Mobile Home Park Mastery: Episode 322

The Lessons Learned From Charlie Munger

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Warren Buffett’s long-time business partner in Berkshire Hathaway passed away recently at the age of 99. His contributions to America were more than just about making money. In this Mobile Home Park Mastery podcast, we’re going to discuss the life of Charlie Munger and his significant impact on the mobile home park industry, as well as the lives of those who listened to his philosophies. He will be greatly missed.

Episode 322: The Lessons Learned From Charlie Munger Transcript

Charlie Munger passed away on November 28th, and with him went an era of all kinds of important features to all of us, particularly those in the mobile home park business. This is Frank Rolfe of Mobile Home Park Mastery podcast. We're gonna talk about Charlie Munger and his many, many contributions. Now, Charlie Munger was born 1924 in Omaha, Nebraska. That's right, the same hometown as Warren Buffett, his later business partner. And the first interesting thing about Munger is, like many Americans, back during World War II, he dropped out of college to enlist in the army. He didn't have to, he could have gone on with his college degree, could have stayed in his nice peaceful existence there in Omaha, but instead chose to fight. And he did that because he was of the generation where you thought more about humanity and other Americans than you did just all selfishly about yourself.

So he goes to war, he gets out, and then he goes to Harvard Law School where he does exceptionally well. And he kind of figures out his investment philosophy while he is at Harvard, because his big passion at Harvard became playing cards. And if you read his early quotes, some of his first quotes, they revolve around the fact that what he learned from playing cards is, "That in life, you want to fold early if you believe you have a losing hand, but if you think you have a winning hand, you want to bet big because opportunity doesn't come around that often. And when it does come your way, you've gotta grab it and you have to harness it." Now, Munger then ran his own investment firm, which many people may not know. He was an investment firm manager, just as was Buffett. From 1962 to 1975, he was completely on his own, he had no affiliation with Warren Buffett at all. He did a phenomenal job. And during that period, he produced an average of a 19.8% annual return at the same time that the Dow Jones only produced 5% annually.

And of course, you know the rest of the story, you know that he ultimately became business partners with Warren Buffett, and we all know the story of Berkshire Hathaway and how it grew to become one of the greatest investment stories in American history. But Munger was more than just a guy who made money. There are people out there who just made money, we don't really know their stories or their quotes, and they never were in the media, and we couldn't even pick them out of a crowd. But Munger was more than just that. You can't just label him as a guy who was great at making money and that was his only goal and focus, 'cause it's not true.

So one of the things about Charlie Munger that I feel are more important than just a simple fact that, yes, he went on to become a billionaire, and indeed, Berkshire Hathaway is the greatest investment firm in the history of America. Well, the first item which reflects back to his career in the military, his choice to fight for the nation back during World War II, is that Charlie Munger was a member of the Greatest Generation, and that label, and it's a very accurate label, reflects back on the group of our population which is dwindling greatly every day. And these are the folks that really built America, because let's be honest, most of America, the America that you know and that you enjoy was really built by people who lived and built things during the 50s and the 60s and the 70s, and the 80s. And this was the Greatest Generation. And they were called the Greatest Generation because they were. They did it all.

They went to war. They defeated our adversaries. They created all of these wonderful things that we enjoy today. The Interstate Highway System. All of the modern advancements in many industries were all brought about because of a group that just couldn't stop working and couldn't stop thinking about everyone but themselves. And it's been my blessing to have spent my entire career working with people who are Greatest Generation members. Back when I had my billboard business, all of my land owners were Greatest Generation people. And in my mobile home park career, almost all of my sellers have been Greatest Generation members. And I would say that one of the key losses for the younger generations to be honest with you, is they will never have that ability to interact with people from the Greatest Generation. I've learned so much from those people in simple conversations, such very smart philosophies on life and on business. It's amazing how much you could get from just a five or 10-minute or 30-minute discussion with a Greatest Generation member.

