Charlie Munger on The Wooden Effect: Berkshire's $160 Billion Cash Strategy | Final Interview with CNBC 2023 【C:C.M 329】

[Transcript]

BECKY QUICK: I think back in 2015, for the 50th anniversary of Berkshire, you wrote in the shareholders letter that among many other things you had a $60 billion pile of cash at that point. You thought that pile of cash would decline over time because you’d be able to buy more and more things. Now you’ve got almost $160 billion in cash. Is there an opportunity for a really big purchase with that? And do you think you’ll see one?

CHARLIE MUNGER: Well, of course, there’s an opportunity for a purchase a lot bigger than people can make who don’t have $160 billion. We have $160 billion in cash, plus a great credit rating we deserve. And who in the hell has that? Not very many.

Yes, but what it’s gonna be, I can’t tell you. It can’t be anything too small. Because it doesn’t matter how good it is, we’re of a size now where too small just doesn’t move the needle very much. So we need something big to come along and use up all our cash, and some borrowing.

But who's more likely to find something than a guy who has $160 billion in cash, plus a long history of buying bargains? I don’t think it’s hopeless. It may have to be done by some different people. You know that next time, we may not be able just to squeeze a little more lemon juice out of the old lemons. They may have to squeeze some new lemons, meaning new people may have to make the decisions.

But who can make them better than somebody that has watched the early process all through all those years, and seeing how well it works, and who starts with a little legacy of $160 billion in cash?

BECKY QUICK: So you’re talking about Greg Abel, Ajit Jain.

CHARLIE MUNGER: Yes, any of—

BECKY QUICK: Ted and Todd.

CHARLIE MUNGER: – or somebody not yet identified. The main trick that Berkshire shows is the power of what I call the Wooden effect. And Wooden was the most famous basketball coach of a whole era. And you figure out what the hell he really did, which of course somebody like Warren and me, we just automatically do it.

He concentrated about 90% of the playing time in seven players. And everybody else was just a sparring partner for the people. And that turned out a great system for winning at basketball because you identified your best player and concentrated so much of the playing time on your best player. And more playing creates better, better, better. You learn by playing in a way you can never learn just by shooting practice baskets. So he concentrated all this playing time on his best players.

Simple idea. That’s what Berkshire did. Of course, it worked better.
 

Source: https://youtu.be/H5Oom5Rjp_Y?si=ZEkkZkAN6WyOWcl9

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