#380 Four Hundred Pages of Warren Buffett and Charlie Munger In Their Own Words

**David Senra** (0:00)
I asked Charlie Munger what he thought of Jeff Bezos, and he told me that Bezos was ferociously intelligent. In this book, Buffett calls Bezos a miracle worker, and something that Bezos had in common with Munger and Buffett is from day one. In his very first shareholder letter, Jeff Bezos emphasized the importance of having the very best team. He wrote, setting the bar high in our approach to hiring has been and will continue to be the single most important element of Amazon's success. Bezos' focus on talent is just like this quote from Steve Jobs that happened in an interview that Steve gave the very same year in 1997 And Steve said, I think that I've consistently figured out who the really smart people are to hang around with. You must find extraordinary people. The key observation is that in most things in life, the dynamic range, you'll hear me repeat that over and over again in this episode, the dynamic range between the average quality and the best quality is at most two to one. But in the field that I was interested in, I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to one. So given that, you're well advised to go after the cream of the cream and to build a team that pursues the A-plus players. And that is exactly what Ramp did. Ramp has the most talented technical team in their industry. Becoming an engineer at Ramp is nearly impossible. In the last 12 months, they've hired only 0.23% of the people that applied. This means when you use Ramp, you now have top tier technical talent and some of the best AI engineers working on your behalf 24-7 to automate and improve all of your business' financial operations. And they do this on a single platform, which means the longer that you use Ramp, the more efficient your company becomes. That is very important because as Sam Walton said in his autobiography, you can still make a lot of different mistakes and still recover if you run an efficient operation or you can be brilliant and still go out of business if you're too inefficient. Ramp helps you run an efficient organization. In the end of that interview, Steve Jobs added one thing. He said that a small team of A-plus players can run circles or on a giant team of B and C players. From a customer's perspective, what is having a team of A-plus players sound like? It sounds like this customer review that I read, which said that Ramp is like having a teammate who you never need to check in on because they have it handled. Ramp's website is incredible. Take the time today to visit it and set up a demo and check out this product. You won't regret it. Make history's greatest entrepreneurs proud by going to ramp.com and learn how they can help your business today. That is ramp.com. One more tool that I want to tell you about is Vesto. A lot of my friends are using Vesto to see all of their company's bank accounts in one view. Vesto helps you connect and control all of your business bank accounts from one dashboard. I know the founder of Vesto, Ben, spent a bunch of time with them. I've offered to help him by introducing him to other of my friends that could benefit from using Vesto. I actually called one of my friends and he told me, David, I will meet with anyone that you want me to, but I have to tell you upfront that we say no to over 90 percent of the software that we were pitched. Yet, a week later, I hear back and he said that Ben and Vesto are great and that they signed up. So I asked him, can you please ask your team to explain the benefit they get from Vesto in their own words? I'm going to read you this text message exchange. They said, it provides us the ability to view all of our bank accounts and loan accounts on one platform with a single sign on. It makes it much easier to grant access to users in one place as opposed to 20 different banks. So I text back, what did they do before Vesto? This is his response. We have 20 plus different bank logins across like five accountants. We literally use 21 banks. So every bank has an account and a loan that multiple people need access and views to. Just to log in and see everything would take hours and be in all different tabs. So if you have multiple accounts and multiple businesses, go to vesto.com and schedule a demo with the founder Ben. Tell them that David sent you that is Vesto with a V. So vesto.com, the link will also be down in the show notes. I hope you enjoy this episode. It really is just me ripping through a bunch of Munger and Buffett's best ideas very rapidly and I had a lot of fun doing so. So the book I want to talk to you about today is Buffett and Munger Unscripted, Three Decades of Investment in Business Insights from the Berkshire Hathaway Annual Shareholder Meetings. It was selected and arranged by Alex Morris and Alex was kind enough to send me a copy before the book was released. He had a really smart idea. Since I think 1994, all of the Berkshire Meetings or Berkshire Meetings have been broadcast. They've been recorded and broadcast so anybody can watch them. So he went through like 30 years, watched every single meeting, took copious amounts of notes, and then what he created for you and I really, the way I think about this is it's a reference tool. So he separated it not by year but by topic. So you can pick up this book, scroll through the table of contents and say, okay, I want to learn about subject X. You go right to that page and it'll show this year and this timestamp, this is what they said about that. So I read the book all the way through in chronological order and did what I always do, which is just take a copious amount of notes and underlines and then add context as I'm reading these notes and highlights, how it relates to the other 379 episodes that you and I have gone over and the hundreds of history's greatest founders that you and I have studied. So I want to start out with Charlie Munger talking about the importance of creating your own luck by following your curiosity and your intense interest. So Charlie says, Warren says he was lucky to find Geico, but not every 21-year-old was