Is Charles Munger The Greatest ‘Passive’ Investor Of All Time?

In their latest episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discuss Is Charles Munger The Greatest ‘Passive’ Investor Of All Time? Here’s an excerpt from the episode:

Jake: Speaking of Charlie, has anybody figured out the price that would trigger a margin call for Baba.

Tobias: Well, I saw what Buffett has said. They’ve got to dine out on the equity at the moment– on the net equity. So, on the net position, it’s a doughnut.

Jake: Okay.

Tobias: Do you mean, is there a price where it gets called?

Jake: Yeah. Well, is there a price for the shoulder tap?

Tobias: I don’t know.

Jake: Better hope that infamous Australian contract finally comes through, so they get some cash flow to pay off the margin loan.

Tobias: [laughs]

Jake: Oh, boy.

Tobias: Isn’t that duh?

Jake: I don’t know.

Tobias: Is it that bad?

Jake: I don’t know why Baba’s off a fair amount. I don’t know exactly where that trigger would be.

Tobias: Charlie’s always swung for the fences. Buffett’s the steady hand on the tiller there. Buffett just no zeros, no doughnuts.

Jake: A friend told me the other day and I thought this was pretty smart that Munger might be the best investor of all time and that he basically was a passive holder to get to a billionaire. Who’s been a passive anything and made a billion dollars?

Tobias: To be fair, he was vice chairman.

Jake: Okay.

Tobias: He’s on the board. [laughs]

Jake: [laughs] Okay. Don’t ruin my story with these little trivia facts, Toby.

Tobias: Billy, you’re rolling your eyes at that, too. I think that’s fair, isn’t it?

Bill: Well, I think Charlie is an incredible thinker. He had a heck of a track record for himself. I think that Charlie’s best investment was to find a truly talented savant that was also a workaholic and let that guy go.

Tobias: No doubt.

Jake: Said another way. A passive investor that rode something to billion dollars.

Tobias: There’s passive in this passive. He was actually sitting on the board. They’re like, “If I’ve to occupy the vice chairmanship of a public company for whatever it is 50 years, 70 years. I’ll do it. But I won’t regard it as passive.” But yes, the point is right. Yeah, he is–

Jake: He’s good.

Tobias: He did the right thing there.

Bill: I don’t think this is speculation. I think this is factual. When they were going through Solomon, I think Charlie probably provided very, very valuable advice on strategic decisions that Buffett should make. I think he was probably an incredible sounding board.

Tobias: As a lawyer? Will they give advice?

Bill: I think is everything. I think he probably– [crosstalk]

Jake: [crosstalk] the whole trip, it was good advice.

Bill: Yeah, game theory, legal, all of it. I think he added his value there, but day-to-day– That’s how I’ve always said. I’d rather be Charlie than Buffett. Charlie lives a pretty good life.

Jake: Found Li Lu, too, and rode that for quite a– I’m not sure how much he has still with Li Lu. But that’s got to be half his net worth maybe?

Tobias: How much risk is there really in this Baba position? Because I still think I’ve said this a few times, it’s a genuine risk for zero.

Bill: It doesn’t matter. It’s in Daily Journal. Who honestly cares?

Tobias: Daily Journal share holds might feel strongly about it.

Jake: [crosstalk] opinion. [laughs]

Bill: But here’s my beef with– If you held Daily Journal, and you have a problem with this, then I think you had the opportunity to get out when Charlie bought Baba. I don’t think it’s a fair criticism to say, “Well, he’s going out and doing things that Charlie wants to do.” It has never been a secret that that is Charlie’s entity and you’re along for the ride. It’s never been a secret that it’s a bunch of old guys running that company. So, it’s on you in my opinion.

Tobias: This is a big left turn though to put that much money into a Chinese idea, he’s gone a little bit off right there, hasn’t he?

Bill: No way, man. Think about the question that I asked him. When I asked him, if people should be studying quality companies and he looked at me and he’s like, “Well, I own the best Chinese companies and you own none. So, I’m right. You’ll realize it.” Well, suck on this pain, Charlie.

Jake: [laughs]

Bill: Please don’t clip that and put that as our thing.

Jake: Yeah, that’s it. [crosstalk]

Bill: I don’t want Charlie to have pain. But that’s what I’m saying. He’s never hidden his affection for the Chinese great companies ever. This bet isn’t working right now.

Tobias: Yeah. It may workout. Could you see Buffett do something like this? I doubt it.

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