WEBVTT 00:00:00.000 --> 00:00:02.980 Welcome to the Deep Dive. Today, we are taking 00:00:02.980 --> 00:00:05.679 on a titan whose influence shaped how, well, 00:00:05.719 --> 00:00:08.080 how billions and billions of dollars are invested, 00:00:08.240 --> 00:00:11.779 yet whose name is. It's often relegated to a 00:00:11.779 --> 00:00:14.660 footnote. When most people hear the name Charlie 00:00:14.660 --> 00:00:17.399 Munger, they immediately think, oh, right, that 00:00:17.399 --> 00:00:19.280 was Warren Buffett's longtime partner. That's 00:00:19.280 --> 00:00:21.539 the one, yeah. And while that is, you know, factually 00:00:21.539 --> 00:00:24.079 true, he was absolutely instrumental in building 00:00:24.079 --> 00:00:26.339 the greatest investment vehicle in history, Berkshire 00:00:26.339 --> 00:00:29.100 Hathaway. That definition just completely undersells 00:00:29.100 --> 00:00:31.530 the man. It absolutely does. It undersells his 00:00:31.530 --> 00:00:34.289 monumental impact, his own independent career, 00:00:34.450 --> 00:00:37.810 and just the unique, the architecture of his 00:00:37.810 --> 00:00:39.710 thinking. Right. Charlie Munger, who was born 00:00:39.710 --> 00:00:42.890 on New Year's Day, 1924, and passed away in November 00:00:42.890 --> 00:00:46.350 2023, just shy of his 100th birthday, he was 00:00:46.350 --> 00:00:48.369 so much more than a business partner. So much 00:00:48.369 --> 00:00:51.229 more. I mean, to even label him just as an investor 00:00:51.229 --> 00:00:53.479 is kind of a disservice. He was an attorney, 00:00:53.600 --> 00:00:56.560 a highly disciplined financial manager, a philanthropist, 00:00:56.560 --> 00:00:58.840 and I think crucially, a synthesizing philosopher 00:00:58.840 --> 00:01:02.100 whose whole output was dedicated to identifying 00:01:02.100 --> 00:01:06.280 and exploiting human irrationality. That is precisely 00:01:06.280 --> 00:01:09.280 our mission today. We dove deep into the source 00:01:09.280 --> 00:01:12.500 material, the detailed biography, his legal career 00:01:12.500 --> 00:01:15.459 track, those often overlooked early performance 00:01:15.459 --> 00:01:18.299 numbers, and of course, his famous collected 00:01:18.299 --> 00:01:21.200 wisdom to synthesize the story of Munger's life. 00:01:22.159 --> 00:01:24.579 Our goal is to find out why Buffett himself called 00:01:24.579 --> 00:01:26.819 Munger the architect of the modern Berkshire 00:01:26.819 --> 00:01:29.900 Hathaway business philosophy. It was Munger who 00:01:29.900 --> 00:01:32.519 drove that crucial conceptual pivot, the one 00:01:32.519 --> 00:01:35.000 that turned Berkshire from a traditional deep 00:01:35.000 --> 00:01:37.980 value firm into the diversified powerhouse we 00:01:37.980 --> 00:01:40.659 know today. And to truly contextualize Munger's 00:01:40.659 --> 00:01:42.879 significance, you have to appreciate the sheer 00:01:42.879 --> 00:01:45.659 breadth of his simultaneous roles. He served 00:01:45.659 --> 00:01:47.319 as the vice chairman of Berkshire Hathaway from 00:01:47.319 --> 00:01:50.010 1978 until he died. That's the one everyone knows. 00:01:50.170 --> 00:01:51.390 That's the headline, yeah. That's the headline. 00:01:51.549 --> 00:01:53.790 But for decades, he was also running Wesco Financial 00:01:53.790 --> 00:01:56.870 Corporation as its chairman, serving as the chairman 00:01:56.870 --> 00:01:59.189 of the Daily Journal Corporation. And he was 00:01:59.189 --> 00:02:00.769 a founding partner of the revered California 00:02:00.769 --> 00:02:04.390 law firm Munger, Tolis, and Olson. So he's operating 00:02:04.390 --> 00:02:06.670 in law, publishing, and finance all at the same 00:02:06.670 --> 00:02:09.830 time. All at once. All while serving as Buffett's 00:02:09.830 --> 00:02:12.449 chief intellectual writer. He was the man Buffett 00:02:12.449 --> 00:02:16.129 depended on to challenge and really refine his 00:02:16.129 --> 00:02:19.090 own ideas. So the big question for you, the learner, 00:02:19.210 --> 00:02:22.669 is this. How did a successful lawyer and financial 00:02:22.669 --> 00:02:26.259 analyst pivot? to create a philosophical framework, 00:02:26.560 --> 00:02:30.120 what he called elementary worldly wisdom, that 00:02:30.120 --> 00:02:32.300 just fundamentally changed how some of the world's 00:02:32.300 --> 00:02:35.139 most successful investors think about risk, decision 00:02:35.139 --> 00:02:37.439 -making, and opportunity. Right. How do you build 00:02:37.439 --> 00:02:39.500 something like that? How do you create an intellectual 00:02:39.500 --> 00:02:42.219 model that lasts for generations? His approach 00:02:42.219 --> 00:02:44.620 was a true intellectual latticework. I mean, 00:02:44.639 --> 00:02:47.180 he constructed it piece by piece, drawing models 00:02:47.180 --> 00:02:49.680 not just from finance, but from physics, biology, 00:02:50.039 --> 00:02:52.500 psychology, history. He insisted that the most 00:02:52.500 --> 00:02:54.919 complex problems in one field often yield to 00:02:54.919 --> 00:02:57.439 pretty simple solutions from another. So we're 00:02:57.439 --> 00:02:59.180 going to trace that path. We are. We're going 00:02:59.180 --> 00:03:01.080 to trace that path, starting with the formative 00:03:01.080 --> 00:03:02.939 years that shaped his fundamental discipline. 00:03:03.240 --> 00:03:05.159 Okay, let's unpack this and trace the beginnings 00:03:05.159 --> 00:03:07.340 of that framework, starting right back in Omaha 00:03:07.340 --> 00:03:11.060 and his really unexpected educational trajectory. 00:03:11.680 --> 00:03:14.400 When we look at Munger's early life, you see 00:03:14.400 --> 00:03:17.139 this immediate establishment of... deep roots 00:03:17.139 --> 00:03:19.639 and a tradition of rigor. Charlie Munger was 00:03:19.639 --> 00:03:22.900 born in Omaha, Nebraska on January 1st, 1924. 00:03:23.400 --> 00:03:26.039 And right away, we see the foundation of his 00:03:26.039 --> 00:03:28.120 lifelong connections to power and structure. 00:03:28.379 --> 00:03:31.340 His grandfather, Thomas Charles Munger, was a 00:03:31.340 --> 00:03:33.900 highly prominent figure in the region. He was 00:03:33.900 --> 00:03:36.199 a U .S. District Court judge appointed by none 00:03:36.199 --> 00:03:39.439 other than President Theodore Roosevelt. Wow. 00:03:39.599 --> 00:03:42.599 So that suggests a pretty early exposure to high 00:03:42.599 --> 00:03:44.699 -level decision -making and legal structure, 00:03:44.800 --> 00:03:47.199 right? Absolutely. And this Omaha connection 00:03:47.199 --> 00:03:51.400 is deeper and more personal than just the legal 00:03:51.400 --> 00:03:52.759 lineage. Right. There's the Buffett connection. 00:03:53.000 --> 00:03:55.379 Exactly. When he was a teenager, Munger actually 00:03:55.379 --> 00:03:57.639 worked a job, which he reportedly found incredibly 00:03:57.639 --> 00:04:00.360 boring, at a local grocery store called Buffett 00:04:00.360 --> 00:04:02.560 and Son. And the owner of that store was Ernest 00:04:02.560 --> 00:04:04.300 P. Buffett, who was Warren Buffett's grandfather. 00:04:04.939 --> 00:04:07.560 Exactly. So while the two future partners wouldn't 00:04:07.560 --> 00:04:09.819 truly meet and connect until much, much later, 00:04:09.919 --> 00:04:12.599 after Munger had established his own career path 00:04:12.599 --> 00:04:15.080 out in California, the roots of their shared 00:04:15.080 --> 00:04:18.420 Midwestern background and their intertwined family 00:04:18.420 --> 00:04:20.579 histories were already there. They were established 00:04:20.579 --> 00:04:23.180 in Nebraska soil. But his formal education path 00:04:23.180 --> 00:04:25.879 was anything but traditional or linear, which 00:04:25.879 --> 00:04:28.720 I think speaks volumes about his eventual intellectual 00:04:28.720 --> 00:04:31.819 curiosity and his willingness to just pivot. 00:04:31.939 --> 00:04:34.350 Yeah, you see that right away. He initially started 00:04:34.350 --> 00:04:36.009 at the University of Michigan studying mathematics, 00:04:36.230 --> 00:04:38.370 a field that, you know, clearly instilled the 00:04:38.370 --> 00:04:40.610 logical rigor essential to his later models. 00:04:40.949 --> 00:04:43.170 But the outbreak of the Second World War quickly 00:04:43.170 --> 00:04:46.370 changed his course. He dropped out in 1943 at 00:04:46.370 --> 00:04:48.610 the age of 19 to serve in the U .S. Army Air 00:04:48.610 --> 00:04:50.970 Corps. He eventually earned the rank of second 00:04:50.970 --> 00:04:54.050 lieutenant. His military service, though, provided 00:04:54.050 --> 00:04:56.949 this absolutely crucial and unexpected academic 00:04:56.949 --> 00:04:59.970 detour that really set the stage for his West 00:04:59.970 --> 00:05:03.509 Coast life. How so? Well, Munger received a notably 00:05:03.509 --> 00:05:05.490 high score on the Army General Classification 00:05:05.490 --> 00:05:07.970 Test, which was a standardized psychological 00:05:07.970 --> 00:05:10.949 and aptitude test they used to determine assignments. 