going to go down to Washington, DC, start knocking on the doors of empty buildings to try to find something out that he was curious about. So we also made our own luck by being curious and seeking wisdom. Buffett adds to this, if you enjoy what you're doing, you are likely to get a better result than if you go to work with your teeth clenched every morning. My favorite, they say variations of the same ideas. Obviously, they repeat the importance of repetition is persuasive, but my favorite way that they ever said this is Munger said, intense interest in any subject is indispensable if you're going to excel in it. In fact, there's a great quote from this guy named Naval Ravikant that really echoes a lot of Buffett and Munger's ideas with what they're saying about here. And especially in the age of infinite leverage, how important, I think that idea only becomes more important. It's definitely something I'm betting my life and career on. But Naval said, if you're not 100% into it, somebody else who is 100% into it will outperform you. And they won't just outperform you by a little bit. They'll outperform you by a lot, because now we're operating in the domain of ideas. Compound interest really applies, and leverage really applies. I think it's really important. If you enjoy what you're doing, you're going to get a better result than if you go to work with your teeth clenched every morning. There's another thing that's really important, and Munger talks about having the benefit, both him and Buffett had the benefit of role models that they could emulate inside of their family. Munger says, I think we're helped because we came from families where there were some admirable people, and we tended to identify other admirable people outside of the family. So inside the family, there's a maxim that Buffett will repeat, and he talks about the importance of picking the right heroes. So inside the family, you think of Buffett's relationship, the fact that he was very close with his father, called his father his hero. Munger was very close with his father, but he also talks about his grandfather, Judge Munger. And one of the things that I think had a really big impact on the way Charlie conducted his life was the fact that he observed, and they were told stories of, later on in the family as well, that Judge Munger's sound judgment and then also financial strength really helped the Munger, the entire Munger clan, survive the Great Depression. He was able to provide jobs. He was able to bail out some family members. And Munger talked about just how you get the sense of when he talks about his admiration for his grandfather that that's the role that he wanted to play inside of his own family as well. Another interesting idea and what I obviously want to do here is because this is essentially 400, almost 500 pages of Munger and Buffett in their own words. There's almost no other commentary or anything else. So I'm just going to rip through ideas because it's very different from, you know, I've done what 10 episodes, something like that between all the biographies of Buffett and Munger. And so what I want to do here is just rip through idea after idea after idea, because one of the, I think, the really skills, the most admirable skills that Buffett and Munger both have, is they're able to coin phrases that make their ideas, one, easy to understand and two, memorable. And they also do this by telling short little stories. So it's going to rip through, you know, maybe 100 different ideas that I found most interesting. And even though I've read almost every book that I found on Munger and Buffett so far, they use different ways to describe the same ideas. So that they were actually new to me in this book, where later on, Charlie, you know, they talk about the fact that you should study as much business history as possible. You should be reading, you know, every biography you can get your hands on. Munger's read more biographies than I have. One of the reasons they mentioned this is because Munger states this in a different way, or at least a way that's new to me, where he says you need to, you should pick an extreme example and ask what the hell happened here. So that's something that they repeat over and over again. There's an example of this. Warren says, I owe a great deal to Charlie in terms of learning a lot about businesses. I've also spent a lifetime looking at businesses, seeing why some work and why some don't. As Yogi Berra said, you can see a lot just by observing. That's pretty much what Charlie and I have been doing for a very long time. They talk about the fact that greed doesn't run the world, that envy does, and the one way to, one, you have to cure yourself of envy, and two, you should want to have, you should want to deserve any success that comes your way. And again, this comes from something they learned from a family member. So Charlie Munger is telling us that you really should build yourself into a person that deserves what you get. And so Charlie says, I had a great grandfather. When he died, the preacher gave the talk, and he said, none envied this man's success so fairly won and wisely used. That is a very simple idea. We want to have people think of us as having won fairly and used wisely. And then here's another idea that I absolutely love, that if you're actually paying attention, right, you can spot opportunities in parallel industries. And so they were talking about, I cannot believe how we absolutely missed Google. And why would they, like, why would they even say that? Because they were using Google's ads at Geico, and it was the most effective ads that they could possibly find. And then they realized, hey, these ads cost Google almost nothing. So this is what Munger says. I feel like a horse's ass for not identifying Google better at Warren Ads. We had some insights because we were using Google ads at Geico, and we were seeing the results produced. We were paying $10 a click for something that had a marginal cost to Google of exactly zero. And we saw the ads were working for us. We could see at Geico how well Google advertising worked, and we just sat there sucking