Monish Pabloe: Munger takes simple ideas seriously

Text丨Li Jian

Editor丨Li Zhuang

On March 20, Monish Pable, an investor of Indian origin, was interviewed by YPO. He talked about his friendship with Charlie Munger and the wisdom he learned from the late investor.

Monish mentioned that the day before Charlie died, he was still thinking about making one last donation for a nonprofit in the hospital. "Until the last day, he tried to help others as much as he could, out of his mind and body. His family accompanies him in the hospital, but he still helps some nonprofits. ”

Monish praised Charlie for his shining trait, which is that he can skillfully guide others in judging things. For example, Warren Buffett's imprint on the price will surface from time to time, and Munger will see it, but he will not say it to his face. He will skillfully guide people to feel that this is their own idea.

The stars have fallen, but through Monish's experience and perspective, we can continue to feel Munger's wisdom and ethics. This issue will share with readers an excerpt of the highlights of the dialogue.

"Clone Master" has a natural advantage in the investment world

Robert Pittenger: First of all, Charlie Munger said, "Take a simple idea seriously. Can you talk about what that means, what does Charlie mean by that, and how do you apply it to your life and investments?

Monish Pabolai: I learned early on about the power of cloning and replication.

I came across a book by Tom Peters that wrote, "I think the most incredible thing is that you can go directly to your competitor, sit down with him, tell him all the conditions for you to get an advantage, and they'll listen to you, but the behavior won't change." When I read that, I thought it was ridiculous, the world couldn't work this way.

I was in my twenties at the time and didn't know how things worked, but I had to prove Tom Peters wrong. I'm going to look for a clever way to do it and replicate it. And every time I see someone doing something smart, I copy it, and that proves him wrong.

From being in my twenties to now almost sixty, I've found that most of the time Tom Peters is right. I don't know exactly why, but humans have a natural aversion to cloning. They think that if they didn't come up with the idea, they would lose their identity.

A very small number of people are clones, and these people own the whole world. For example, almost everything at Microsoft is cloned. Microsoft's labs cost billions of dollars and got nothing. Their successful experiences are: Lotus to create Excel, WordPerfect to create Word, Mac to create Windows, and so on. Even now, OpenAI is outstanding in the field of artificial intelligence, Google invests a lot of money in R&D, and Microsoft does not do any work, but it is ahead of the curve.

James Sinegal, the former CEO of Costco, cloned the whole model from his colleague Sol Price. He was asked, "What did you learn from Saul Price?" and he replied, "That's the wrong question." Everything I know is from Thor. ”

Whether it's Charlie or Warren, their success comes from a persistent pursuit of a few simple ideas. For example, in the '70s, when they bought Joy Candy in California, they made a leapfrog decision where they paid three times the book value for the company. They think they're spending too much money, and they don't really understand how good the business is.

The only thing Warren does each year is to let management run the company on its own. However, on January 1 of each year, he raises the price of candy to be significantly higher than the inflation rate. For example, if inflation is 3%, he raises prices by 10%, and the next year inflation is 3% or 4%, he raises by another 10%.

To his surprise, he continued to raise prices sharply, while unit sales continued to rise. He was stunned that businesses could have such powerful pricing power. Neither Warren nor Charlie knew about brands or the power of them, but they had a deep understanding of "what is this phenomenon? What does this mean? How can we apply this to other businesses?"

Today, we see that this is crucial for Berkshire. So once you make up your mind and persistently pursue simple ideas, there will be many good results.

Charlie is an excellent persuader

Robert Pitanger: How did Charlie change Warren's investment thinking over the years?

Monish Pabelai: Charlie's extraordinary thing is that he lets Warren go at his own pace. He never criticized Warren for any of the decisions he made. To this day, Warren is deeply engraved with the price imprint, which emerges from time to time. Charlie will see this, but will not say it to his face.

Interestingly, Charlie has been on the Costco Board for almost three decades. He also serves on the boards of institutions such as Harvard-Westlake School in Los Angeles, the University of California, Berkeley, Stanford University, or the University of Michigan. His charm lies in his ability to improve these institutions without making them feel imposed. Charlie steered the business in another direction in a persuasive way, and the management didn't even realize that he was being persuaded.

