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Collection: Charlie Munger - #185 'Berkshire's Anadarko Investment'


Video Link: https://youtu.be/2E7_owS9nUU


In this episode, Charlie Munger was asked why did Berkshire Hathaway invested $10 billion in Occidental Petroleum for Anadarko takeover?


In this episode, you’ll learn:

  • Charlie Munger on Berkshire's Anadarko investment.

  • Why investing is simple if you don't make it hard?

To check out all Collection: Charlie Munger <click here>

 

[Transcript]

(Source: https://youtu.be/Rh1WCzfCP24)

JACK DANGERMOND 00:00

Last summer, you bought Anadarko big oil company.


CHARLIE MUNGER 00:03

Yes.


JACK DANGERMOND 00:03

And you described – I think you just gotten back from being with Warren for the weekend.


CHARLIE MUNGER 00:08

Yeah.


JACK DANGERMOND 00:09

You were describing that you didn't do all the analytics and you didn't do all of the research but you used your bag of tricks. And you flew out to Omaha, you and Warren spent the weekend, you called up the president Bank of America, got the money, made the deal.


CHARLIE MUNGER 00:24

No, I didn't go to Omaha.


JACK DANGERMOND 00:25

Where did you go?


CHARLIE MUNGER 00:26

No, no, I stay. We have a telephone. (Laughter & Applause)


JACK DANGERMOND 00:32

You talk – (Laughter) Okay, you talked to Warren about it.


CHARLIE MUNGER 00:36

Anyway – (Laughter)


JACK DANGERMOND 00:38

Yeah, but you made it in about two days and it was like –


CHARLIE MUNGER 00:40

No.


JACK DANGERMOND 00:42

Okay.


CHARLIE MUNGER 00:43

Warren didn't need. Warren and I have been together so long that just one grunt we can speak of volume. (Laughter)


And no, it's perfectly obvious the Permian Basin is our number one oil reservoir and we don't have another like it. And it's perfectly obvious, you have a preferred stock that you have an advantage over everybody else and plus an upside. And so we've done this kind of thing before too. So, of course we did it.


And it's not very difficult, but you're right, there are all kinds of organizations, endless due diligence and... We knew enough to act –


JACK DANGERMOND 01:34

Based on the rules.


CHARLIE MUNGER 01:35

– where they were in a hurry. Yes, but, you don't need perfect. If you're 96 percent sure that's all you're entitled to in many cases.


And I see these people doing this due diligence and the weaker they are as a thinkers the more due diligence they do. And of course, it's just a way of allaying and enter and security. And of course, it doesn't work.


You got to be able to quickly understand, how much brains does it take to know the Permian Basin is America's best oil reserve? It's layer after layer after layer, you know, there is nothing like comparable.


JACK DANGERMOND 02:13

Yes.


CHARLIE MUNGER 02:13

And if you have an eight percent dividend off the top, from a perfectly reputable place, very talented people. The woman that runs that is a production engineer, she's good. And they get better results in that shale than other people. And so it's a no-brainer. At least it's a no-brainer if you don't make it hard.


But I see people, if you – In America now, they do these leveraged buyouts and these firms do what they call due diligence and they will send armies of young lawyers out at high rates per hour riffle through all the purchasing orders at a place like Esri.


JACK DANGERMOND 02:55

Don't even think about it. (Laughter)


CHARLIE MUNGER 02:57

No, I'm not thinking about. But they – my point is they knew Esri wouldn't.


You don't have to look through the purchasing orders to know Esri is a good business. And yeah, I don't think people are that insecure mentally ought to be in positions of decision-making power. (Applause)

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