00:05:11.310 --> 00:05:14.769 And this high score led to him being ordered 00:05:14.769 --> 00:05:17.290 to study meteorology at Caltech in Pasadena, 00:05:17.310 --> 00:05:21.170 California. And Pasadena ended up becoming his 00:05:21.170 --> 00:05:24.069 adopted hometown. It's where he would live for 00:05:24.069 --> 00:05:27.069 most of his adult life, raise his family, and 00:05:27.069 --> 00:05:29.600 build his financial empire. So it was a completely 00:05:29.600 --> 00:05:33.620 unplanned geographic and intellectual pivot dictated 00:05:33.620 --> 00:05:35.920 entirely by his test scores and the demands of 00:05:35.920 --> 00:05:38.040 the war. That's amazing. It really highlights 00:05:38.040 --> 00:05:40.160 his early adaptability, doesn't it? And it's 00:05:40.160 --> 00:05:42.860 the legal mind, the lawyer's mind that truly 00:05:42.860 --> 00:05:45.529 shaped his eventual financial rigor. After the 00:05:45.529 --> 00:05:48.009 war, he hadn't completed his undergraduate degree, 00:05:48.170 --> 00:05:50.670 having dropped out of Michigan. But he was determined 00:05:50.670 --> 00:05:52.870 to apply to his father's alma mater, Harvard 00:05:52.870 --> 00:05:55.250 Law School, one of the most prestigious legal 00:05:55.250 --> 00:05:57.569 programs in the world. The audacity of that, 00:05:57.670 --> 00:05:59.829 even back then, applying without a completed 00:05:59.829 --> 00:06:02.470 undergrad degree, it was just immense. And he 00:06:02.470 --> 00:06:04.250 was initially rejected by the dean of admissions 00:06:04.250 --> 00:06:06.949 for that exact reason. Of course. But here is 00:06:06.949 --> 00:06:09.410 one of those great early anecdotes that confirms 00:06:09.410 --> 00:06:13.800 the value of relationships and tenacity. The 00:06:13.800 --> 00:06:16.319 dean of admissions relented after a call came 00:06:16.319 --> 00:06:19.680 in from a powerful family friend, the former 00:06:19.680 --> 00:06:22.920 dean of Harvard Law, Roscoe Pound. A pretty good 00:06:22.920 --> 00:06:25.199 person to have in your corner. A very good person. 00:06:25.959 --> 00:06:28.480 Munger was admitted, and once he was given the 00:06:28.480 --> 00:06:32.000 chance, he absolutely excelled. He became a member 00:06:32.000 --> 00:06:33.920 of the Harvard Legal Aid Bureau and graduated 00:06:33.920 --> 00:06:36.860 in 1948 with a Juris Doctor degree, receiving 00:06:36.860 --> 00:06:39.759 magna cum laude honors. So the speed and quality 00:06:39.759 --> 00:06:42.220 of his work just spoke for itself. It really 00:06:42.220 --> 00:06:45.240 did. So he clearly had the intelligence, but 00:06:45.240 --> 00:06:47.399 he used his legal education not just to practice 00:06:47.399 --> 00:06:49.939 law, but to refine his thinking into a system. 00:06:50.120 --> 00:06:52.600 He settled in California and was a founding partner 00:06:52.600 --> 00:06:55.560 of Munger, Tullis and Olson in 1962, which quickly 00:06:55.560 --> 00:06:58.180 became, and it remains, a hugely successful and 00:06:58.180 --> 00:07:01.279 respected firm. But he quit law in 1965. Right. 00:07:01.319 --> 00:07:03.279 He quits to focus entirely on managing investments. 00:07:03.680 --> 00:07:05.860 It sounds like law gave him the essential structure, 00:07:06.000 --> 00:07:08.300 that ability to identify holes in arguments and 00:07:08.300 --> 00:07:10.779 weaknesses in systems. But investing offered 00:07:10.779 --> 00:07:13.800 the philosophical challenge. That's the perfect 00:07:13.800 --> 00:07:16.800 distinction. Law teaches you how to think critically, 00:07:16.939 --> 00:07:19.300 how to identify risks and hidden liabilities, 00:07:19.560 --> 00:07:21.740 and how to argue from multiple perspectives. 00:07:22.139 --> 00:07:25.139 All skills that are necessary for analyzing a 00:07:25.139 --> 00:07:28.279 business. But Munger himself credited his core 00:07:28.279 --> 00:07:30.959 business success not just to his legal background, 00:07:31.139 --> 00:07:34.930 but to an even earlier pursuit. Card playing. 00:07:35.050 --> 00:07:38.410 Ah, the poker player's rulebook for business. 00:07:38.829 --> 00:07:41.649 This is where we get the first real glimpse of 00:07:41.649 --> 00:07:44.329 his core strategy, this asymmetry of opportunity, 00:07:44.550 --> 00:07:46.850 which is just central to everything he later 00:07:46.850 --> 00:07:48.889 taught. He developed this skill during his time 00:07:48.889 --> 00:07:51.290 in the army and in college. Munger didn't view 00:07:51.290 --> 00:07:54.329 card playing as gambling. He saw it as a transferable 00:07:54.329 --> 00:07:56.569 lesson in probability and capital management, 00:07:56.649 --> 00:07:58.689 which is essential for business and investing. 00:07:59.149 --> 00:08:01.290 And he distilled it down into a rule book. He 00:08:01.290 --> 00:08:03.589 did. He distilled this learning into what became 00:08:03.589 --> 00:08:06.009 his fundamental rule book. And it's beautifully 00:08:06.009 --> 00:08:08.750 simple in its articulation. He said, what you 00:08:08.750 --> 00:08:11.089 have to learn is to fold early when the odds 00:08:11.089 --> 00:08:13.550 are against you. Or if you have a big edge, back 00:08:13.550 --> 00:08:15.350 it heavily because you don't get a big edge often. 00:08:15.980 --> 00:08:18.139 Opportunity comes, but it doesn't come often, 00:08:18.199 --> 00:08:20.439 so seize it when it does come. That is a philosophy 00:08:20.439 --> 00:08:23.040 that just flies in the face of modern portfolio 00:08:23.040 --> 00:08:26.639 theory, which often preaches constant activity 00:08:26.639 --> 00:08:29.040 and broad diversification. Completely. Munger's 00:08:29.040 --> 00:08:31.839 approach is such a clear, almost brutally rational 00:08:31.839 --> 00:08:34.899 philosophy. It's focused on patience and concentration. 00:08:35.379 --> 00:08:37.879 It's not about playing every hand. It's about 00:08:37.879 --> 00:08:41.019 rigorously reserving your energy and your capital 00:08:41.019 --> 00:08:43.840 for the few times the odds are overwhelmingly 00:08:43.840 --> 00:08:47.009 mathematically. in your favor. And that focus 00:08:47.009 --> 00:08:50.750 on rarity and value led him to directly criticize 00:08:50.750 --> 00:08:54.149 the prevalent trading mentality. He argued that 00:08:54.149 --> 00:08:55.929 treating company shares like baseball cards, 00:08:56.070 --> 00:08:59.269 meaning frequent high volume trading based on 00:08:59.269 --> 00:09:01.549 predicting short term market movements, is a 00:09:01.549 --> 00:09:03.610 guaranteed losing strategy over the long run. 00:09:03.690 --> 00:09:05.710 Yeah. He asked, why would you spend your life 00:09:05.710 --> 00:09:07.830 trying to predict the irrational behavior of 00:09:07.830 --> 00:09:10.289 emotional human beings? Exactly. He wanted to 00:09:10.289 --> 00:09:13.000 focus on. deep intrinsic value, consistency of 00:09:13.000 --> 00:09:15.700 quality and holding power, not market sentiment 00:09:15.700 --> 00:09:18.720 or, you know, fleeting excitement. He realized 00:09:18.720 --> 00:09:20.360 early on that if you don't have an edge, you 00:09:20.360 --> 00:09:22.399 shouldn't play. And most people, he believed, 00:09:22.500 --> 00:09:24.960 don't have an edge most of the time. This philosophical 00:09:24.960 --> 00:09:27.580 rejection of frequent trading rooted in the poker 00:09:27.580 --> 00:09:30.600 table immediately leads us into his early career 00:09:30.600 --> 00:09:33.080 as an investor and the pivotal shift that eventually 00:09:33.080 --> 00:09:37.029 united him with Buffett. This philosophy. patience, 00:09:37.029 --> 00:09:39.470 concentration, and just backing your best ideas, 00:09:39.649 --> 00:09:42.090 it immediately leads us into the next phase of 00:09:42.090 --> 00:09:44.490 his life, his transition to full -time investment 00:09:44.490 --> 00:09:47.730 management. We'll call this the shift to concentrated 00:09:47.730 --> 00:09:50.919 investment and the pivotal... Berkshire partnership. 