On March 10th, I met James Sineggle, the founder of Costco, at the Charlie Memorial. I asked him, "Charlie has been on the board for thirty years. Can you point out how Costco is different from when Charlie is away?" he couldn't think of any different, because Charlie guided them to change in such a subtle way that they thought it was their own idea.

Costco is not a retailer, but a purchasing agent for a customer, which is a very different way of thinking, and it's amazing that Charlie reinforces that mindset so that management doesn't even realize the impact.

Robert Pitanger: A few years ago, you invested in some companies in Turkey, and no one was paying attention to Turkey at the time. I'm curious, have you reported these investments to Charlie, and what does Charlie think about your investments.

Monish Pablé: Every time I mention Turkey to him, he is pessimistic. He would immediately say, "I don't want to do this." I don't want to hear it. "But I insisted on telling Charlie that we have a cola bottling plant in Turkey. Because I know Charlie knows a lot about the Coke business, and they're the majority shareholder of Coca-Cola. I said, "Charlie, tell me, how will I lose money this time?" and he replied, "It will work." I said, "But you're too pessimistic." He said, "No, it will work." "I saw a change in his attitude.

His idea of investing in Turkey is that investing in Turkey is a very hard thing for him to do a lot of work, a lot of travel, and a lot of work. But I guess I'm going to concentrate because we're in an industry where there's no strikeout. It's not like baseball, where strikeouts go and you can pass by with countless good balls.

It doesn't matter if Charlie says "no" to Turkey and Turkey performs well. It's important that he doesn't say "yes" to things that are not done well. This is his principle. Regarding Turkey, I finally got him to move, and it's pretty good.

Simple ideas but taken seriously

Robert Pitanger: Can you talk about his sense of humor? I heard that he still had a sense of humor when he was hospitalized for the last time.

Monish Pablé: He was joking with the nurse, and the nurse asked him, "How are you?" and he said, "Oh, I'm dying, what about you?"

Just a month before Charlie died, I had his last dinner with him. I didn't know that this would be the last time I would see him. It was just the two of us at that dinner, and it was a Saturday at his house. His mind is still very sharp, but he told me that there are a lot of problems with his body. The day before he died, he was in the hospital making donations for a non-profit organization. I don't think Charlie believes in God, he's agnostic. He doesn't believe in what happens after death, he believes it's what happens after death.

In an interview he gave before his death, the host asked him, "If someone were to write a sentence on your tombstone, what would you want to write?" and he said, "I try to be a useful person." It was a simple idea, but he took it very seriously. Until the last day, he poured everything into his body and mind. On his last day, his family was with him, but he was still trying to help some nonprofits.

I'm going to tell you an interesting story with some very good truths. I used to play bridge with Charlie at the Los Angeles Country Club. He plays bridge every Friday, and I play bridge with him and his friends once or twice a month. Normally, we have lunch at the Los Angeles Country Club restaurant around 12:30. The food and environment there were lovely. Then we'll go and play bridge for three to four hours.

At one point, I was sitting at a table of four, and across from me were Charlie Munger and Rick Guerin. They are very good friends. It was Rick who brought them to their attention to the Joy Candy. I told them, "You think it's just a bridge game, a lunch, but for me, it's an iconic moment." An Indian from the outskirts of Mumbai sits with two great figures from history. Even if you don't think so, that's what it is for me. ”

Robert Pitanger: How did Charlie manage the assets he left behind?

Monish Pabloe: In 2010, Charlie's wife had an accident and she fell down the stairs from her home in Minnesota. She had a lot of surgeries and then passed away. She had always wanted to leave half of her fortune to her eight children, and the year she died happened to be the only year in the U.S. tax code where there was no estate tax. At the time, Charlie's net worth was around $2 billion. At the time, he gave about $125 million to each of his children in the form of Berkshire stock, which could now be worth about $400 million.

From a philanthropic standpoint, the kids do a lot of amazing things. Their achievements are impressive. Also, Charlie once told me that he wanted to donate the money. He made a lot of different types of donations. I think that by the time he died, the donations would have been in the billions. I don't know what he's going to do with the money, and I don't think he's going to leave more money for the kids. He must have planned something, but I don't know.

(This article has been published in the April 27 issue of Securities Market Weekly, and the article only represents the author's views and does not represent the position of this journal.) The individual stocks mentioned in this article are for analysis only and do not constitute investment advice. ）