our thumbs. So when I thought of that, I didn't think of Warren or Charlie or Geico or Google. I remember, so there's a guy named Jay Gold who I became slightly obsessed with, because I'm always fascinated by people that reach the top of the profession who they admire. And so Rockefeller was asked one time, like, who's the greatest businessman you know? And he said, without hesitation, Jay Gold, Cornelius Vanderbilt, when he was the richest man in America, he was in the 70s, he said that Jay Gold, who was in his 30s at the time, was the smartest man in America. So I read a bunch of biographies of Jay Gold, and Jay was making a ton of money in the railroad industry at the time. And by paying attention to what was happening next to the railroads, he actually spotted a massive opportunity, and that was in the telegraph industry. So I want to read from this transcript of this episode on Jay Gold I did. It says, Jay was keenly interested in the telegraph business now. Telegraphs went hand in hand with railroading because telegraph companies strung their lines alongside the railroad tracks, the railroad tracks that he owned. And so he started looking into this monopoly, the telegraph monopoly of the day, which was Western Union, and Jay could not believe how much money they made. Western Union was a money machine. Jay coveted it. He said, I'd rather be the president of Western Union than the president of the United States. So I absolutely love that idea. You can spot an opportunity in these industries that are running parallel to the one that you're already operating in. This is a great line from Warren Buffett, but it could definitely be something that Charlie Munger says over and over again. He says, the world is overwhelmingly short-term focus. So my friend Ho Nam, who's the founder of Altos Ventures, he made me aware of this tweet that he wrote, and I thought it was really interesting. He was reading this book, and in the book, there's this quote by this guy named Andy Taylor. So Andy Taylor is actually one that took over Enterprise Rent-A-Car, and he grew it from $78 million in revenue to $24 billion in revenue. And he was asked what allowed you to do that, and he replied with one word, focus. He continues, I'm not the smartest person in the room, but I have the ability to focus at a level that most people can't, and I can focus for very long periods of time. He worked on that business for 38 years. He continues, I never tired of that focus. I never tired of buying cars. I never tired of renting cars. I never tired of service. I don't get bored. Most CEOs don't have the attention span to dedicate four decades of their life to doing the same thing over and over and over again, and doing it really, really well. And so obviously, going back to the Buffett quote, the world is overwhelmingly short-term focus. Well, if you want an edge, you just do the opposite of what the world does. Now, I'm going to repeat this over and over again, because it is my favorite line in the book. You pick an extreme example and ask, what the hell happened here? So they're constantly, because Munger and Buffett both have this encyclopedic knowledge of business history in their heads, they're constantly referencing ideas they have, and they explain the idea to you and I through stories, and usually through the stories of an individual founder or individual company. And so here's an example of the importance of investing in and partnering, if you can, with talented fanatics. This is Munger. I always cite the early history of National Cash Register. He was created by a fanatic who bought all the patents, had the best sales force, and had the best production plans. He was a very intelligent man and passionately dedicated to the cash register business. And it was a godsend to retailing when cash registers were invented. Think about that. There was a time where the amount of theft, I think the primary, in addition to organizing your sales and keeping track of it, I think it drastically reduced the amount of theft that would happen at the actual cash register for your employees stealing from you, in other words. If you read an annual report prepared by John Henry Patterson, who he's describing, who was the CEO of National Cash Register, any idiot could see that this was a talented fanatic who was very favorably located, and therefore, the investment decision was easy. We have the NCR annual report from 1904 Patterson not only tells you why his cash register is worth to people about 20 times what he's selling it for, but he also tells you that you're an idiot if you want to go into competition with him. Another idea that's explained beautifully with a story that none of this, none of this works if you cannot trust your own judgment. So Buffett says, you can't expect anybody else to do this for you. People are not going to tell you about wonderful little investments. You have to find them yourself. When I first visited Geico in January 1951, I left, and then the rest of the year, I went down and would visit leading insurance analysts. I thought I had discovered this wonderful thing. So I went to see these great investment houses that specialize in insurance stocks, and I wanted to know what their opinion was. And they told me that I didn't know what I was talking about. You can't look around for people to agree with you. You can't look around for people to even know what you're talking about. You have to think for yourself. An ability to detach yourself from the crowd is a quality that you need. Another note that I left myself, and really an idea that I absolutely love, there's just always, it's always shocking to me. I think I got obviously the benefit of reading biographies and studying history in general. There's just always opportunity hiding in plain sight. So think about the last few weeks. So Jerry Jones was the 76th person, right? Seventy-five other people before buying the Dallas Cowboys said no, right? Jerry Jones was the 76th and he said yes. He paid 140 million today. That's worth $10 billion, including all the money and opportunities that came from that, and the three decades that he's owned the team.