00:09:51.240 --> 00:09:52.899 Right. And it's so important to remember that 00:09:52.899 --> 00:09:55.220 Munger wasn't immediately linked to Buffett's 00:09:55.220 --> 00:09:58.279 growing empire. He was building his own stellar 00:09:58.279 --> 00:10:01.059 independent track record first. He was a superstar 00:10:01.059 --> 00:10:04.120 in his own right. He absolutely was. In 1962, 00:10:04.440 --> 00:10:06.919 the same year he co -founded his law firm, he 00:10:06.919 --> 00:10:09.039 also formed an investment firm called Wheeler, 00:10:09.080 --> 00:10:11.440 Munger and Company. And the performance numbers 00:10:11.440 --> 00:10:13.500 from that era, I mean, they cover a period that 00:10:13.500 --> 00:10:15.980 included significant market upheaval. And they're 00:10:15.980 --> 00:10:17.840 truly astounding. They're often overshadowed 00:10:17.840 --> 00:10:19.730 by the later Berkshire fame. What are we talking 00:10:19.730 --> 00:10:21.669 about, numbers -wise? So, during the period of 00:10:21.669 --> 00:10:24.789 1962 through 1975, Munger's partnership generated 00:10:24.789 --> 00:10:30.360 compound annual returns of 19 .8%. 19 .8%. We 00:10:30.360 --> 00:10:32.840 need to unpack that for the listener, because 00:10:32.840 --> 00:10:34.960 that is a massive number, especially when it's 00:10:34.960 --> 00:10:37.500 compounded over 14 years. We're talking about 00:10:37.500 --> 00:10:40.379 the compound annual growth rate, or CAGR, and 00:10:40.379 --> 00:10:42.539 it essentially means that on average, year after 00:10:42.539 --> 00:10:45.200 year, the value of that partnership grew by nearly 00:10:45.200 --> 00:10:47.679 a fifth. Exactly. And that compounding effect 00:10:47.679 --> 00:10:50.279 is what generates true wealth. When you compare 00:10:50.279 --> 00:10:54.320 Munger's 19 .8 % CAGR to the Dow Jones Industrial 00:10:54.320 --> 00:10:57.240 Average's annual appreciation rate of just 5 00:10:57.240 --> 00:10:59.440 .0 % during that exact year, exact same period? 00:10:59.899 --> 00:11:02.340 Well, it's a stark difference. He was generating 00:11:02.340 --> 00:11:04.940 nearly four times the market return. That isn't 00:11:04.940 --> 00:11:07.419 just luck. No, that's proof right there that 00:11:07.419 --> 00:11:09.519 Munger was a super investor in his own right, 00:11:09.659 --> 00:11:12.240 achieving market defying success through his 00:11:12.240 --> 00:11:14.860 specific concentrated approach. And that remarkable 00:11:14.860 --> 00:11:17.179 performance was so notable that Buffett dedicated 00:11:17.179 --> 00:11:20.100 a section of his famous 1984 essay, The Super 00:11:20.100 --> 00:11:22.019 Investors of Graham and Doddsville, specifically 00:11:22.019 --> 00:11:24.460 to Munger's results. Munger was living proof 00:11:24.460 --> 00:11:26.980 that superior long -term returns could be achieved 00:11:26.980 --> 00:11:29.279 by focusing on inherent value and avoiding the 00:11:29.279 --> 00:11:31.799 market's emotional swings. But the journey wasn't 00:11:31.799 --> 00:11:35.019 a straight line up. I mean, that 19 .8 % CAGR 00:11:35.019 --> 00:11:38.059 was achieved through tremendous volatility. The 00:11:38.059 --> 00:11:40.019 sources show he wound down the partnership in 00:11:40.019 --> 00:11:43.059 1976 after significant back -to -back losses. 00:11:43.600 --> 00:11:47.120 percent in 1973 and another 31 percent in 1974. 00:11:47.500 --> 00:11:50.679 Oof. Those were extremely turbulent years for 00:11:50.679 --> 00:11:52.919 the stock market, right? Oil crisis, high inflation. 00:11:53.059 --> 00:11:55.379 But those losses really underscored the risks 00:11:55.379 --> 00:11:57.759 inherent in the highly concentrated investing. 00:11:58.059 --> 00:12:01.100 They do. It must have been a painful exit. dissolving 00:12:01.100 --> 00:12:03.480 the partnership right after such large drawdowns. 00:12:03.500 --> 00:12:05.779 Yeah, but it highlights his underlying rational 00:12:05.779 --> 00:12:08.120 discipline. I mean, did the dissolution signal 00:12:08.120 --> 00:12:10.679 a failure or was it a calculated retreat based 00:12:10.679 --> 00:12:12.860 on his poker philosophy? I think it signaled 00:12:12.860 --> 00:12:14.679 a recognition that conditions were changing and 00:12:14.679 --> 00:12:16.559 the best opportunities had dried up for that 00:12:16.559 --> 00:12:19.600 specific vehicle. But crucially, in that same 00:12:19.600 --> 00:12:22.200 period, he also showed his long -term conviction 00:12:22.200 --> 00:12:25.679 power in a contrasting move. The anecdote of 00:12:25.679 --> 00:12:27.659 liquidating Mitchum, Jones and Templeton. Right. 00:12:27.840 --> 00:12:30.100 He bought control of this publicly traded competitor 00:12:30.100 --> 00:12:32.299 of Wheeler Munger at three dollars a share, took 00:12:32.299 --> 00:12:34.980 a private and 10 years later liquidated it at 00:12:34.980 --> 00:12:36.980 one hundred and eighty dollars per share. A 60 00:12:36.980 --> 00:12:41.000 fold gain over a decade. That is the big edge. 00:12:41.139 --> 00:12:44.559 Back it heavily. Poker principle and pure action 00:12:44.559 --> 00:12:47.879 applied over a long horizon, ignoring all the 00:12:47.879 --> 00:12:50.159 short -term noise. It perfectly illustrates the 00:12:50.159 --> 00:12:52.820 idea that Munger could tolerate short -term volatility 00:12:52.820 --> 00:12:55.659 or even the dissolution of a partnership if he 00:12:55.659 --> 00:12:57.919 believed in the ultimate fundamental value of 00:12:57.919 --> 00:13:00.860 the underlying business. This principle of buying 00:13:00.860 --> 00:13:03.899 deeply undervalued yet sound businesses became 00:13:03.899 --> 00:13:06.820 the lifeblood of his next major vehicle, Wesco 00:13:06.820 --> 00:13:09.509 Financial Corporation. Wesco was essentially 00:13:09.509 --> 00:13:11.769 the Munger sandbox, wasn't it? It's where he 00:13:11.769 --> 00:13:13.309 applied the philosophy that would eventually 00:13:13.309 --> 00:13:15.889 define modern Berkshire. He was the chairman 00:13:15.889 --> 00:13:19.269 from 1984 through 2011, and it eventually became 00:13:19.269 --> 00:13:21.870 a wholly owned Berkshire subsidiary. Right. And 00:13:21.870 --> 00:13:24.029 it started out simply as a savings and loan association 00:13:24.029 --> 00:13:27.259 headquartered in Pasadena. But Munger used it 00:13:27.259 --> 00:13:29.220 as an intellectual and financial platform to 00:13:29.220 --> 00:13:31.679 acquire and operate diverse ventures, demonstrating 00:13:31.679 --> 00:13:33.860 the nascent Berkshire model on a smaller, more 00:13:33.860 --> 00:13:36.320 centralized scale. So he used the float. He used 00:13:36.320 --> 00:13:38.379 the float, the cash generated from the insurance 00:13:38.379 --> 00:13:41.100 operations and the S &L to purchase operating 00:13:41.100 --> 00:13:43.659 companies and marketable securities. It came 00:13:43.659 --> 00:13:46.220 to control Cort Furniture Leasing, Precision 00:13:46.220 --> 00:13:48.980 Steel Corp. and Kansas Bankers Shorty Company. 00:13:49.559 --> 00:13:51.620 Among others. And most importantly, the Wesco 00:13:51.620 --> 00:13:54.320 equity portfolio became this famous proving ground 00:13:54.320 --> 00:13:57.679 for his concentration strategy. Absolutely. The 00:13:57.679 --> 00:14:00.720 Wesco equity portfolio held over a billion and 00:14:00.720 --> 00:14:03.919 a half dollars in concentrated investments. And 00:14:03.919 --> 00:14:05.720 these weren't speculative growth stocks. They 00:14:05.720 --> 00:14:08.860 were a who's who of American blue chips that 00:14:08.860 --> 00:14:11.639 Munger knew intimately. Coca -Cola, Wells Fargo, 00:14:11.759 --> 00:14:14.440 Procter & Gamble, Goldman Sachs. Kraft Foods, 00:14:14.679 --> 00:14:17.889 U .S. Bancorp. All of them. This portfolio was 00:14:17.889 --> 00:14:19.850 the practical demonstration of Munger's core 00:14:19.850 --> 00:14:22.669 belief. Holding a concentrated number of stocks 00:14:22.669 --> 00:14:24.970 companies, he knew extremely well and understood 00:14:24.970 --> 00:14:27.809 the intrinsic value of a wood produce, superior 00:14:27.809 --> 00:14:30.309 long -term returns while minimizing risk. He 00:14:30.309 --> 00:14:32.710 famously said, you don't need 50 stocks. You 00:14:32.710 --> 00:14:34.789 need five great ones and you need to know everything 00:14:34.789 --> 00:14:37.370 about them. That was his whole philosophy. And 00:14:37.370 --> 00:14:39.529 the Wesco annual meetings in Pasadena became 00:14:39.529 --> 00:14:43.129 legendary because they provided this unvarnished 00:14:43.129 --> 00:14:46.149 view into Munger's mind, independent of the huge 00:14:46.149 --> 00:14:49.070 spectacle of the Omaha meeting. They were basically 00:14:49.070 --> 00:14:52.409 mini Omaha meetings, but maybe more intimate 00:14:52.409 --> 00:14:54.929 and intellectually rigorous. I think that's a 00:14:54.929 --> 00:14:57.370 great way to put it. The sources describe Munger 00:14:57.370 --> 00:14:59.389 interacting with shareholders at considerable 00:14:59.389 --> 00:15:02.309 length, sometimes speculating on weighty moral 00:15:02.309 --> 00:15:04.809 