50 Master Moves That Shaped Berkshire Hathaway

"There are fundamental differences in the way that Warren and Charlie do things"

Munger, Tolles and Olson LLP's Ronald Olson talks about wisdom gleaned from the Buffett-Munger partnership

Published 9 years ago on Jun 12, 2015 7 minutes Read

Charlie and Warren have known each other for the past 56 years and there are very few who have inhaled the same air, personally and professionally. Ron Olson is not only a name partner at Munger, Tolles and Olson LLP, the Los Angeles law firm founded by Charlie, he is also a director on the board of Berkshire Hathaway. If Berkshire or its subsidiaries are working on a deal, it is likely that Olson and another iconic MTO partner Robert Denham are among the first to know.

Charlie and Warren have been together for over 50 years. What is the glue that holds them together? You’ve seen them at close quarters.

Honesty, rationality, mutual admiration and respect. They are probably two of the most rational people I have ever met. The result is that their thinking dominates their relationship and how they analyse problems and people. But in the end, it is mutual respect. 

So, what works? 

Shared values and different roles; Charlie sees Warren’s wide set of abilities that he brings to bear for Berkshire’s benefit. His analytical skills with numbers, financial analysis, ability to assess people, to inspire people, to see around corners, to know that tomorrow’s headline will be based on today’s actions and his desire to be out front. Charlie admires all that about Warren. He has a lot of qualities and values like Warren but he doesn’t want to be out front.

He doesn’t see himself as especially appealing to others. In fact, at a DJCO meeting he said something to the effect that, ‘when people bore me, as they often do at a big gathering, I just ignore them and talk to myself’. He recognises that he can be brutally honest in a way that people don’t like. Warren is charming, his role at Berkshire is different from Charlie’s. If they were both trying to do the same thing, it wouldn’t have worked as well but it works very well the way it is.

Between Warren and Charlie, is it ok for them to agree to disagree or does it always lead to a situation where one convinces the other?

With me and others, Charlie’s rationality is always present. You can have disagreements without being disagreeable. Charlie influenced Warren to change his investment policy in looking to deploy more capital in buying great businesses at fair prices as opposed to fair businesses at great prices. So, I think Charlie influenced that over a period of time in Warren’s thinking. I think there are instances where they continue to see things differently.

What Warren has done with his money philanthropically is very different than what Charlie has done with his. Charlie loves to engage his philanthropy, think about it and be a part of it. Warren doesn’t think he is good at it and he just wants somebody else to run that part of his life. So, I think there are fundamental differences in the way that each of them do some things. But at the same time, there is mutual respect and they both understand what motivates the other. 

You have been a Berkshire director since 1997 but your association with MTO is much deeper. How long have you known Charlie Munger?

47 years. He founded the firm I came to in 1968 and has always officed with us. He has been very close to the firm and has used it as his lawyer for his business work. He loves the firm and has had a lot to do with influencing its fundamental values. He used to tell us lawyers, ‘The best place to find new work is on your desk, not out glad-handing somebody on the golf course. Do what you are doing, do it well and over time that will produce the next good piece of work.’ So, he has had a big influence on our firm and continues to have that. He is a fountain of wisdom that we consult on everything, from family problems to professional problems. 

47 years is a very long time. But going back to the first meeting, is there something that you recall or think was a profound influence?

I suppose he was 44 or something like that. My impression was that he was very old and wise. And that is my impression of him today. He is very old and wise. At 44, he just seemed to have so much more wisdom, knowledge and character than anybody I had been around. As a result, he continued to expand on those fundamental impressions. It is no surprise. This is a man who has devoted his life to learning. He consumes several books a week. He reads broadly from philosophy and history to business to psychology, you name it. He loves biographies because he considers them a wonderful tool for teaching life that works and doesn’t work; the paths of success and of failure and the frailties and failings of human beings. And he’s able to take that information, categorise, remember and apply it like no other human being I have been around.

Can you articulate a few qualities of Charlie Munger that you have picked up over time or tried to imbibe? 

His devotion to life-long learning is certainly one. I suppose the second would be his extreme honesty with himself and others. I emphasise: himself as well as others. He can be brutally honest and has no time for people who engage in self-pity. His advice to people who are unhappy: lower your expectations. He believes devotion to life-long learning and honesty, even if it is brutal or unkind at times is a path to a better life. He encourages people to continue to test the ideas that motivate their life.

Make sure they are as valid today as they were before. If they aren’t, you should discard them and move on. So, those are a few that I have tried to pick up. He is very satisfied being by himself, having time to read. He doesn’t need a lot of acclamation. He has become increasingly popular with people in the last 10 years, something that I don’t think he encouraged but people have begun to appreciate his wisdom more broadly than previously.

What are the advantages of having Charlie Munger as a partner?

Charlie is as good as I am going to get. As I referenced, he is a fountain of wisdom. I think EO Wilson wrote, “Today we are drowning in information but starving for wisdom.” And Charlie is wisdom. Having access to him has made both institutions, our law firm and Berkshire Hathaway, better.

Can you recall situations where this came across vividly?

I can think of acquisitions we didn’t make at Berkshire because he didn’t believe business could be sustained as it was conceived. So, we haven’t made certain acquisitions and haven’t made certain mistakes. At the law firm, he is like having an in-house client and a very hard grating client, who is able to capture the views of many clients and express them directly to us. He has taught us about how important it is to be brutally honest in our billing and in rejecting matters we don’t have the competence for.

Everybody has a favourite Charlie Munger story. What is yours?

I have so many. One goes back to the very beginning. Not long after I joined the firm, Charlie was going to give a talk titled ‘How to become very, very rich’. Of course, I was interested in that. But a client insisted that I be in New York that day. So, I go to my partner and I say, ‘Look, I can’t be there but I want to know everything he says. I want you to write down every word. Don’t miss it, take copious careful notes.’ The day I got back, I rushed down to see him. ‘So, what did he say?’

He said, ‘Well, it is like this. You remember when your father sat you down to have the sex talk at about age 13? It was a lot like that. He told me all about it except how to do it.’ Charlie is very good at that. I wasn’t there but I can see him talking on the subject of how to be very, very rich. Now, he believes that the best way to become rich is to do it slowly and live beneath your income, save, reinvest the excess and over time, compound it just as Berkshire has done. Ultimately, you become very, very rich as he has. Not many of us achieve that but it is not a bad lesson in life.

Charlie is legendary for his thrift…

He’s lived in the same house for decades. He is very thrifty and so is Warren, of course. And what drives that is the way in which they generated their initial capital — by living beneath their means and investing the excess. One of Charlie’s earliest investments was in a real estate project where he was able to invest in a set of garden apartments and ultimately sold them for much more than he put in. That made a little bigger pile and he just kept compounding. 

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