- Warren Buffett and Charlie Munger took part in a CNBC interview that aired on Tuesday night.
- The billionaire investors criticized Robinhood and Archegos, and reflected on their friendship.
- Buffett and Munger also discussed remote working and the lessons they took from the pandemic.
- See more stories on Insider’s business page.
Warren Buffett and Charlie Munger discussed their iconic friendship, how they approach business, and how they built Berkshire Hathaway in “Buffett & Munger: A Wealth of Wisdom,” a CNBC program filmed shortly after the Berkshire annual meeting in May and aired on Tuesday night.
The Berkshire Hathaway chairman and vice-chairman also criticized Robinhood, called for tighter regulations after the Archegos Capital fiasco, discussed the remote-working trend, and shared what they learned from the pandemic.
Buffett, 90, and Munger, 97, met more than 60 years ago. The pair went on to build one of America’s biggest conglomerates, which owns companies such as Geico, See’s Candies, and the BNSF Railway, and holds multibillion-dollar stakes in Apple, American Express, Bank of America, Coca-Cola, Kraft Heinz, and other public companies.
Here are the highlights from the interview:
The first clip from Buffett and Munger’s interview focused on the collapse of Archegos Capital earlier this year, and the loose lending standards among banks that allowed it to happen.
Munger singled out Credit Suisse as “the biggest fool of all,” and bemoaned that it took the financial crisis to spur regulators to tighten the rules and clamp down on risky practices last time around.
“Think of how massively stupid that was,” Munger said about Archegos taking on tens of billions of dollars in leverage and blowing itself up. “It was the lure of the really easy money that the idiot was paying you – being the prime broker for a jerk.”
Munger added that the banks should have known better than to lend to Bill Hwang, given the fund manager had pleaded guilty to insider trading in the past. “You can’t make a good deal with a bad person, just forget it,” Buffett said.
“The regulators need to change the laws,” Munger said. “But of course if you’re running a gambling parlor, you want the big players to gamble more furiously.”
“We don’t want to suck people into gambling more than they can afford,” he added.
Buffett chimed in that regulators have a very tough job, as cracking down on the biggest problems involves attacking the financial center of enormous institutions.
The pair also touched on Robinhood, the trading platform that they both slammed at Berkshire’s annual shareholder meeting in May.
Robinhood is a “gambling parlor masquerading as a respectable business,” Munger said. “It’s beneath contempt.”
Buffett added that Robinhood doesn’t push its users to invest in long-term, low-cost index funds. Instead, it encourages them to trade options and take leveraged positions.
“It’s basically a sleazy, disreputable operation,” Munger added.
Buffett and Munger recalled meeting one another at a dinner in 1959. Buffett enjoyed the fact that Munger was “rolling on the floor, laughing at his own jokes” like him, while Munger said he loved Buffett’s irreverence and the fact he doesn’t automatically suck up to the “pompous heads of all civilization.”
They also discussed the start of their partnership. “We had fun in the early days because it was like hunting expeditions,” Munger said.
The next part of Buffett and Munger’s interview focused on how they built Berkshire. They reflected on the conglomerate’s earliest holdings, which included Blue Chip Stamps and Berkshire’s original textile mills, and how those businesses ultimately failed as society moved on.
Buffett said that Diversified Retailing, its department-store business, was eventually sold and the proceeds were plowed back into Berkshire. The investor estimated that decision generated about $25 billion in value, based on the increase in Berkshire’s stock price since then.
Buffett also commented on the mishmash of businesses that made up Berkshire in its early days. “It looked like a plate of spaghetti at one time, which was not good,” he said.
Munger said that a key lesson he learned from Berkshire’s early failures: “If it’s clear that something is a mistake, fix it quickly. It doesn’t get better while you wait.”
Next, the pair discussed their relationships with their fathers. “I never heard my dad say in my life, ‘Be sure you pay all your debts,’ but I just watched how he lived,” Buffett said.
“You want to have certain people in life that you don’t want to disappoint,” he continued. “You want to have people that make you a better person.”
“I was surrounded by high-grade people,” Munger said, highlighting his father, who was a lawyer like him. “I was just forced to imitate the right people.”
Buffett recalled how as a young boy, he often dropped in on four or five housewives on his way home from Sunday mass, as he always enjoyed speaking to people older than him.
The investor emphasized the power of being able to choose the people in his life. “We’ve had that luxury now for 60 years or close to it,” he said. “That beats 25-room houses, and six cars. What really is great is if you can do what you want to do in life, and associate with the people you want to associate with in life.”
Buffett also reflected on his first impression of Munger. “I knew when I met Charlie, after a few minutes in the restaurant, that this guy was gonna be in my life forever.”
“We were gonna have fun together, we were gonna make money together, we were gonna get ideas from each other, we were both gonna both behave better than if we didn’t know each other,” he added.
Buffett and Munger also discussed how they adapted to the pandemic. “I’ve fallen in love with Zoom,” Munger said, adding that he uses the video-communication tool at least three times daily. “It just adds so much convenience.”
Meanwhile, Buffett said he’s “not a Zoom guy” and doesn’t see much value in using it. “I find the telephone a very satisfactory instrument,” he said.
Munger also discussed some of the pandemic’s fallout. “A lot of business travel will never come back,” he said, adding that companies will decide to have a couple of in-person meetings a year and use Zoom to conduct the rest of them. Highlighting the slump in office demand, he added that lots of aspects of work could change for good.
Buffett added that a lot remains unknown about the pandemic, and highlighted how uneven and unpredictable the economic impacts have been with smaller businesses struggling and many large corporations thriving.
The Berkshire chief also disclosed that some of his company’s car dealerships wanted to apply for government aid, but Buffett stopped them because they had a “rich parent.” He also underscored the immense danger when droves of people take out loans in a crisis because they’re worried they won’t have access to credit in a week’s time.
“You get enough people believing something won’t be there next week in banking, it won’t be there next week, absent the Federal Reserve,” Buffett said.
The investor added that his most important lesson from the pandemic was that it was bound to occur eventually, and that it wasn’t “the worst one that’s imaginable at all,” he said.
Buffett and Munger emphasized how much they enjoy Berkshire’s decentralized structure, which allows them to delegate responsibility to the managers of its scores of subsidiaries. Munger predicted that the strategy would catch on more widely.
“Just as we found we can eliminate some business travel, we’re gonna find we can get rid of some dumb bureaucracy in American corporations,” he said.
Buffett also balked at the idea of helming a centralized company. “I’d resign or would have been fired,” he said. “I’d rather be in a jail cell with a few people who are interesting, and plenty of reading material.”
Partners for life
The Berkshire chief reserved some heartfelt praise for his partner of six decades.
“It goes well beyond buying a stock and selling it higher,” Buffett said about Munger’s contributions to society. “He’s designed dormitories and helped build them. He’s worked at hospitals to understand how they can be made better and serve more people and do it at less cost.”
“Charlie’s worked on big problems, and he doesn’t need to,” the investor continued. “Charlie has never shaded anything he’s told me since we met, in terms of presenting it to me in a different way than reality, and he’s never done anything I’ve seen that’s self-serving.”
“He makes me better than I would otherwise be,” Buffett added. “I don’t wanna disappoint him.”