and financial issues, like what Benjamin Franklin 00:15:04.809 --> 00:15:07.960 would do in the given situation. Wow. That level 00:15:07.960 --> 00:15:10.519 of philosophical rigor and detailed commentary 00:15:10.519 --> 00:15:12.980 tells you everything about his personality. He 00:15:12.980 --> 00:15:15.179 was encouraging people to use history, physics 00:15:15.179 --> 00:15:17.559 and morality, not just spreadsheets, to make 00:15:17.559 --> 00:15:20.179 investment decisions. So Munger had already established 00:15:20.179 --> 00:15:22.700 himself as an investment giant and a philosophical 00:15:22.700 --> 00:15:25.539 innovator. How did this intellectual powerhouse 00:15:25.539 --> 00:15:28.879 ultimately connect with and reshape Warren Buffett's 00:15:28.879 --> 00:15:31.559 strategy? The ultimate partnership began, as 00:15:31.559 --> 00:15:34.340 many great things do, very simply. Munger met 00:15:34.340 --> 00:15:36.379 Warren Buffett over lunch at the Omaha Club. 00:15:36.600 --> 00:15:39.399 And as the story goes, the two began talking 00:15:39.399 --> 00:15:41.299 about investments and never stopped. They just 00:15:41.299 --> 00:15:43.519 clicked. They found they were intellectual soulmates 00:15:43.519 --> 00:15:46.899 who complemented each other perfectly. Munger 00:15:46.899 --> 00:15:49.120 formally joined Berkshire as vice chairman in 00:15:49.120 --> 00:15:52.639 1978. And the sources, particularly Buffett's 00:15:52.639 --> 00:15:55.039 own words, they make it clear this is far more 00:15:55.039 --> 00:15:57.840 than a board appointment. Oh, far more. Buffett 00:15:57.840 --> 00:15:59.980 openly acknowledged that Munger was his closest 00:15:59.980 --> 00:16:02.840 partner. And in 2024, after Munger's passing, 00:16:03.080 --> 00:16:05.700 Buffett gave this profound account of Munger's 00:16:05.700 --> 00:16:08.740 role in his annual letter to shareholders. He 00:16:08.740 --> 00:16:10.899 used that powerful metaphor that we opened with. 00:16:11.000 --> 00:16:13.059 That he was the architect. He was the architect 00:16:13.059 --> 00:16:16.039 of modern Berkshire Hathaway's philosophy. Buffett 00:16:16.039 --> 00:16:18.059 noted that while he himself was skilled at building, 00:16:18.320 --> 00:16:21.350 Munger was the one who designed the plans. He 00:16:21.350 --> 00:16:23.850 also noted a remarkable dynamic of humility in 00:16:23.850 --> 00:16:26.429 Munger, stating Munger was part older brother, 00:16:26.590 --> 00:16:29.330 part loving father, and that Munger never sought 00:16:29.330 --> 00:16:32.149 credit. Buffett said Munger happily let him take 00:16:32.149 --> 00:16:34.769 the bows and receive the accolades, even when 00:16:34.769 --> 00:16:36.870 Munger knew he was right about a crucial business 00:16:36.870 --> 00:16:39.769 decision. Which is an incredibly rare dynamic 00:16:39.769 --> 00:16:42.070 in the high stakes world of finance and ego. 00:16:42.470 --> 00:16:46.269 It speaks volumes to Munger's ego control and 00:16:46.269 --> 00:16:49.830 his absolute focus on the correct long term outcome. 00:16:50.409 --> 00:16:53.350 regardless of who got the credit. So let's zoom 00:16:53.350 --> 00:16:55.690 in on the specific architectural change Munger 00:16:55.690 --> 00:16:58.450 brought, because before Munger, Buffett was famously 00:16:58.450 --> 00:17:01.289 a student of Benjamin Graham, focused primarily 00:17:01.289 --> 00:17:05.289 on buying cigar butt stocks. Right. These cheap, 00:17:05.329 --> 00:17:07.890 troubled assets trading below their liquidation 00:17:07.890 --> 00:17:10.809 value with one final puff of profit left in them. 00:17:11.099 --> 00:17:14.019 Graham's philosophy was quantitative, focused 00:17:14.019 --> 00:17:16.240 purely on the margin of safety regardless of 00:17:16.240 --> 00:17:18.180 the underlying quality of the business. And Munger 00:17:18.180 --> 00:17:20.619 argued that this approach, while safe, was ultimately 00:17:20.619 --> 00:17:23.359 suboptimal and it capped their returns. Exactly. 00:17:23.640 --> 00:17:25.539 Munger convinced Buffett that it was fundamentally 00:17:25.539 --> 00:17:28.079 better to pay a fair price for a wonderful business, 00:17:28.259 --> 00:17:30.759 a high -quality company with sustainable competitive 00:17:30.759 --> 00:17:33.599 advantages, than to pay a cheap price for a bad 00:17:33.599 --> 00:17:35.980 business that required endless fixing or liquidation. 00:17:36.319 --> 00:17:39.319 That shift from deep value liquidation to quality 00:17:39.319 --> 00:17:41.920 growth, that was the single most important architectural 00:17:41.920 --> 00:17:44.339 change Munger brought to Berkshire. How did he 00:17:44.339 --> 00:17:46.619 make that case? Was there a specific business 00:17:46.619 --> 00:17:49.319 that sort of exemplified this paradigm shift? 00:17:49.579 --> 00:17:52.380 The primary example that's always cited is the 00:17:52.380 --> 00:17:55.940 acquisition of See's Candies in 1972. Buffett 00:17:55.940 --> 00:17:57.779 initially resisted because the owners wanted 00:17:57.779 --> 00:18:01.059 $30 million, which, based on the book value and 00:18:01.059 --> 00:18:03.400 Graham's strict metric, seemed... Way too expensive. 00:18:03.599 --> 00:18:06.400 Okay. Munger strongly advocated for the purchase, 00:18:06.539 --> 00:18:09.700 arguing that See's had an intangible quality 00:18:09.700 --> 00:18:12.920 pricing power driven by brand loyalty that was 00:18:12.920 --> 00:18:15.680 worth far more than the tangible assets suggested. 00:18:16.039 --> 00:18:18.359 So Buffett bought it, paid what seemed like a 00:18:18.359 --> 00:18:20.900 premium based on the old rules. And See's Candies 00:18:20.900 --> 00:18:23.259 went on to generate billions of dollars for Berkshire 00:18:23.259 --> 00:18:26.059 over the decades, requiring very little new capital 00:18:26.059 --> 00:18:30.069 investment. It proved Munger's point. A truly 00:18:30.069 --> 00:18:32.069 wonderful business, even if you buy it at what 00:18:32.069 --> 00:18:34.269 seems like a high price, will compound wealth 00:18:34.269 --> 00:18:36.849 dramatically over time. This shift was profound. 00:18:36.950 --> 00:18:39.470 It changed Berkshire's mandate from passively 00:18:39.470 --> 00:18:41.690 managing distressed assets to actively owning 00:18:41.690 --> 00:18:44.230 high quality, long term engines of compounding 00:18:44.230 --> 00:18:47.150 growth. And this pivot, driven by Munger, is 00:18:47.150 --> 00:18:49.089 why they started purchasing companies like Coca 00:18:49.089 --> 00:18:51.809 -Cola, which had the brand, the moat and the 00:18:51.809 --> 00:18:55.029 enduring quality Munger insisted upon. This brings 00:18:55.029 --> 00:18:57.390 us perfectly to the philosophical engine that 00:18:57.390 --> 00:19:00.549 powered Munger's entire worldview, a system he 00:19:00.549 --> 00:19:02.930 developed not just for investing, but for life. 00:19:03.230 --> 00:19:06.309 This shift in business philosophy leads us right 00:19:06.309 --> 00:19:08.990 into Munger's true intellectual legacy, which 00:19:08.990 --> 00:19:11.130 we'll call the latticework of worldly wisdom 00:19:11.130 --> 00:19:14.150 and the Lollapalooza effect. This systematic 00:19:14.150 --> 00:19:16.410 way of thinking is what's memorialized in his 00:19:16.410 --> 00:19:18.690 collected wisdom, largely published in the book 00:19:18.690 --> 00:19:21.569 Poor Charlie's Almanac. Munger's philosophy centers 00:19:21.569 --> 00:19:24.029 on this idea of creating a mental model framework, 00:19:24.269 --> 00:19:27.289 a latticework built from what he called elementary 00:19:27.289 --> 00:19:30.190 worldly wisdom. Worldly wisdom. I love that. 00:19:30.349 --> 00:19:32.250 It's a great phrase. He believed that nearly 00:19:32.250 --> 00:19:34.809 every complex problem could be solved, or at 00:19:34.809 --> 00:19:37.329 least avoided, by drawing knowledge from a diverse 00:19:37.329 --> 00:19:39.750 set of fundamental disciplines, not just the 00:19:39.750 --> 00:19:42.069 field the problem came from. He specifically 00:19:42.069 --> 00:19:44.470 advocated for synthesizing knowledge from mathematics, 00:19:44.809 --> 00:19:48.190 physics, history, economics, and above all, psychology. 