Smead Capital Management CEO Cole Smead and Annandale Capital Co-Founder George Seay joined Yahoo Finance Live to reflect on Munger's legacy.
Smead said Munger "reinforced time and time again... the idea that here we are on Earth, all we're really doing is learning to learn. He talked about using multiple models in how you think about things. It's an interdisciplinary world that we deal in because it's so complex... you'll rarely find someone like Charlie who wanted to read so much, wanted to learn so much." Smead also noted that Munger "pointed out that you don't do great things in your life. Most of the success in your life is not doing stupid things or what he called ignorance avoidance."
Seay called Munger "super special" and that, in addition to being a "great investor" with Buffett, Munger was a "brilliant attorney... He was kind of a Renaissance man." When it comes to Berkshire Hathaway's future, Seay is not concerned. "I think the future of Berkshire is exceptional," Seay says, adding that he hopes the company is kept together because its "future is bright."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
JULIE HYMAN: Berkshire Hathaway vice chairman Charlie Munger has died at the age of 99. The company announcing the news in a press release saying he died this morning at a hospital in California. Berkshire Hathaway CEO Warren Buffett saying in the release, Berkshire Hathaway could not have been built to its present status without Charlie's inspiration, wisdom, and participation.
For more perspective here, we have Cole Smead, Smead Capital Management CEO, and George Seay, Annandale Capital founder and chairman. Cole, I want to start with you. It looks like George getting set up there. So I'll start with you here. I feel like you were raised on Berkshire Hathaway and sort of the philosophies, the value, investing philosophies of these guys. Is that fair to say? I mean, I think of your father as a value investor who closely followed these. I think of you and your firm as closely following this kind of philosophy. Kind of talk to me about your perspective here.
COLE SMEAD: Yeah. It's a great question. Thanks for having me. I really consider Charlie Munger to be like my patron saint from a worldly wisdom perspective. That's something that Charlie often talked about was worldly wisdom, understanding and studying the ways of the world. And I think what Munger reinforced time and time again is the idea that here we are on Earth, all we're really doing is learning to learn.
He talked about using multiple models in how you think about things. It's an interdisciplinary world that we deal in, because it's so complex. And I just think you'll rarely find someone like Charlie, who wanted to read so much, who wanted to learn so much. I think one of the things that he just kept it simple and is such a unique way. He would make statements-- your prior colleague was commenting on his statements, his one-liners.
But what his one-liners really did is they cut to the heart of the matter and spoke truth all at the same time. Most people usually have two problems with doing what Charlie does. One, they don't know the truth. Second, they don't want to tell other people the truth. And I think that's what Munger is unique opportunity was in society beyond all the, obviously, the personal financial success he had.
And I just-- you know, to your point on what Berkshire has evolved with Charlie, you cannot replace a Charlie Munger in any way, shape, or form, nor do I think you want to. The question for Berkshire will be, how do they have to evolve with the talents and the gifts of the people that they have around them today? Because you can't replace them.
JOSH LIPTON: And George, I want to bring you in here as well and just get your response to this news, George, your reaction to the news of Charlie Munger's passing. And what kind of impact as well. He had on you?
GEORGE SEAY: Yeah. Thanks for having me on. It's a real privilege to get to talk about Charlie Munger. I have a real distinct memory from April 2000 right after the tech bubble started bursting, and Berkshire Hathaway had gone straight down in a straight line about 30% from where it had peaked when they bought General Re.
And I'll never forget me and Franklin Delano, Roosevelt's great grandson, and one of my best friends, who's a hedge fund manager in California managing several billion dollars, we got there at like 5:00 in the morning to go to the annual meeting. And it was the lowest attended annual meeting since then and even before then for many years, because his investment philosophy and style, both Munger and Buffett, were so out of favor. And we got down there on about the fourth row. And I'll never forget watching Warren and Charlie eating their dilly bars and drinking their cherry Cokes, et cetera, et cetera, and having all these 20-something-year-olds go, I made over 100% last year, what's wrong with you, guys? You guys are totally out of step. And you you'll never recover.
And they were so polite to these young people. They were professional, respectful, polite, made a real impact on me on the character of these men and how well they conducted themselves. And being a Texan, I'm really admiring of how blunt Charlie Munger was. He was such a blunt-to-the-point, no-nonsense man. And I feel like that's kind of an old California persona that we're starting to lose people who respond like that. And we Texas love bluntness. So he was super special. And I don't think you can say, enough of that. They're just-- they just don't make them like that anymore.
