Earlier this year at the Redlands Forum Charlie Munger spoke about a number of topics including what makes a great business for investment. Here’s an excerpt from the interview:
Q: I have a question. As you have acquired many companies, you and Warren together in your career, you’ve looked at probably thousands. What’s the kind of philosophy that you have determining what’s a good company and what’s not a good company. I’m not suggesting that you had perfect success in all of your acquisitions because I know you have you told me that but what is it that… what is your sort of philosophical rule base for when you’re looking at organizations to invest in or acquire?
Munger: Well we have a very peculiar way of looking at things. We want to buy something that’s intrinsically a very good business meaning that an idiot could run it and it would do all right. Then we want that business which an idiot could run successfully to have a wonderful person running it. And if we have a wonderful business with a wonderful person running it that really turns us on, and it works very well. Now we do make exceptions, but not many, and it’s a pretty simple philosophy. Warren sometimes says if you have to choose a good person or good business. You know what he says? This is not politically correct, he says good business! He wants something that has such tremendous strength.
I had a friend when I was practising law and he said – if it won’t stand a little mismanagement it’s not much of a business, and we like businesses that stand a lot of mismanagement but don’t get it. And that’s our formula.
You can watch the entire interview here:
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