00:19:48.839 --> 00:19:51.079 It's the antithesis of specialization, isn't 00:19:51.079 --> 00:19:54.099 it? If you only know finance, every problem looks 00:19:54.099 --> 00:19:57.579 like a P -E ratio problem. But if you know physics 00:19:57.579 --> 00:20:01.059 and psychology and history, you have a much broader 00:20:01.059 --> 00:20:04.480 toolkit. Precisely. The goal is not just to be 00:20:04.480 --> 00:20:06.799 brilliant in one narrow field, like financial 00:20:06.799 --> 00:20:09.420 modeling, but to think across disciplines to 00:20:09.420 --> 00:20:11.880 ensure you are considering all the variables 00:20:11.880 --> 00:20:15.000 and potential failure modes. For instance, he 00:20:15.000 --> 00:20:17.460 advocated borrowing the idea of critical mass 00:20:17.460 --> 00:20:20.759 from physics. The idea that results don't scale 00:20:20.759 --> 00:20:23.400 linearly, but once you reach a certain threshold, 00:20:23.740 --> 00:20:26.259 the result just explodes exponentially. And he 00:20:26.259 --> 00:20:28.019 applied that to business growth and reputation 00:20:28.019 --> 00:20:30.900 building. Yes. And the power of this approach 00:20:30.900 --> 00:20:33.099 is that it dramatically reduces the chance of 00:20:33.099 --> 00:20:34.900 meeting catastrophic problems in the first place 00:20:34.900 --> 00:20:36.700 because you have considered failure modes identified 00:20:36.700 --> 00:20:39.680 by entirely different domains. I love that observation 00:20:39.680 --> 00:20:42.400 made by author Peter Bevelin, who noted Munger's 00:20:42.400 --> 00:20:45.000 incredible ability to unlearn my own best loved 00:20:45.000 --> 00:20:48.000 ideas. That is the sign of a truly synthesized. 00:20:48.079 --> 00:20:50.420 flexible thinker who uses these models to actively 00:20:50.420 --> 00:20:53.740 check their own confirmation biases. Yes, the 00:20:53.740 --> 00:20:56.299 models are a defense mechanism against self -delusion. 00:20:56.740 --> 00:20:59.980 And central to Munger's entire latticework was 00:20:59.980 --> 00:21:02.400 the foundational idea of high ethical standards. 00:21:02.759 --> 00:21:05.160 He did not see ethics as an academic pursuit. 00:21:05.380 --> 00:21:08.279 He saw it as an integral business model. Munger 00:21:08.279 --> 00:21:10.640 was very clear about this. Good businesses are 00:21:10.640 --> 00:21:13.299 ethical businesses. A business model that relies 00:21:13.299 --> 00:21:16.430 on trickery is doomed to fail. So he viewed ethics 00:21:16.430 --> 00:21:19.569 not as some constraint on profit, but as an essential 00:21:19.569 --> 00:21:22.210 component of creating a sustainable long term 00:21:22.210 --> 00:21:25.089 business model that earns trust and therefore 00:21:25.089 --> 00:21:27.619 longevity. And he used specific philosophical 00:21:27.619 --> 00:21:30.359 concepts to criticize what he viewed as catastrophic 00:21:30.359 --> 00:21:33.859 modern failings. He gave a profound talk in 2010 00:21:33.859 --> 00:21:35.980 where he referenced the American philosopher 00:21:35.980 --> 00:21:39.000 Charles Frankel when discussing the 2008 financial 00:21:39.000 --> 00:21:41.220 crisis and the philosophy of responsibility. 00:21:41.579 --> 00:21:43.819 What was Frankel's concept? Frankel's core concept 00:21:43.819 --> 00:21:46.799 essentially states, a system is responsible only 00:21:46.799 --> 00:21:48.900 to the degree that the people who make the decisions 00:21:49.400 --> 00:21:51.559 bear the consequences of those decisions. So 00:21:51.559 --> 00:21:53.539 if you can make a terrible decision and offload 00:21:53.539 --> 00:21:55.720 the risk before the consequences materialize, 00:21:55.819 --> 00:21:58.240 the system is fundamentally irresponsible and 00:21:58.240 --> 00:22:01.359 it's designed for disaster. Exactly. Munger applied 00:22:01.359 --> 00:22:03.519 this directly to the loan systems that created 00:22:03.519 --> 00:22:06.039 the housing bubble. He criticized systems where 00:22:06.039 --> 00:22:08.700 people making the loans, often through what he 00:22:08.700 --> 00:22:11.339 termed lies and twaddle, about the borrower's 00:22:11.339 --> 00:22:13.900 ability to pay, could promptly dump those loans 00:22:13.900 --> 00:22:15.819 onto someone else, like institutional investors, 00:22:16.119 --> 00:22:18.240 without bearing any responsibility when those 00:22:18.240 --> 00:22:20.940 loans eventually defaulted. Right. To Munger, 00:22:21.039 --> 00:22:24.299 that was an anoral, irresponsible system that 00:22:24.299 --> 00:22:27.019 was guaranteed to fail spectacularly because 00:22:27.019 --> 00:22:29.200 the feedback loop of consequences was broken. 00:22:29.549 --> 00:22:31.849 That focus on systems designed to break down 00:22:31.849 --> 00:22:34.349 is fascinating, and it brings us to the concept 00:22:34.349 --> 00:22:36.750 that Munger is perhaps most famous for coining 00:22:36.750 --> 00:22:40.069 and defining, the Lollapalooza effect. This is 00:22:40.069 --> 00:22:42.769 where multiple factors pile up on top of one 00:22:42.769 --> 00:22:45.390 another to produce an extreme, often irrational, 00:22:45.650 --> 00:22:48.289 result. This is where his synthesis of knowledge, 00:22:48.430 --> 00:22:50.269 especially from psychology, becomes absolutely 00:22:50.269 --> 00:22:53.480 crucial. Munger used the term Lollapalaza effect 00:22:53.480 --> 00:22:56.640 for the phenomena where multiple biases, mental 00:22:56.640 --> 00:22:59.279 models, or psychological tendencies act together 00:22:59.279 --> 00:23:02.279 simultaneously and crucially in the same direction. 00:23:02.420 --> 00:23:04.500 So it's not just one thing. It's the combination. 00:23:05.059 --> 00:23:08.079 It's the combination. When this confluence occurs, 00:23:08.339 --> 00:23:10.839 it doesn't just increase irrationality. It greatly 00:23:10.839 --> 00:23:14.059 multiplies it, leading to outcomes far more extreme 00:23:14.059 --> 00:23:16.420 than any single factor could produce on its own. 00:23:16.859 --> 00:23:19.480 He famously called it the confluence that turns 00:23:19.480 --> 00:23:22.160 human brains into mush. It's the compounding 00:23:22.160 --> 00:23:25.319 effect of human folly. And the power of defining 00:23:25.319 --> 00:23:27.480 it is that once you name it, you can avoid it. 00:23:28.000 --> 00:23:30.960 Munger provided two spectacular concrete examples 00:23:30.960 --> 00:23:34.500 during his famous 1995 talk at Harvard, which 00:23:34.500 --> 00:23:37.059 he titled The Psychology of Human Misjudgment. 00:23:37.079 --> 00:23:39.619 He did. And let's start with the one that seems 00:23:39.619 --> 00:23:42.740 the most mundane, but reveals the deepest psychological 00:23:42.740 --> 00:23:46.069 layers. The Tupperware Party. The Tupperware 00:23:46.069 --> 00:23:48.289 Party, okay. The Tupperware Party is Munger's 00:23:48.289 --> 00:23:51.250 perfect small -scale example of Lollapalooza. 00:23:51.450 --> 00:23:54.130 On the surface, it's just someone buying plastic 00:23:54.130 --> 00:23:56.750 containers. But Munger argued there were three, 00:23:56.869 --> 00:24:00.769 four, or five powerful psychological biases all 00:24:00.769 --> 00:24:03.490 aligning to compel a purchase. Let's detail them 00:24:03.490 --> 00:24:05.329 thoroughly because understanding this dynamic 00:24:05.329 --> 00:24:07.690 is essential to avoiding market frenzies. All 00:24:07.690 --> 00:24:09.529 right, what's the first bias that gets triggered 00:24:09.529 --> 00:24:11.650 the moment you walk in the door? The first is 00:24:11.650 --> 00:24:14.299 the reciprocation tendency. The hostess invited 00:24:14.299 --> 00:24:16.819 you, gave you a party, provided refreshments. 00:24:17.119 --> 00:24:20.900 There is a deeply ingrained subconscious or conscious 00:24:20.900 --> 00:24:24.000 tendency in human nature to feel obligated to 00:24:24.000 --> 00:24:26.500 reciprocate that gesture. And the easiest way 00:24:26.500 --> 00:24:28.700 to relieve that social debt is by making a purchase, 00:24:28.920 --> 00:24:31.759 even a small one. Exactly. So that social obligation 00:24:31.759 --> 00:24:34.220 is the entry point. But then you get the next 00:24:34.220 --> 00:24:38.119 bias that solidifies the transaction, the consistency 00:24:38.119 --> 00:24:41.039 and commitment tendency. OK. During the party. 