In terms of
sizing up managements —
obviously if we’re going to buy the whole business,
that’s a different question.
Then you — because you — we’re going to buy it,
be in bed with them, they’re going to run them,
and we care
very much about whether
whether they’re going to behave in the future as they have in the past
once we own the business.
And we’ve had very good luck on that.
But in terms of marketable securities,
we read the reports.
Now,
Charlie and I
were just talking about one the other day
where we read an annual report
of a large oil company.
And
the company — you know,
hundred pages, public relations people,
lots of pictures — spent a fortune on it.
And you can’t find in that report
what their finding cost per McF or per barrel of oil
was last year. That’s the most important figure
in an oil and gas company over a period of years,
but every year counts.
The fact it wouldn’t even be discussed
— the reason it wasn’t discussed, it was absolutely terrible —
but the fact it wouldn’t even be discussed —
and to the extent it was touched on,
it was done in a dishonest manner.
When we read things
where we basically are getting dishonest messages
from the management,
it makes a difference to us.
You know,
like I say,
in marketable securities we can solve that by
selling the stock,
and it’s not the same thing as
as buying the entire business.
But I think you can learn a lot
by reading the annual letters.
I mean, for one thing, if it’s clearly the
product of some investor relations department or
or
outside consultant or something of the sort,
you know, that tells you something about the individual.
If he’s not willing to talk once a year
through a few pages to the people that gave him their money
to invest,
I mean, that
— I’ve really got —
I’ve got some questions about people like that.
So I like that feeling
that I’m hearing directly
from somebody who regards me as a partner.
And
you may not
get it all the way,
but when I get it 0 percent of the way,
I don’t like it.
I’ve still bought — we’ve still bought into some —
in marketable securities —
we’ve bought into some extremely good businesses
where we thought
they were run by people we didn’t really like very well,
we didn’t feel they could screw them up.
Charlie?
CHARLIE MUNGER: Yeah. I think that’s exactly right.
There are two things:
the quality of the business and the quality of the management.
And if the business is good enough,
it will carry a lousy manager.
And the converse case,
where a really good manager
gets in a really lousy business,
he’ll ordinarily have a very imperfect record.
In other words, it’s a rare person
that can take over a textile business,
totally doomed,
which is what Warren did in his youthful folly —
WARREN BUFFETT: Right.
CHARLIE MUNGER: — and turn it into what’s happened here.
You should not be looking for
other Warrens on the theory they’re under every bush.
WARREN BUFFETT: I figured it out in 20 years, though.
I’ll have to say that for myself.
Twenty years, and I finally figured out
I was in the wrong business.
But there are businesses —
if you gave me first draft pick
of all the CEOs in America
and said it’s your job to run Ford Motor now
or, you know,
pick a company that’s in a terribly tough business,
you know, I wouldn’t do it.
I mean, that
it’s just too tough. They may get it solved,
you know,
if they get cooperation from unions and a whole bunch of things,
but it will not be solely in the control
of the CEO who has that job.
He is dependent
on too many good things happening
outside to say that he alone can get the job,
even if he’s the best in the world.