Charlie Munger on Henry Singleton [2013 SH Meeting]

[nickenumbers]

I continue to work my way thru the BRK Shareholder meeting content and I found this new information for me.

 

Really interesting comments on Henry Singleton [i am a fan and an admirer of him], from Charlie.

 

They were neighbors, who knew!  Enjoy!!!!!!

 

 

34. Follow Teledyne CEO Henry Singleton’s lead

WARREN BUFFETT: Doug? Sort of a lead-in to you, Doug. (Laughter)

 

DOUG KASS: Warren, in a previous answer to a question, you suggested, I think for the first time, that when you’re gone — and everyone here hopes that’s not for a very long time —

 

WARREN BUFFETT: No one more than I. (Laughter)

 

DOUG KASS: I thought you would say that —

 

You’re going to move — Berkshire will likely move — to a more centralized style, or approach, to management.

 

My question is, in the past you’ve demonstrated a great deal of respect for Dr. Henry Singleton, the founder and longtime CEO of the diversified conglomerate Teledyne.

 

You have written about Singleton, quote, “Henry is a manager that all investors, CEOs, would-be CEOs, and MBA students should study.

 

“In the end, he was 100 percent rational, and there are very few CEOs about whom I can make that statement,” close quotes.

 

Prior to his death, he broke up Teledyne into three companies. Dr. Singleton told our mutual friend, Lee Cooperman, that he did it for several reasons.

 

There was one reason in particular that Lee mentioned to me that I want to ask you about. According to Singleton, Teledyne was getting very hard to manage for one CEO.

 

What would you say about the Berkshire situation, given your company’s greater complexity, size, and the management issues that you faced in the last three years?

 

And what is the advisability of restructuring Berkshire into separately-traded companies along business lines?

 

WARREN BUFFETT: Berkshire, to me, seems about the easiest company to manage imaginable.

 

And if you took an earlier answer — and I understand why you did, that implied greater centralization after my death, there will be a tiny bit more, just in terms of the small companies. But I do not anticipate any change of any real significance.

 

Now, Charlie knew Henry Singleton, and I think it might be interesting for Charlie to give you his views on what Singleton did right and, eventually, wrong.

 

And, I’ll answer the last part of your question, though.

 

Breaking it up into several companies, I’m convinced, would produce a poorer result. Certainly now, and I believe in the future.

 

Charlie?

 

CHARLIE MUNGER: Well, Henry Singleton was a genius who could play chess blindfolded just below the grandmaster level and never got less than an 800 on any complicated math or physics exam.

 

And, I knew him. He lived in my community.

 

But he started as a conglomerate where he was very interested in reporting higher earnings all the time so he could keep the daisy chain going. And when he managed it on the way down, he bought in the stock relentlessly and very logically, like a great chess player should.

 

And — but he managed those companies on a way more centralized basis than Berkshire has ever operated.

 

And in the end, the great bulk of the enterprises, he wanted to sell to us. And by that time, he was ill and he really wanted to sell to us. And of course, he wanted Berkshire stock.

 

And we basically said to him, “Henry, we love you and we’d love to buy your businesses, but we don’t want to issue Berkshire stock.”

 

So, I don’t think you should get the idea that just because he was a genius he did it better than we did.

 

He did, in some ways, because he understood these very high-tech businesses, but —

 

WARREN BUFFETT: He played the public markets way better. I mean, it—

 

CHARLIE MUNGER: Yeah.

 

WARREN BUFFETT: We’re not interested in doing that, actually.

 

CHARLIE MUNGER: No, we’re not.

 

WARREN BUFFETT: And he was incredible in that, and he made a fortune for shareholders that stayed with him.

 

But he was — to some extent, he looked at the shareholder group as somebody to be taken advantage of, and he issued stock like crazy. I’ll bet he did at least 50 acquisitions where—

 

CHARLIE MUNGER: Yes.

 

WARREN BUFFETT: He wanted to use a very fancy price stock. He was playing the game of the ’60s, and we actually have never wanted to get in that game.

 

I mean, he promoted the stock. And, you know, he had the Litton Industries background on it, and it was a game that worked wonderfully if you didn’t care about how it ended up.

 

And so we have not played that game. He was — in terms of wanting to get Berkshire stock — you know, he essentially was going into the third stage—(laughs) — of first issuing shares at overprice, then buying it back very underpriced, and then he was going to —

 

CHARLIE MUNGER: — sell it to us for more than it was worth.

 

WARREN BUFFETT: Yeah, exactly.

 

CHARLIE MUNGER: It was the wrong stock. But he was an enormously talented man and that cool rationality was to be admired.

 

I like our system better. We’re more avuncular than Teledyne was.

 

WARREN BUFFETT: Not the toughest test. (Laughs)

 

[gfp]

Great quote, thanks for that.

[Liberty]

Thank you for sharing, nickenumbers

[colinwalt]

Thank you for sharing, nickenumbers

 

+1

[chesko182]

A podcast summarizing the book on Singleton (which is very hard to get) "A Distant Force" (with transcript)

 

https://moiglobal.com/henry-singleton-lessons/

[nickenumbers]

So cool!  Thanks chesko182.  This is Sweeter than stolen honey!!! 

 

I can't wait to listen to it.