00:24:41.420 --> 00:24:44.359 you are encouraged to handle the products. Often 00:24:44.359 --> 00:24:45.920 to give positive feedback, you might verbally 00:24:45.920 --> 00:24:48.180 say, oh, I love the seal on that lid, or that 00:24:48.180 --> 00:24:51.220 container looks incredibly useful. Munger noted 00:24:51.220 --> 00:24:54.259 that once people publicly commit to a view, even 00:24:54.259 --> 00:24:57.220 a small trivial one, they feel a powerful psychological 00:24:57.220 --> 00:25:00.160 pull to maintain consistency. So making a purchase 00:25:00.160 --> 00:25:02.779 is the ultimate consistent action that reinforces 00:25:02.779 --> 00:25:04.640 the positive public statements you have already 00:25:04.640 --> 00:25:06.500 made. You don't want to contradict yourself by 00:25:06.500 --> 00:25:09.450 walking out empty -handed. Exactly. But the party 00:25:09.450 --> 00:25:12.509 setting introduces a third massive factor, social 00:25:12.509 --> 00:25:15.569 proof. If others around the table are buying, 00:25:15.710 --> 00:25:18.630 that signals that buying is the correct, normalized, 00:25:18.690 --> 00:25:21.569 and desirable behavior. The buyer looks around 00:25:21.569 --> 00:25:24.069 and sees validation for their choice in the actions 00:25:24.069 --> 00:25:26.769 of their peers. And often in that sales environment, 00:25:27.009 --> 00:25:28.930 there's an element of authority bias or maybe 00:25:28.930 --> 00:25:31.869 liking tendency. The hostess is a friend, someone 00:25:31.869 --> 00:25:34.210 you like and trust, which further lowers your 00:25:34.210 --> 00:25:37.079 internal resistance to buying. Absolutely. The 00:25:37.079 --> 00:25:39.299 triad of reciprocation, commitment, and social 00:25:39.299 --> 00:25:42.279 proof. Amplified by liking, working together 00:25:42.279 --> 00:25:45.400 creates a Lollapalooza effect. That compounding 00:25:45.400 --> 00:25:47.940 pressure makes it incredibly difficult for a 00:25:47.940 --> 00:25:50.319 normal person to maintain strict rational judgment. 00:25:50.640 --> 00:25:53.819 The combined psychological force is far greater 00:25:53.819 --> 00:25:55.599 than the value of the plastic containers themselves. 00:25:55.920 --> 00:25:57.980 Now let's apply that idea to something more complex 00:25:57.980 --> 00:26:00.799 and potentially ruinous, the financial market. 00:26:00.880 --> 00:26:03.380 The other example Munger used is even more visceral 00:26:03.380 --> 00:26:05.759 and speaks directly to market frenzies, open 00:26:05.759 --> 00:26:09.380 outcry auctions. Open outcry auctions are textbook 00:26:09.380 --> 00:26:12.940 Lollapalooza. They're a perfect financial analog 00:26:12.940 --> 00:26:15.500 to the Tupperware party. They combine multiple 00:26:15.500 --> 00:26:18.039 biases that specifically encourage people to 00:26:18.039 --> 00:26:21.119 overpay wildly for assets. Again, you have social 00:26:21.119 --> 00:26:23.700 proof. The frenetic environment of others bidding 00:26:23.700 --> 00:26:27.079 means the item must be highly valuable. And reciprocation. 00:26:27.160 --> 00:26:29.779 The tendency to immediately respond to the previous 00:26:29.779 --> 00:26:32.119 bidder to maintain your position in the fight. 00:26:32.430 --> 00:26:34.710 You also have the commitment tendency here, just 00:26:34.710 --> 00:26:36.829 like Tupperware. Once you've committed to bidding 00:26:36.829 --> 00:26:40.170 once, twice, or three times, there's a sunk cost 00:26:40.170 --> 00:26:42.309 element that makes retreating feel like a failure. 00:26:42.529 --> 00:26:44.730 But the key element, the one that drives the 00:26:44.730 --> 00:26:47.130 action over the edge into true irrationality, 00:26:47.130 --> 00:26:50.369 is the deprivation superreaction syndrome. This 00:26:50.369 --> 00:26:52.849 is Munger's name for what is often called loss 00:26:52.849 --> 00:26:55.970 aversion, but amplified. This is the sense of 00:26:55.970 --> 00:26:58.329 loss of what the person believes should be, or 00:26:58.329 --> 00:27:01.519 is theirs, the item they want. The fear of losing 00:27:01.519 --> 00:27:03.500 the item to a competitor drives increasingly 00:27:03.500 --> 00:27:05.980 irrational bids. So the fear of missing out, 00:27:06.039 --> 00:27:08.240 FOMO, combines with the commitment to the price 00:27:08.240 --> 00:27:10.359 already paid and the need to follow social proof, 00:27:10.619 --> 00:27:13.240 creating a frenzy where rational valuation just 00:27:13.240 --> 00:27:16.119 flies out the window. Precisely. And Munger's 00:27:16.119 --> 00:27:18.900 practical advice regarding this entire Lollapalooza 00:27:18.900 --> 00:27:22.940 cluster was simple and direct. Explicitly, do 00:27:22.940 --> 00:27:25.759 not attend such auctions. He advised recognizing 00:27:25.759 --> 00:27:28.039 the psychological setup and opting out entirely 00:27:28.039 --> 00:27:30.700 because your rational brain is likely to turn 00:27:30.700 --> 00:27:32.779 to mush. Whether it's in a living room selling 00:27:32.779 --> 00:27:35.279 Tupperware or on a trading floor chasing a hot 00:27:35.279 --> 00:27:37.480 stock, the lesson is the same. The lesson is 00:27:37.480 --> 00:27:39.940 the same. When you see multiple psychological 00:27:39.940 --> 00:27:42.359 pressures aligning in one direction, extreme 00:27:42.359 --> 00:27:44.859 irrationality is the highly probable outcome. 00:27:45.039 --> 00:27:48.339 That is the essence of worldly wisdom, knowing 00:27:48.339 --> 00:27:51.460 how your own mind is wired and designing systems 00:27:51.460 --> 00:27:54.359 like avoiding auctions to protect yourself. That's 00:27:54.359 --> 00:27:56.579 a powerful tool for self -protection. It's a 00:27:56.579 --> 00:27:59.140 remarkable legacy built on avoiding folly as 00:27:59.140 --> 00:28:01.279 much as seeking brilliance. Munger's success 00:28:01.279 --> 00:28:03.039 wasn't just about constructing this rigorous 00:28:03.039 --> 00:28:05.299 latticework. It was also about how he used his 00:28:05.299 --> 00:28:07.480 voice. And that brings us to his most provocative 00:28:07.480 --> 00:28:09.799 views, a fascinating intersection of his caution 00:28:09.799 --> 00:28:13.220 and his architectural legacy. Munger, despite 00:28:13.220 --> 00:28:15.619 his enormous wealth, was famous for his personal 00:28:15.619 --> 00:28:18.869 modesty and caution. He was indeed. Munger lived 00:28:18.869 --> 00:28:21.089 in the same relatively modest California home 00:28:21.089 --> 00:28:23.529 for 70 years, often pointing out that it was 00:28:23.529 --> 00:28:27.059 a simple, practical house. He credited his success 00:28:27.059 --> 00:28:30.299 and his impressive longevity living to 99 to 00:28:30.299 --> 00:28:33.559 a long held sense of caution and maybe more humorously, 00:28:33.619 --> 00:28:36.680 the ability to avoid all standard ways of failing. 00:28:36.779 --> 00:28:39.579 He viewed life like investing as a game of avoiding 00:28:39.579 --> 00:28:42.980 unforced errors. Exactly. And he had a very critical, 00:28:43.059 --> 00:28:45.900 almost philosophical take on the wealthy who 00:28:45.900 --> 00:28:49.019 pursue ostentatious lifestyles purely for status. 00:28:49.529 --> 00:28:51.910 He advised strongly against envy and against 00:28:51.910 --> 00:28:53.890 the modern compulsion to overspend your income, 00:28:54.130 --> 00:28:56.750 arguing that people who build really fancy houses 00:28:56.750 --> 00:29:00.390 become less happy, not happier. He believed that 00:29:00.390 --> 00:29:02.670 excessive material consumption created complexity 00:29:02.670 --> 00:29:05.170 and social pressure that undermined true contentment. 00:29:05.230 --> 00:29:07.329 But while he was personally modest, his opinions 00:29:07.329 --> 00:29:10.420 on modern finance were anything but quiet. Munger 00:29:10.420 --> 00:29:13.059 was arguably the most fiercely outspoken critic 00:29:13.059 --> 00:29:15.160 in the financial world, particularly regarding 00:29:15.160 --> 00:29:17.240 speculative trends that he believed exploited 00:29:17.240 --> 00:29:19.799 human psychological weaknesses, those Lollapalooza 00:29:19.799 --> 00:29:27.640 setups. It was legendary for its brutality and 00:29:27.640 --> 00:29:29.660 its visceral language. He did not hold back. 00:29:29.859 --> 00:29:32.720 He employed some extremely vivid and deliberately 00:29:32.720 --> 00:29:35.559 shocking language to make his point clear. He 00:29:35.559 --> 00:29:37.779 called Bitcoin in particular noxious poison, 00:29:38.000 --> 00:29:42.079 stupid, immoral and disgusting. Munger saw zero 00:29:42.079 --> 00:29:44.640 utility outside of criminal transactions or, 00:29:44.700 --> 00:29:47.180 you know, facilitating speculation. I think I 00:29:47.180 --> 00:29:50.240 remember a quote about trading. Something unsavory. 00:29:50.279 --> 00:29:52.660 The sources quote him using a highly critical 00:29:52.660 --> 00:29:55.359 analogy for the speculative frenzy, saying it's 00:29:55.359 --> 00:29:57.539 like somebody else is trading turds and you decide 00:29:57.539 --> 00:30:00.329 I can't be left out. He also likened it to a 00:30:00.329 --> 00:30:02.730 venereal disease and advocated for banning its 00:30:02.730 --> 00:30:05.269 use outright in the United States. Wow. So his 00:30:05.269 --> 00:30:07.170 view is fundamentally that it lacked intrinsic 00:30:07.170 --> 00:30:10.569 utility, encouraged dangerous speculation, and 00:30:10.569 --> 00:30:13.029 was detrimental to civilization's long -term 00:30:13.029 --> 00:30:15.390 interests because it enabled fraud. Pretty much. 00:30:15.569 --> 00:30:17.630 Yeah. And he wasn't just criticizing the asset. 