July 15 (Bloomberg) -- Charles T. Munger, vice chairman of Berkshire
Hathaway, has been Warren Buffett's sidekick since 1959. While Buffett
made a name for himself as a statesmanlike critic of inept auditors,
see-no-evil regulators, fee-gouging money managers and greedy CEOs,
Munger gradually emerged from Buffett's shadow to tongue-lash those
same targets mercilessly.
Munger, 87, delighted in ripping open the disappointing realities of
economic life to reveal them as he saw them. No one but he would say,
as he did recently, that if he ran the European Union he would never
have let in Greece, a country full of people who "are raising hell
about having an adult life" and who feel that "having a job ruins
eight hours a day."
A man who speaks this way is going to make enemies. Buffett, 80, has
made his share, but Munger has a higher tolerance than Buffett for
being disliked. He has come to play a role in the business world not
unlike that once played by the critic H.L. Mencken, who stabbed the
puffed-up preservers of the status quo with the sharp needle of
searing, unforgettable prose.
I've heard Munger called hypocritical, heartless and pompous. Munger
describes himself as imperious, irreverent and arrogant. It's good to
have somebody like that around. The business world is better off with
a Munger to point out how far it has strayed. The people who control
the world's commerce need to hear it from one of their own.
Raisins and Turds
Besides, nobody else would say a lot of the entertaining things that
have come out of Charlie Munger's mouth, such as when, in 2000, he
criticized bankers who foisted worthless Internet stocks on the public
by saying, "If you mix raisins and turds, they're still turds."
Wall Street has long been a favorite target of Munger's, and it holds
a special enmity for him. He's called bankers megalomaniacs,
bucket-shop operators and evil. Whatever the latest Wall Street
money-making scheme, up rose Munger to decry it. His latest volley was
to say that it's like letting "rats loose in the granary" to allow
high frequency trading in stocks, which should be considered legalized
front-running.
Munger is not only a critic and Buffett's partner, but also a lawyer,
real estate investor, CEO and philanthropist. He has used his sharp
tongue in service of decisive action to avert intolerable risk. One
episode in the late 1980s, when the savings and loan industry was
using accounting tricks to create capital out of thin air, sticks out
in my mind as perhaps his finest hour.
Bailout and Backlash
The S&Ls were careening toward a crisis of widespread bankruptcies
that would destroy depositor savings, require a taxpayer bailout and
result in a furious public backlash. Munger, who is chairman and chief
executive officer of Berkshire's savings and loan operation, Wesco
Financial, foresaw that Wesco's better behavior wouldn't prevent it
from being tainted by association.
He not only throttled back Wesco's lending, but also took an extreme
stand to distance Wesco from the other savings and loans by resigning
from the U.S. League of Savings Institutions in a letter. In it, he
likened the trade association to metastasizing cancer cells and called
its lobbying practices "flawed, indeed disgraceful."
Quixotic Move
It was a quixotic move, one that only a person who was willing to be
detested by an entire industry would make. The move also paid off when
the S&L crisis erupted and Wesco avoided being splattered with mud. It
was Munger's actions in the S&L crisis that started Berkshire on its
road to being held up as the moral exemplar of corporate America. Its
reputation was later cemented when Buffett assumed the role of interim
chairman of Salomon Brothers Inc. to save the company, in which
Berkshire had a major investment, from bankruptcy after Salomon was
caught covering up an employee's rigging of Treasury-bond auctions.
I've wondered what makes a man a Munger. He isn't trying to be a hero.
Perhaps a person who feels that something innate in him means he will
be disliked finds that easier to tolerate if he provokes the
disapproval himself. It's ironic, or predictable -- maybe even both --
that a man who cultivates enemies with broadsides against the
comfortably selfish has won a large audience of fans, and I mean fans
in the fanatical sense of the word.
Nature of Suffering
On July 1, Munger held an informal meeting to replace the annual
shareholder meeting of Wesco, which had been a publicly traded
subsidiary of Berkshire until it acquired the rest of Wesco's shares
earlier this year. His audience of hundreds had traveled from across
the U.S. on a holiday weekend to listen to their hero.
Among many other subjects, Munger talked about the nature of
suffering. I believe he did this partly to clarify a statement made
last year, when his mouth got him into trouble for saying that
individuals who had been hurt by the financial crisis should "suck it
up, buddy." Munger was telling the one group of people who had not
been bailed out to suck it up, and I was among the many who criticized
him for having a "let them eat cake" attitude.
Munger thinks of adversity as an opportunity, and said that "you
should assume life will be tough, and ask yourself if you can bear it,
and if so, smile and go on." Hence, suck it up. In his personal life,
Munger has sucked it up a few times, after the loss of a young son to
cancer, after being blinded in one eye, after the death of his wife
last year.
Darwinian View
He also said he had not used his own wealth to "avoid all misery" and
deliberately took on some projects in his career that were not
financially enriching and that caused him various forms of grief. Even
so, under Munger's Darwinian view of the world, he is one of the
survivors who's prospered rather well, and I would still like it
better if he showed more sympathy toward the weak. But then again, if
he did, he wouldn't be Charlie Munger.
On July 1, Munger said he was giving his swan song. Get a new cult
hero, he told his audience of hard-core fans. Suck it up. It'll be
good for you. That's probably true, but I hope this isn't the last we
hear from Charlie Munger. I, for one, am going to miss him. And so
will the business world, which needs people like him.
(Alice Schroeder, the author of "The Snowball: Warren Buffett and the
Business of Life" and formerly a top-ranked insurance analyst on Wall
Street, is a Bloomberg View columnist. The opinions expressed are her
own.)
Read more Bloomberg View columns.
To contact the author of this article: Alice Schroeder at
aliceschroeder@ymail.com .
To contact the editor responsible for this article: Paula Dwyer at
pdwyer11@bloomberg.net .
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