Charlie Munger is famous for recommending that people radically reconsider even their most firmly held ideas. His oft-repeated quote, "Any year that passes in which you don’t destroy one of your best loved ideas is a wasted year," has become something of a slogan among those interested in understanding Munger's ideas and approach to seeing the world.
A recent Farnam Street blog post outlines the way this works in doing the work Munger thinks is required in holding an opinion. Citing Munger it reads, "The ability to destroy your ideas rapidly instead of slowly when the occasion is right is one of the most valuable things. You have to work hard on it. Ask yourself what are the arguments on the other side. It’s bad to have an opinion you’re proud of if you can’t state the arguments for the other side better than your opponents. This is a great mental discipline."
In this destructive process, timing is important. Warren Buffett has famously credited Munger with having the best 30 second mind in the world. I wonder if Buffett would have done better in responding to a recent query about Berkshire's abstention from voting on Coca-Cola's executive compensation if he'd had Munger next to him as he does at (this weekend's) annual Berkshire Hathaway shareholder meeting.
In a recent interview with Becky Quick of CNBC, Buffett explained his decision to abstain, "Well, we abstained because— we didn't agree with the plan. We thought it was excessive. And— I love Coke. I love the management, I love the directors. But— so I didn't want to vote no. It's kind of un-American to vote no at a Coke meeting. So that's— but we— I didn't want to express any disapproval of management. But we did disapprove of— of the plan." I'm not quite sure how to take his 'un-American' comment, it seems as though he's just trying to lighten the mood (you be the judge: the interview is embedded below). But the sentiment doesn't seem to be at all consistent with Buffett's or Munger's normal positions...or common sense.
Consider Buffett's concerns from later in the interview, "The plan— compared to past plans was a significant change. And— there's already a 9 percent or so overhang in terms of options outstanding relative to the amount of sh— shares outstanding, 8 percent— 8 percent— 8 percent to 9 percent. And— this authorization of another 500 million shares. Not all of which would've gone on options. But that's another 11 percent of the company. And— and— I thought it was too much. And— I talked to my partner Charlie Munger, and he thought it was too much. So we abstained." Buffett has been, rightly, criticized for his response. The tenor of Buffett's remarks evolved a bit after that initial response, as in this interesting interview with Stephen Gandel. But I wonder if the change was for the better or worse.
To paraphrase Buffett, I love Warren Buffett, I really do. But I disagree with his position. I realize that going against the Oracle of Omaha is kind of un-American, but I think he's wrong on this one. Worse, he's wrong in a way that's a huge departure from his past position, "The way to get big shots to change their behavior is to embarrass them. The press has great opportunities for this, but the big institutional investors could help."
If, for example, you used Buffett's line from the CNBC interview, "but taking on a committee...is a little bit like belching at the dinner table. I mean, you can't do it too often. If you do, you find you're eating in the kitchen pretty soon" on the Charlie Munger I've read about, wouldn't you expect him to reply, "Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your new peer group...then to hell with them." Peter D. Kaufman thought this insight so important, he used the sentiment in his dedication to Munger in the edition of "Poor Charlie's Alnamack" he edited (picture below taken from "Poor Charlie's").
It's not because his son is on the board, but Buffett would have hewed closer to his principles by saying to hell with them. At the very least, he could have spoken out publicly concerning the compensation plan in advance of the vote. Yes, he's right that the vote happened on 83-17% lines. Berkshire's 9 percent wouldn't have made a difference. But the reason the Berkshire annual meeting is finance's Woodstock is because Buffett and Munger tell the truth. And, usually, have the courage of their convictions.
If destroying good ideas is important, getting rid of bad ones should be even better. Of course, making sure your behavior comports with one's best, most current ideas is crucial.
A recent Farnam Street blog post outlines the way this works in doing the work Munger thinks is required in holding an opinion. Citing Munger it reads, "The ability to destroy your ideas rapidly instead of slowly when the occasion is right is one of the most valuable things. You have to work hard on it. Ask yourself what are the arguments on the other side. It’s bad to have an opinion you’re proud of if you can’t state the arguments for the other side better than your opponents. This is a great mental discipline."
In this destructive process, timing is important. Warren Buffett has famously credited Munger with having the best 30 second mind in the world. I wonder if Buffett would have done better in responding to a recent query about Berkshire's abstention from voting on Coca-Cola's executive compensation if he'd had Munger next to him as he does at (this weekend's) annual Berkshire Hathaway shareholder meeting.
In a recent interview with Becky Quick of CNBC, Buffett explained his decision to abstain, "Well, we abstained because— we didn't agree with the plan. We thought it was excessive. And— I love Coke. I love the management, I love the directors. But— so I didn't want to vote no. It's kind of un-American to vote no at a Coke meeting. So that's— but we— I didn't want to express any disapproval of management. But we did disapprove of— of the plan." I'm not quite sure how to take his 'un-American' comment, it seems as though he's just trying to lighten the mood (you be the judge: the interview is embedded below). But the sentiment doesn't seem to be at all consistent with Buffett's or Munger's normal positions...or common sense.
Consider Buffett's concerns from later in the interview, "The plan— compared to past plans was a significant change. And— there's already a 9 percent or so overhang in terms of options outstanding relative to the amount of sh— shares outstanding, 8 percent— 8 percent— 8 percent to 9 percent. And— this authorization of another 500 million shares. Not all of which would've gone on options. But that's another 11 percent of the company. And— and— I thought it was too much. And— I talked to my partner Charlie Munger, and he thought it was too much. So we abstained." Buffett has been, rightly, criticized for his response. The tenor of Buffett's remarks evolved a bit after that initial response, as in this interesting interview with Stephen Gandel. But I wonder if the change was for the better or worse.
To paraphrase Buffett, I love Warren Buffett, I really do. But I disagree with his position. I realize that going against the Oracle of Omaha is kind of un-American, but I think he's wrong on this one. Worse, he's wrong in a way that's a huge departure from his past position, "The way to get big shots to change their behavior is to embarrass them. The press has great opportunities for this, but the big institutional investors could help."
If, for example, you used Buffett's line from the CNBC interview, "but taking on a committee...is a little bit like belching at the dinner table. I mean, you can't do it too often. If you do, you find you're eating in the kitchen pretty soon" on the Charlie Munger I've read about, wouldn't you expect him to reply, "Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your new peer group...then to hell with them." Peter D. Kaufman thought this insight so important, he used the sentiment in his dedication to Munger in the edition of "Poor Charlie's Alnamack" he edited (picture below taken from "Poor Charlie's").
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| Charlie Munger on importance of adjusting behavior to acquired wisdom. |
It's not because his son is on the board, but Buffett would have hewed closer to his principles by saying to hell with them. At the very least, he could have spoken out publicly concerning the compensation plan in advance of the vote. Yes, he's right that the vote happened on 83-17% lines. Berkshire's 9 percent wouldn't have made a difference. But the reason the Berkshire annual meeting is finance's Woodstock is because Buffett and Munger tell the truth. And, usually, have the courage of their convictions.
If destroying good ideas is important, getting rid of bad ones should be even better. Of course, making sure your behavior comports with one's best, most current ideas is crucial.
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