, the trading platform they both criticized at Berkshire’s annual shareholders meeting in May.
Robinhood is a “gambling hall masquerading as a respectable business,” Munger said. “It is unworthy of contempt.”
Buffett added that Robinhood does not push its users to invest in long-term, low-cost index funds. Instead, it encourages them to trade options and take leveraged positions.
“This is basically a shady and unsavory operation,” added Munger.
Buffett and Munger recalled meeting at a dinner party in 1959. Buffett enjoyed the fact that Munger “rolled around on the floor, laughing at his own jokes” like him, while Munger said he liked it. ‘Buffett’s irreverence and the fact that he doesn’t do it automatically. sucks the “pompous heads of all civilization”.
They also discussed the start of their partnership. âWe had fun at the start because it was like hunting expeditions,â Munger said.
The next part of Buffett and Munger’s interview focused on how they built Berkshire. They reflected on the conglomerate’s early operations, which included Blue Chip Stamps and the original Berkshire textile factories, and how those businesses ultimately failed as the company evolved.
Buffett said Diversified Retailing, his department store business, was eventually sold and the profits were reinvested in Berkshire. The investor estimated that the move generated a value of around $ 25 billion, based on the increase in Berkshire’s share price since then.
Buffett also commented on the mishmash of businesses that made up Berkshire when it started. âIt looked like a plate of spaghetti at one point, which wasn’t good,â he said.
Munger said a key lesson he learned from early Berkshire failures: “If it’s clear that something is wrong, fix it quickly. It doesn’t improve while you wait.”
Afterwards, the couple discussed their relationship with their fathers. âI never heard my dad say in my life, ‘Make sure you pay off all your debts,’ but I just watched how he was living,â Buffett said.
âYou want to have certain people in your life that you don’t want to disappoint,â he continued. “You want to have people who make you a better person.”
“I was surrounded by high profile people,” said Munger, highlighting his father, who was a lawyer like him. “I just had to imitate the right people.”
Buffett recalled that as a young boy he often met four or five housewives on his way home from Sunday mass because he always liked to talk to people older than himself.
The investor emphasized the power of being able to choose the people in his life. âWe’ve had this luxury now for almost 60 years,â he said. âIt beats 25-room, six-car houses. What’s really great is if you can do whatever you want to do in life and associate with the people you want to associate with in life.â
Buffett also reflected on his first impression of Munger. “I knew when I met Charlie, after a few minutes at the restaurant, that this guy was going to be in my life forever.”
“We were going to have fun together, we were going to make money together, we were going to get ideas from each other, we were both going to behave better than if we didn’t know each other,” he added.
Buffett and Munger also discussed how they have adjusted to the pandemic. âI fell in love with Zoom,â Munger said, adding that he uses the video communication tool at least three times a day. “It adds so much convenience.”
Meanwhile, Buffett said he was “not a Zoom guy” and didn’t see much point in using it. “I find the telephone a very satisfying instrument,” he said.
Munger also discussed some of the fallout from the pandemic. âA lot of business trips will never come back,â he said, adding that companies would decide to have a few in-person meetings a year and use Zoom to organize the rest. Highlighting the drop in demand for office space, he added that many aspects of the job could change for good.
Buffett added that much remains unknown about the pandemic and pointed out how uneven and unpredictable the economic impacts have been with small businesses struggling and many large, booming businesses.
The Berkshire chief also revealed that some of his company’s car dealers wanted to apply for government help, but Buffett arrested them because they had a “rich relative.” He also underlined the immense danger when masses of people take out loans in a crisis because they fear they will not have access to credit within a week.
âYou have enough people who think that something won’t be there next week in the banking industry, it won’t be there next week, in the absence of the Federal Reserve,â said Buffett.
The investor added that his most important lesson from the pandemic was that it had to happen eventually and that it was not “the worst imaginable at all,” he said.
Buffett and Munger underlined how much they appreciate Berkshire’s decentralized structure, which allows them to delegate responsibilities to the managers of its dozens of subsidiaries. Munger predicted that the strategy would spread more widely.
âJust as we’ve discovered that we can eliminate some business travel, we’re going to find out that we can get rid of stupid bureaucracy in American business,â he said.
Buffett also balked at running a centralized business. “I would have resigned or I would have been fired,” he said. “I would rather be in a jail cell with a few interesting people and a lot of reading.”
Partners for life
The Berkshire chef has reserved some heartfelt praise for his partner for six decades.
âIt goes way beyond buying a stock and selling it higher,â Buffett said of Munger’s contributions to the company. “He designed dormitories and helped build them. He worked in hospitals to understand how they can be improved and serve more people and do it at a lower cost.”
âCharlie has worked on some big issues, and he doesn’t need to,â the investor continued. “Charlie has never hidden everything he has told me since we met, in terms of presenting something different from reality, and he has never done anything selfish that I have seen.”
“He makes me better than I would be otherwise,” added Buffett. “I don’t want to disappoint him.”