JACK DANGERMOND 00:00
One of the things I have as a question is you have acquired many companies, you and Warren together in your career. You've looked at probably thousands. What's the kind of philosophy that you have determining what's a good company and what's not a good company?
I'm not suggesting that you had perfect success in all of your acquisitions, because I know you haven't, you told me that. But what is it that – what is your sort of philosophical rule base for when you're looking at organizations to invest in or acquire?
CHARLIE MUNGER 00:31
Well, we have a very peculiar way of looking at things. We want to buy something that's intrinsically, a very good business, meaning that an idiot could run and it would do all right, and then we want that business, which an idiot could run successfully to have a wonderful person in it running it.
And if we have a wonderful business with a wonderful person running it that really turns us on and it works very well. And now we do make exceptions but not many. And it's just pretty simple philosophy.
Warren sometimes says you have to choose good person or good business. You know what he says this is not politically correct. He says good business. He wants something that has such tremendous strength.
I had a friend when we practice law and he said, "if it won't stand a little mismanagement it's not much of a business." And we like businesses that stand a lot of mismanagement but don't get it. So that's our formula and it – and we can't make it work perfectly, but it certainly worked better than most people's.
Things have been and then – and we reject some wonderful businesses with some wonderful people where it's just too tough.
JACK DANGERMOND 02:00
CHARLIE MUNGER 02:01
You know, I took on – once I've been so lucky in life that I took on a job of me, chairman of a non-profit hospital because it was a losing hand, too many competitors, too weak position and a lot of terrible defects.
And I said, you know, this is good for me. I – you know, I am – I exposed myself to the disappointments of the real world and I want to tell you is 40 years mixed agony and pleasure. (Laughter) And the agony never went away.
It was – if the business is tough enough, it has a way of staying tough. As Warren says that when a business who have a reputation for being tough and a manager with an opportunity for being brilliant get together. He says, it's the reputation of the business that remains. And if they start tough, they stay tough.
It's really hard to change a whole damn business or a person, lots of luck if you're too disappointed, one of your children. (Laughter)
1. Between good person or good business. Pick good business (a business that idiot can run).
2. If a business start tough, it will stay tough.