*Repost* Warren Buffett And Charlie Munger Are Failures
I’m on vacation right now so I’m reposting some of the most popular articles from the blog until I get back on Monday August 3rd.
On Failure Part Two
I wrote a version of this post a few days after leaving my job almost a month ago and planned to keep it private. But it helped me get over losing my job. And helped me get over the anger, sadness, depression, fear, and other emotions I felt. So I’ve decided to share it with everyone.
Rough times happen to everyone from time to time. But destructive thoughts if left unchecked can lead to bad things. I’m sharing this post in the hopes of helping someone else who may be going through their own rough times.
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But I’m not the best resource to learn from on failure… Let us learn from a couple masters who both failed before making billions of dollars. And helping millions of people around the world.
Warren Buffett and Charlie Munger Are Failures
Warren Buffett’s biggest failure is now his biggest triumph. And he uses this “failure” to help millions of people throughout the world.
One of Charlie Munger’s first major investments failed. But he used that “failure” to become rich and help the world too.
I have failed. And I will now use this “failure” to help make the world a better place like Buffett and Munger did.
But before we talk about that we need to talk about three major failures.
Warren Buffett’s a Failure
In the 1950’s and 60’s Warren Buffett started an investment partnership with $100,000 of his own money. And money he raised from family and friends.
Over time he built the firm by buying portions of smaller companies whose prices were cheap. He did this so well that soon after starting he was able to buy entire companies instead of just portions of them.
But he soon failed…
Berkshire Hathaway Is a Failure
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The original Berkshire Hathaway was a textile company based in New England. When Buffett took it over no matter what he did the company continued to lose money. This was because new and cheaper foreign and non union Southern US companies made it impossible for Berkshire to compete on price. This led to the company losing millions of dollars over the years after Buffett bought it.
As this continued for years Buffett came to realize he was fighting a losing battle. And instead of continuing to pour money into Berkshire and letting the business fail. He used this money to buy companies that would make money instead.
He started buying smaller insurance companies. And used the excess funds from these insurance companies – insurance float – to buy even more profitable and undervalued companies.
In doing this he turned his original $100,000 investment funds into the $357 billion behemoth it is now. Today Berkshire is one of the biggest companies in the world. And it owns some of the most valuable companies and brands on Earth.
But by his own admission he wouldn’t have done as well without teaming up with another failure.
Charlie Munger Is a Failure
Charlie Munger was first a high profile lawyer. And then a property developer in California before becoming a full time investor in his late 30’s.
His fund did well for years as he built up the companies assets. And one of his first major investments was in a company called Blue Chip Stamps.
It was a stamp trading company that also produced a lot of float. For example, if you gained 100 stamps you could exchange the stamps for a prize like a vacuum cleaner.
When Munger bought Blue Chip it was growing and producing a lot of excess cash. At its peak in 1970 Blue Chip generated $126 million in sales.
But Munger recognized a problem a few years after buying Blue Chip. Sales began to decline fast. And nothing Munger did stemmed the tide of falling sales
Instead of letting it fail he used the excess funds from Blue Chip – which was still profitable while sales fell – and used these funds to buy other companies. He eventually bought Wesco which is an insurance/financial company. And used the float from this business to buy ever bigger stakes in profitable and undervalued companies.
Sound familiar?
By this time Buffett and Munger had met, exchanged ideas on a regular basis, and were friends. But they still didn’t work together.
Munger did such a great job running Blue Chip that Buffett bought Blue Chip and merged it into Berkshire Hathaway and then a change occurred.
The Change of Mindset
Buffett has said when this happened, Munger helped change the way Berkshire invested its growing cash machine. Instead of concentrating on just cheap companies that weren’t great businesses. They turned their focus to companies that were cheap or fairly valued. But now concentrated on good to great businesses.
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Side note on the book Mindset.
I first read the book Mindset after seeing Erik Spoelstra – multi time championship coach of the Miami Heat – recommend it.
It’s a phenomenal read. And while I read this before the problems I had at my job. The lessons I learned reading Mindset helped me cope with losing my job.
I cannot recommend Mindset enough not only for coping. But also for teaching lesson on how to get into the proper “championship” mindset.
If these kinds of lessons interest you I also recommend The Obstacle Is The Way.
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Due to this combination of minds. The change in mindset. And the power of compound interest, Berkshire exploded…
But we will get back to that later…
I Failed Too
After overcoming debilitating health issues that lasted for 10 years. After teaching myself about investing. Writing my own full length value investing education book. And then being hired, I failed.
I thought my knowledge about how to analyze a company’s balance sheet and investment potential was all I needed… I was wrong.
I thought I had all the tools necessary to succeed but I didn’t. Hard work can only get you so far…
Without the proper mindset, and in my case purpose, you will still fail no matter how hard you work. And I don’t mean fail at your job. I mean you will fail yourself. Your principles. And what you are striving to become and build.
Buffett and Munger’s Failures Are Now Helping The World
Buffett and Munger grew to become two of the wealthiest, most powerful, and respected people in the world.
Mr. Buffett who has been one of top three most wealthy people in the world for years has gained 98% of his $77 billion net worth after the age of 65.
And will give 99% of this fortune to the the Bill and Melinda Gates Foundation upon his death.
Charlie Munger is worth $1.3 billion. And has already given hundreds of millions of dollars causes he supports.
Both men not only plan to give billions of dollars to causes they care about. But the luxury of having all the money they do enables them to also give time to these causes as well. This is far more important.
While I can’t speak for Mr. Buffett and Munger on their motivations. I can speak for myself…
I wasn’t making an impact on anyone else’s lives other than my families. And I failed myself and what I’m striving to build. That changes now…
My Purpose is Helping Others
This is what I had to learn by leaving my prior company and coming back to this blog.
Together we can make not only the lives of our families betters. But those of the rest of the world as well.
This is my purpose…
This blog will no longer be about improving my own knowledge. It will be about teaching and improving others lives.
I have several projects that I will announce over the coming weeks. All related to finance and geared towards helping and educating as many people as possible.
While I can’t reveal what they are yet since they aren’t finished. I can tell you today that part of all sales from this blog will go towards helping, educating, and feeding kids and adults who need a hand up.
5% – to start – of all sales from this blog. My book. And all future unannounced projects will go to charities of my choosing in the Philippines. And also to local charities in my area.
The percentage given will grow over time as me and my family become more secure financially. And the scope of the charities will grow as well. But this will be a great start.
Together we can make a difference in people’s lives. Do great things. And improve the world.
Mr. Buffett and Mr. Munger are going to help tens of millions of people with the money and time they’re contributing.
How many people can a blog and like minded people help?
Let’s find out in the coming years.
Are there any books, articles, sayings, or lessons that you’ve learned that have helped you when you’ve failed in the past?
If so please share with everyone below so we all can learn.
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