One more thing that most people forget, Charlie Munger was a brilliant attorney. I mean, he wasn't just a great investor with Buffett, he was a very accomplished attorney. So he was kind of a Renaissance man. He was doing a lot of things.
JULIE HYMAN: And talk to me a little bit more, George, about his legacy. I mean, when you talk about, you know, there aren't a lot of investors like this anymore, but what do you think sort of the lasting legacy of Charlie Munger is in terms of the effect on how people think about investing?
GEORGE SEAY: Yeah. Well, I think he taught people a lot of patience. I mean, he just held Berkshire stock for so long and was very patient in watching an investment thesis play out. And these days, we're in the, you know, 30-second sound bite. And you see in movies images flash before your eyes every couple of seconds. And it's kind of I-want-it-now kind of generation. And so that kind of long-term thinking, which is so wise in investing, people should follow his example and not turn into day traders again or try to rush in and out of investments.
And also, you have to really have a huge amount of gratitude to him and Buffett for creating literally hundreds of thousands of American jobs. I mean, if you look at all the impact Berkshire Hathaway has had on our country and the good of our country and the good of our families around the country and people who need to work, it's just-- you can't overstate it. It's tremendous.
JOSH LIPTON: And Cole, there's a statement here from Warren Buffett as well, saying Berkshire Hathaway could not have been built to its present status without Charlie's inspiration, wisdom, and participation. What do you make of that statement, Cole? And what do you think Munger taught Buffett? How do you think the impact and influence he had on Warren Buffett?
COLE SMEAD: Yeah. Well, there's really-- there's kind of two areas to Berkshire Hathaway. There is, to your colleague's comment earlier, there was the Ben Graham era to Berkshire Hathaway, which was what Buffett had learned from, obviously, his mentor Ben Graham and the idea of triple nets and really buying securities in aggregate that were cheap. And you know, Munger not only helped Buffett focus on the kind of businesseses he wanted to own, but, obviously, the quantity of businesses. He wanted to own.
You know, Munger was quoted for saying, you know, put few eggs in the basket and watch the basket. In other words, the idea that you actually take less risk with fewer investments than you do by taking more, which, as Munger often said, was antithetical to what's taught in business schools even today. And so I think those kind of principles were really the second half and second act of Berkshire Hathaway where Munger was, not only teaching people about how to deal with risk, but then also the quality of businesses he wanted to deal in. The Coca-Colas, for example, that came later. The See's Candy, which they talk voraciously about from their investment in the 1970s, which was a turning point for Berkshire Hathaway at that time.
So I think that's really important. But let me add one more thing. Don't forget that, you know, people want to go out and do great things in their life. And Munger pointed out that you don't do great things in your life. Most of success in your life is not doing stupid things or what he called ignorance avoidance. So you want to have a great marriage, great, don't do stupid things. Practice ignorance avoidance. You want to run a great business, yeah, don't do the stupid things.
And I think removing the negative. It's a negative art that Munger was really trying to have us understand. And by removing that negative, it allows for a lot of positives to come to our life. And again, we're terribly indebted to him for his thinking, because, again, Warren would not say it like that. Charlie said it in a way that connected with you. And what a blessing to us all.
JOSH LIPTON: Don't do stupid things, that's a simple important life lesson. George, I want to end here with you. You know Berkshire well. I'm interested, George, what you think the future of Berkshire looks like.
GEORGE SEAY: I think the future of Berkshire is exceptional. I do think there will be people calling for it to be broken up and pieces sold off once Mr. Buffett passes away. But I hope they keep it all together. It's a very unique American institution really, not just a business, but institution. And it's brought so many blessings to so many different people.
And I think the future is bright. And I think whoever takes over as the CEO, probably the guy who runs the power division, they'll start buying back even more stock. I think they'll buy back gobs of stock. And I think that stock will perform extremely well for a long time to come.
And I want to add to my colleague's comment about quality. Munger really did impact Buffett significantly like that and pulled him away from Ben Graham into growth at a reasonable price and buy great businesses at a fair price kind of mentality. And if only Buffett had bought Costco, you think about how big the investment portfolio have been. He bought it when Munger first bought it.
And also, one other thing that Charlie said that I think was so wise is hang around with the very best people. Don't waste time with people who are toxic, negative, dishonest. Just stay away from those people like the plague, because they can ruin your life. And he was very successful at running around with great people-- Buffett being the best example.
JOSH LIPTON: All right. Thank you so much, guys. Cole Smead, Smead Capital Management CEO, and George Seay, Annandale Capital founder and chairman, thank you both.
GEORGE SEAY: Great to be with you all.