00:30:17.869 --> 00:30:20.529 He was critiquing the entire system around it, 00:30:20.609 --> 00:30:23.170 arguing that its success was based on selling 00:30:23.170 --> 00:30:25.150 hope to people who couldn't afford the risk. 00:30:25.329 --> 00:30:27.509 And he didn't spare the intermediaries either. 00:30:27.880 --> 00:30:30.259 turning his criticism sharply to the brokerage 00:30:30.259 --> 00:30:33.079 app Robinhood. What was his problem with Robinhood? 00:30:33.200 --> 00:30:35.880 Munger argued that Robinhood's success relied 00:30:35.880 --> 00:30:38.420 entirely on catering to the gambling instincts 00:30:38.420 --> 00:30:40.660 of the public, not their rational investment 00:30:40.660 --> 00:30:43.619 interests. He fiercely criticized the commission 00:30:43.619 --> 00:30:46.259 -free trading model that encourages 30 or 40 00:30:46.259 --> 00:30:48.700 trades a day by selling customer order flow. 00:30:49.230 --> 00:30:52.049 So he felt this system deliberately leveraged 00:30:52.049 --> 00:30:55.029 the biases of immediacy and commitment, making 00:30:55.029 --> 00:30:57.549 it another prime Lollapalooza setup designed 00:30:57.549 --> 00:31:00.009 to exploit the very people it was claiming to 00:31:00.009 --> 00:31:03.410 help. Exactly. His hope, stated clearly, was 00:31:03.410 --> 00:31:06.009 that we don't have more of it. He viewed it as 00:31:06.009 --> 00:31:08.230 a corrosive force against sensible long -term 00:31:08.230 --> 00:31:10.619 saving. It's interesting how Munger's systemic 00:31:10.619 --> 00:31:13.000 rational thinking led him to some unexpected 00:31:13.000 --> 00:31:15.259 conclusions outside of traditional investment 00:31:15.259 --> 00:31:18.259 debates. While he often aligned with conservative 00:31:18.259 --> 00:31:20.619 financial principles, he held some surprisingly 00:31:20.619 --> 00:31:24.359 unconventional political views. He did. He stated 00:31:24.359 --> 00:31:27.160 openly that he was not a normal Republican. He 00:31:27.160 --> 00:31:29.339 was a strong advocate for fundamental reform 00:31:29.339 --> 00:31:31.960 of the U .S. health care system, advocating for 00:31:31.960 --> 00:31:34.799 Medicare for all as a necessary fix. That's not 00:31:34.799 --> 00:31:37.640 what you'd expect. Not at all. He called the 00:31:37.640 --> 00:31:40.859 current American system insane and a national 00:31:40.859 --> 00:31:44.279 disgrace, praising Singapore's single payer system 00:31:44.279 --> 00:31:47.259 as a superior model that achieved better outcomes 00:31:47.259 --> 00:31:50.920 at a lower cost. This shows that the same rational 00:31:50.920 --> 00:31:53.220 calculus he applied to evaluating high quality 00:31:53.220 --> 00:31:56.279 businesses seeking efficiency, quality and low 00:31:56.279 --> 00:31:59.119 cost sometimes led him to conclusions that defied 00:31:59.119 --> 00:32:01.660 traditional U .S. political labels. If a system 00:32:01.660 --> 00:32:04.059 was obviously inefficient, regardless of ideology. 00:32:04.779 --> 00:32:07.119 Munger was going to call it out. He was. Now 00:32:07.119 --> 00:32:08.980 we have to discuss the final and perhaps most 00:32:08.980 --> 00:32:11.720 controversial aspect of his legacy, his architectural 00:32:11.720 --> 00:32:14.740 philanthropy. Munger had no formal architectural 00:32:14.740 --> 00:32:17.299 training, but he became heavily involved in building 00:32:17.299 --> 00:32:19.799 designs, particularly university dormitories, 00:32:19.920 --> 00:32:22.640 often using his significant financial donations 00:32:22.640 --> 00:32:24.940 as leverage for implementing his specific plans. 00:32:25.180 --> 00:32:28.299 This is a perfect real -world illustration of 00:32:28.299 --> 00:32:31.539 how Munger's intense self -confidence, his certainty 00:32:31.539 --> 00:32:33.880 that he had found the correct, most rational 00:32:33.880 --> 00:32:36.980 way to solve a complex problem, sometimes clashed 00:32:36.980 --> 00:32:39.380 dramatically with professional, established expertise. 00:32:40.079 --> 00:32:42.220 Right. Because he believed in his latticework, 00:32:42.359 --> 00:32:44.460 he believed he could apply psychological and 00:32:44.460 --> 00:32:47.359 efficiency models to any problem, including architecture. 00:32:47.660 --> 00:32:50.059 And he would often donate massive sums to universities 00:32:50.059 --> 00:32:52.720 on the precondition that they follow his architectural 00:32:52.720 --> 00:32:55.279 blueprints exactly. This philanthropic model 00:32:55.279 --> 00:32:57.859 yielded results at major institutions, right? 00:32:58.250 --> 00:33:01.470 In 2004, he gave over $40 million to Stanford 00:33:01.470 --> 00:33:04.289 for the Munger graduate residence. He also made 00:33:04.289 --> 00:33:06.869 a massive $110 million gift to the University 00:33:06.869 --> 00:33:10.049 of Michigan in 2013 for their Munger graduate 00:33:10.049 --> 00:33:12.950 residences. And the key design aspect of both 00:33:12.950 --> 00:33:15.410 was maximizing the density of single occupancy 00:33:15.410 --> 00:33:18.369 rooms and shared common spaces. The intent behind 00:33:18.369 --> 00:33:20.549 this design was always noble and flowed directly 00:33:20.549 --> 00:33:23.130 from his philosophy. He wanted to design physical 00:33:23.130 --> 00:33:25.630 spaces to encourage the interdisciplinary thinking, 00:33:25.829 --> 00:33:28.450 the latticework, that defined his own success. 00:33:28.730 --> 00:33:30.910 So he's trying to build a community of scholars 00:33:30.910 --> 00:33:32.930 who would talk to one another and cross -fertilize 00:33:32.930 --> 00:33:36.849 ideas. Precisely. Similarly, he gave $65 million 00:33:36.849 --> 00:33:39.690 to UC Santa Barbara for a residence building 00:33:39.690 --> 00:33:41.890 for the Kavli Institute for Theoretical Physics, 00:33:42.130 --> 00:33:44.450 again with the explicit design goal of bringing 00:33:44.450 --> 00:33:47.289 physicists together to solve problems. But this 00:33:47.289 --> 00:33:49.349 philosophy reached a critical breaking point 00:33:49.349 --> 00:33:52.210 with the UCSB controversy, focusing on the proposed 00:33:52.210 --> 00:33:55.089 Munger Hall, which became a globally recognized 00:33:55.089 --> 00:33:58.250 case study in philanthropic tension. The controversy 00:33:58.250 --> 00:34:01.329 began in March 2016, when Munger announced an 00:34:01.329 --> 00:34:04.309 extraordinary $200 million gift to UC Santa Barbara, 00:34:04.470 --> 00:34:07.250 conditioned entirely on the construction of Munger 00:34:07.250 --> 00:34:09.670 Hall, an undergraduate dormitory designed by 00:34:09.670 --> 00:34:12.670 Munger himself. The proposed building was colossal, 00:34:12.690 --> 00:34:16.250 a 1 .68 million square foot megadorm designed 00:34:16.250 --> 00:34:18.869 to house up to 4 ,500 students. And its most 00:34:18.869 --> 00:34:21.090 contentious signature feature. The inclusion 00:34:21.090 --> 00:34:24.030 of over 90 % windowless bedrooms in common areas. 00:34:24.289 --> 00:34:26.510 A lack of natural light in a student dormitory 00:34:26.510 --> 00:34:29.070 became the Hillmonger chose to fight on, primarily 00:34:29.070 --> 00:34:32.409 for reasons of efficiency and density. What was 00:34:32.409 --> 00:34:34.469 Munger's rationale for this design? How did he 00:34:34.469 --> 00:34:37.150 defend it? Munger argued that his design maximized 00:34:37.150 --> 00:34:40.539 two crucial elements. affordability and privacy. 00:34:41.159 --> 00:34:43.880 By eliminating individual exterior windows and 00:34:43.880 --> 00:34:46.500 routing all light into shared common areas and 00:34:46.500 --> 00:34:49.480 central light wells, he could achieve an unprecedented 00:34:49.480 --> 00:34:52.099 density of private single occupancy bedrooms. 00:34:52.679 --> 00:34:55.500 He believed that single rooms fostered focus 00:34:55.500 --> 00:34:58.059 and privacy, which students needed, and that 00:34:58.059 --> 00:35:00.199 the density encouraged interaction in the shared 00:35:00.199 --> 00:35:03.019 social spaces, forcing that community of scholars 00:35:03.019 --> 00:35:05.710 he idealized. He reportedly claimed the windowless 00:35:05.710 --> 00:35:08.170 rooms felt like luxury cabins on a cruise ship. 00:35:08.269 --> 00:35:10.969 He did. But the backlash was severe and came 00:35:10.969 --> 00:35:12.610 from the professional architectural community, 00:35:12.809 --> 00:35:15.030 culminating in the resignation of a key university 00:35:15.030 --> 00:35:18.139 professional. Right. In 2021, architect Dennis 00:35:18.139 --> 00:35:20.280 McFadden resigned from the university's design 00:35:20.280 --> 00:35:22.420 review committee after two decades of service, 00:35:22.599 --> 00:35:25.039 publishing a scorching letter that detailed his 00:35:25.039 --> 00:35:27.920 opposition. He called the design unsupportable 00:35:27.920 --> 00:35:30.480 as an architect, a parent and a human being. 