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Charlie Munger’s magic is in what he doesn’t do

Charlie Munger, who will headline this year’s Sohn Hearts & Minds Conference, places one quality above all else: patience.
James Thomson
Oct 13, 2021

When Charlie Munger headlines the sixth annual Sohn Hearts & Minds Investment Leaders Conference on December 3, he’ll have no shortage of topics on which to train his legendarily acerbic wit.

An unprecedented M&A boom, sky-high equity valuations, special-purpose acquisition companies (SPACs), bitcoin, GameStop – Munger’s immortal line that “if you mix raisins with turds, they’re still turds” has never seemed more apt.

But conference co-founder and Barrenjoey co-executive chairman Guy Fowler says there’s one question Munger sensibly won’t answer: what comes next.

Berkshire Hathaway duo Warren Buffett and Charlie Munger

“I don’t know, and I don’t think anyone does,” he says. “And that’s why Charlie is so good because he wouldn’t profess to know. He would just say that I have a portfolio of companies that I know are going to be better in 20 years than they are today.”

Fowler, his two conference co-founders Matthew Grounds (also co-executive chairman of Barrenjoey) and Gary Weiss, and Chris Cuffe – who chairs the $1 billion listed investment company set up to allow ASX investors to back the stock picks made each year at the conferences by top local and international fund managers – have pulled off an incredible coup in securing Munger.

The 97-year-old investment icon, who has helped Warren Buffett run Berkshire Hathaway for 46 years, will be interviewed by Caledonia Investments’ Mark Nelson, who has formed a bond with the famed investor during frequent visits to the US for Berkshire’s annual general meeting.

The pandemic might have again cruelled hopes of holding the conference in person, but Cuffe says one benefit of a virtual event is that it does open the door to securing overseas talent (Munger isn’t likely to have made the trek to Australia at his age).

With ticket prices slashed from $3500 to $500 due to the virtual format, the conference is surely set for a record-breaking year that will build on the $30 million the event has so far raised for medical research through the conference and the management of the LIC, which has returned 102 per cent since the market’s trough in March 2020, versus a 50 per cent gain for the ASX 200.

While Munger is as active as ever in markets – it was revealed in recent days he’s upped his bet on beaten down Chinese giant Alibaba – it is the immovable values he has placed at the centre of his career that Grounds, Fowler and Cuffe most want to hear about.

“The whole investment world these days, and for decades really, has been obsessed with monthly returns, quarterly returns, whatever,” Cuffe says. “But the secret to good investing has always been long term, and that’s why B1 and B2 [Buffett and Munger] are at the top of the list as far as I’m concerned.”

The overarching lesson for the trio from Munger’s career is one of patience.

“He’s got principles and philosophies with which he invests that transcend any market cycle ... and they’re very valuable to hear and learn,” Fowler says.

Asked for his favourite Munger quote, Grounds nominates a classic: “There are huge mathematical advantages in doing nothing.”

Cuffe’s pick is along similar lines: “The big money is not in the buying or the selling, but in the waiting.”

Fowler’s favourite quote could apply equally to investors and columnists: “Knowing what you don’t know is more useful than being brilliant.”

This article was originally posted by The AFR here.

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