Charlie Munger's Interview with Todd Combs

Shane Parrish (0:01)

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What I am is a guy who's been able to take moderate obsession and a long attention span and turn them into pretty good results. Of course, a long attention span will help you a lot if you're reasonably smart. That was Charlie Munger explaining his success. In 2022, Todd Combs sat down with Munger for a conversation that has never been released publicly until now.

The conversation was part of the Singleton Prize for CEO Excellence. And we have permission from Todd and the Singleton Foundation to share it with you today. This thing is such a gem. I went through all 20 pages and pulled out the ideas I think are most useful, not just for investors, but for anyone trying to make better decisions. On the surface, it's a conversation about Singleton, investing and business, but underneath, it's an operating manual for life. Three ideas run through it, how to recognize the rare people worth betting on, how to choose problems worth solving, and how to remain in control when everyone else is being forced to act. I'm Shane Parrish, and this is Outliers.

Let's start with how Munger thought about exceptional people. Commenting on Singleton, he said he was like a guy who wears size 16 shoes and webbed feet competing with a bunch of ordinary people, so he was fun to watch because he was so cool and rational. What made Singleton so unusual was that he paid no attention to convention. He didn't buy back stock because the buybacks were popular, he bought it back because it was cheap. Munger said, when Henry was buying stock and gobs, that was a very uncommon thing to do, and now, of course, it's very common. You could say Henry has triumphed, but Henry wouldn't be buying a lot of stock. A lot of people are buying stock now, but after it's selling for more than it's worth. They like growing their stock no matter what its value, and people like Henry and Berkshire would buy their stock on the cheap. Munger summed up Singleton like this. You aren't going to see many Henry Singletons in your lifetime. He was valedictorian of his class at MIT, and he was valedictorian everywhere. If you want to learn more about Singleton, we did an episode on him. I'll link to it in the show notes. And if you're enjoying Outliers, follow the show. Most people who listen haven't yet, and it helps more people find us.

Singleton wasn't the only manager that Munger admired. When Todd Combs brought up Tom Murphy, Munger summed up his success in two sentences. What Tom did was he delegated enormously. And if it was really important, he went and did it himself. Very simple. And Henry was very simple. That sounds easy, but delegating enormously only works when you give power to the right people. And Combs pointed out that Munger had spent his life recognizing great management and still underestimated how valuable it could be.

And then he asked Munger, do you have any thoughts or comments you'd like to share around this and how you've identified great management? And Munger answered with a lesson from basketball.

I think the great lesson of these careers is what I call the Wooden Lesson. And Wooden had the best basketball coaching record in the world. And nobody else was even close. And how did he do it? The answer was he concentrated almost 100% of the playing time on his top 7 players. And of course, they got better and better during all that extra playing time. And that's what happens when you give so much power to a Wooden or Buffett or something. You're doing the Wooden system and it works like gangbusters. And as an investor, if you can find somebody, even a mini Wooden or a mini Singleton or a mini Buffett and play them, and when they have a hell of a run, certainly that can be a very good way to invest.

The Wooden Lesson only works if you choose the right people. And talent wasn't the only thing that Munger looked for when choosing people.

Combs noted that Munger's heroes like Lee Kuan Yew and Otto von Bismarck and George Marshall all shared a sense of duty and honor. Then he asked them if there's another trait he admires in them. And Munger had a name for it. He called it the fiduciary gene. I like the fiduciary gene. Think of the difference between someone like George Washington who voluntarily left power, setting an example, and those paranoid rulers who came into power and start killing people to stay in power, trying to subvert the systems and so forth. And of course, the George Washingtons are way the hell better. What maybe the current world is teaching us is that our forefathers who gave us term limits understood human nature.