00:35:30.599 --> 00:35:34.159 That is a staggering public rebuke. And McFadden's 00:35:34.159 --> 00:35:36.719 central point was that Munger's design ignored 00:35:36.719 --> 00:35:39.320 documented evidence regarding human well -being. 00:35:39.579 --> 00:35:42.639 He argued that access to natural light, fresh 00:35:42.639 --> 00:35:45.519 air, and views of nature significantly improved 00:35:45.519 --> 00:35:48.079 the physical and mental well -being of occupants, 00:35:48.159 --> 00:35:51.000 especially students under stress. So he characterized 00:35:51.000 --> 00:35:53.780 Munger Hall as a social and psychological experiment 00:35:53.780 --> 00:35:56.579 with an unknown impact on the lives and personal 00:35:56.579 --> 00:35:58.619 development of the undergraduates the university 00:35:58.619 --> 00:36:02.019 serves. In essence, yes. Munger's rigorous application 00:36:02.019 --> 00:36:04.840 of efficiency and density models clashed violently 00:36:04.840 --> 00:36:07.059 with established knowledge of human psychology 00:36:07.059 --> 00:36:10.409 and physiology. The very system Munger preached, 00:36:10.610 --> 00:36:12.949 drawing from multiple disciplines, seemed to 00:36:12.949 --> 00:36:15.269 have failed him here, as he overruled the expertise 00:36:15.269 --> 00:36:17.989 of architects and psychologists in favor of his 00:36:17.989 --> 00:36:21.289 own cost and density model. So Munger, the architect 00:36:21.289 --> 00:36:23.929 of worldly wisdom, ran into a real -world dilemma 00:36:23.929 --> 00:36:25.829 where his model was considered fundamentally 00:36:25.829 --> 00:36:28.150 detrimental to the mental health of thousands 00:36:28.150 --> 00:36:30.750 of young adults. What was the final outcome of 00:36:30.750 --> 00:36:33.389 that $200 million gift and the windowless dorm 00:36:33.389 --> 00:36:36.670 planes? After years of widespread backlash and 00:36:36.670 --> 00:36:38.849 mounting pressure from students, faculty, and 00:36:38.849 --> 00:36:41.869 professionals, UC Santa Barbara ultimately abandoned 00:36:41.869 --> 00:36:44.610 the project. The university announced the decision 00:36:44.610 --> 00:36:48.300 in August 2023. And as a result of the failure 00:36:48.300 --> 00:36:51.320 to follow his strict precondition, Munger formally 00:36:51.320 --> 00:36:54.239 withdrew his $200 million pledge of support, 00:36:54.440 --> 00:36:57.280 concluding this very public battle over the architecture 00:36:57.280 --> 00:37:00.179 of community just months before his death. A 00:37:00.179 --> 00:37:02.360 powerful cautionary tale about the limits of 00:37:02.360 --> 00:37:05.860 generalist expertise. As we wrap up this extensive 00:37:05.860 --> 00:37:08.599 deep dive, the trajectory of Charlie Munger's 00:37:08.599 --> 00:37:11.139 life is remarkably consistent, even in its pivots. 00:37:11.300 --> 00:37:13.579 He transitioned from a highly successful specialized 00:37:13.579 --> 00:37:16.400 lawyer and concentrated investor, evidenced by 00:37:16.400 --> 00:37:19.539 that market -crushing 19 .8 % CAGR in his early 00:37:19.539 --> 00:37:22.719 partnership, into a synthesized generalist thinker 00:37:22.719 --> 00:37:24.539 whose greatest contribution was applying mental 00:37:24.539 --> 00:37:27.260 models across disparate fields. He was the force 00:37:27.260 --> 00:37:29.380 that fundamentally redefined how Berkshire Hathaway 00:37:29.380 --> 00:37:31.739 moved away from cheap, troubled assets toward 00:37:31.739 --> 00:37:34.980 enduring quality. Yes, and it's fascinating how 00:37:34.980 --> 00:37:37.219 his discipline was forged in periods of intense 00:37:37.219 --> 00:37:40.139 pressure. Just a few final biographical details 00:37:40.139 --> 00:37:42.619 really underscore his sheer tenacity in preparation. 00:37:43.159 --> 00:37:46.420 In his 50s, Munger had a failed cataract surgery 00:37:46.420 --> 00:37:48.920 that rendered his left eye completely blind. 00:37:49.360 --> 00:37:52.380 Due to severe pain, he had that eye surgically 00:37:52.380 --> 00:37:55.380 removed. But the crisis deepened when doctors 00:37:55.380 --> 00:37:57.219 later warned him that he had developed sympathetic 00:37:57.219 --> 00:38:00.239 ophthalmia. which is a rare, severe inflammation 00:38:00.239 --> 00:38:02.699 that risks blinding the remaining healthy right 00:38:02.699 --> 00:38:05.900 eye. That is a terrifying diagnosis. It is. And 00:38:05.900 --> 00:38:08.000 Munger's response was a perfect reflection of 00:38:08.000 --> 00:38:09.920 his lifelong habit of preparing for the worst 00:38:09.920 --> 00:38:12.380 -case scenario. When faced with the possibility 00:38:12.380 --> 00:38:14.860 of total blindness, Munger immediately started 00:38:14.860 --> 00:38:17.530 taking Braille lessons. He was preparing to continue 00:38:17.530 --> 00:38:19.829 his life and work, reading and thinking, regardless 00:38:19.829 --> 00:38:21.949 of his physical condition. Thankfully, the eye 00:38:21.949 --> 00:38:24.090 condition eventually receded and he retained 00:38:24.090 --> 00:38:26.170 his sight for the rest of his life. But that 00:38:26.170 --> 00:38:28.250 story truly embodies the spirit of preparing 00:38:28.250 --> 00:38:30.750 for the worst while hoping for the best. He truly 00:38:30.750 --> 00:38:33.150 embodied that rational resilience until his death 00:38:33.150 --> 00:38:36.849 on November 28, 2023, at the age of 99. The core 00:38:36.849 --> 00:38:39.250 takeaway for you, the learner, if you distill 00:38:39.250 --> 00:38:42.409 Munger's entire life. is that success stemmed 00:38:42.409 --> 00:38:45.449 not just from acumen, but from caution, consistency, 00:38:45.829 --> 00:38:48.289 and an ethical foundation that ensured longevity. 00:38:48.789 --> 00:38:51.610 He believed most people fail not because they 00:38:51.610 --> 00:38:54.130 are stupid, but because they are emotional and 00:38:54.130 --> 00:38:57.610 inconsistent. Right. His fold early, back it 00:38:57.610 --> 00:39:00.530 heavily poker principle is the essential lesson 00:39:00.530 --> 00:39:03.329 for seizing truly asymmetric opportunities when 00:39:03.329 --> 00:39:06.239 they finally appear. Exactly. Finally, we leave 00:39:06.239 --> 00:39:08.980 you with one last provocative thought about Munger's 00:39:08.980 --> 00:39:11.559 unconventional definition of responsibility regarding 00:39:11.559 --> 00:39:14.679 wealth transfer. Munger, despite being one of 00:39:14.679 --> 00:39:16.699 the world's great philanthropists and Warren 00:39:16.699 --> 00:39:19.480 Buffett's closest associate, notably did not 00:39:19.480 --> 00:39:21.840 sign the Giving Pledge, the highly publicized 00:39:21.840 --> 00:39:23.860 commitment started by Buffett and Bill Gates 00:39:23.860 --> 00:39:26.380 to give away the majority of one's wealth. His 00:39:26.380 --> 00:39:28.820 reasoning was highly illuminating and speaks 00:39:28.820 --> 00:39:31.400 volumes about his deeply personal and sometimes 00:39:31.400 --> 00:39:34.400 contradictory ethical framework. When asked about 00:39:34.400 --> 00:39:36.679 the pledge, Munger explained that he couldn't 00:39:36.679 --> 00:39:39.079 do it because he had already transferred so much 00:39:39.079 --> 00:39:40.820 to his children that he had already violated 00:39:40.820 --> 00:39:44.139 it. So he prioritized generational family wealth 00:39:44.139 --> 00:39:47.079 transfer and security for his descendants over 00:39:47.079 --> 00:39:49.599 the formal public commitment of the pledge to 00:39:49.599 --> 00:39:53.000 non -family charities. He did. So what does Munger's 00:39:53.000 --> 00:39:55.630 choice... to define responsibility as providing 00:39:55.630 --> 00:39:58.550 maximum security and financial transfer to his 00:39:58.550 --> 00:40:01.190 own descendants. Tell us about his deeply held, 00:40:01.349 --> 00:40:04.150 but often unconventional, definition of success 00:40:04.150 --> 00:40:06.750 and responsibility. Does it reflect the ultimate 00:40:06.750 --> 00:40:09.250 consequence of the Frankl philosophy, where he 00:40:09.250 --> 00:40:11.130 felt most responsible to the people immediately 00:40:11.130 --> 00:40:13.250 under his care? That's something worth mulling 00:40:13.250 --> 00:40:15.130 over, especially when considering the purpose 00:40:15.130 --> 00:40:17.610 of inherited wealth. We invite you to take that 00:40:17.610 --> 00:40:19.710 wisdom and add it to your own intellectual latticework. 00:40:20.070 --> 00:40:21.889 Thank you for joining the Deep Dive.