And in those conversations, there was never any goal to talk about themselves, that wasn't of interest to them, they were more concerned about the big picture. So they would tell you all kinds of philosophies and things on life, and they were always trying to help you. That's one big difference you'll find between Greatest Generation people and Baby Boomers, as Baby Boomers are often thinking about themselves, their needs, their interests, their goals. The Greatest Generation really weren't, they were so friendly, so nice. I remember back in my billboard industry, I did a deal with someone who was a member of the Greatest Generation, I successfully negotiated a lease with him, I built a billboard, and then they would at no compensation, frequently call me and say, "Hey, here's a lead on another billboard location." "Hey, I met this guy, he has a piece of land, maybe you can build a billboard on that." Why was he doing that? He was doing that to help me.

He felt sorry for me. Here I was starting up this billboard company, I had no idea really what I was doing, just out of college, but he had a big heart, and he wanted the younger generation to succeed. So the first great thing about Charlie Munger is that he was a Greatest Generation member. The second thing is that Berkshire Hathaway has been a huge friend to the mobile home park industry. Many people are unaware, but Berkshire Hathaway purchased Clayton Homes and 21st Mortgage and Vanderbilt Mortgage, back around 2003. And that one purchase and all of the things that went on after the purchase have been essential to the modern manufactured housing business. Now, the first time I remember the significance of Berkshire Hathaway buying Clayton was when I was at the Louisville show, and this was not immediately following the purchase, this is maybe a year later. And when I went to the show, everyone was like, "Have you been to the Clayton pavilion? You just won't even believe it." Because in all the prior Louisville shows, most of the manufacturers, they had some other homes there, and some folding tables, and some fabric draped on that, and maybe a center piece and a pile of brochures.

But here was Clayton. And Clayton had taken it to the next level. They had a two-storey little building that you could come and look at their models, and they had a little rooftop restaurant. And the quality of the product was spectacular compared to any of the predecessors, it just blew everyone away that you couldn't even walk in to Clayton home and bear to go look at their peers because it was so less appealing. They had finally brought in professional designers, they were making great choices on finish out, and the product just went up a million percent upon the purchase with Berkshire Hathaway. And don't forget what went on with financing. The cash program was the brainchild of the new owners of Clayton and 21st and Vanderbilt, and it's revolutionized the way that mobile home park owners deal with vacant lots. Prior to that program, if you had a vacant lot and you wanted to put a home on it, it was all on you, you had to go out and find a home and bring it in and pay a ton of money, all out of pocket. And then here comes to cash program, and suddenly they bankroll you, they do the whole process, they even underwrite the loan for you. And then of course, there was the TRU home product, which is another brand of Clayton.

Its goal was to create a very inexpensive home, because in many mobile home parks in parts of America the price point was too high and it needed to be bring down. And that's what TRU did. TRU, I remember the first show that they brought in at TRU home, people were blown away. They had homes in there from about $19,000. Unbelievable price point. People were just... Could not even believe it was possible, they could build something that inexpensively. So the contribution by Charlie Munger via Berkshire Hathaway to our industry has just been phenomenal. But yet, there's still more. One of Charlie Munger's biggest contributions to me is that he did not worry himself with political correctness. He had a wide audience, the meetings they have for shareholders, for Berkshire Hathaway are well known to have massive attendance, people listen very attentively, trying to get just different facts and figures of business and Buffett's philosophy. But then, here was always Charlie Munger giving his own short, quick, witty, politically incorrect commentary. And that's a big problem in America today, is we've lost track of just common sense and straightforward talk. We have to put disclaimers on everything.

Every article, every discussion, you're not allowed to say anything that you know to be true without a million disclaimers on it. Just like those annoying products that you buy that come with all of the disclaimers that are taped to the product. And they're all completely ridiculous, they're all things that you know. But nevertheless, the producers must do that because they're afraid you're gonna sue them, and they're hoping if they put a disclaimer on there like, "Do not put toaster in bathtub," that somehow, that will save them from our American love of litigation. But Charlie Munger didn't care. Now, some would say, "Well, gosh, it's because he was in his 90s, he was financially independent, so he didn't care what he said. You couldn't do a thing to him." But that's not really true.

If you look back at even his early quotes, that was always his style, he just liked to say it like it was. And he didn't really care who we hurt, who he offended, he just cared about telling you the truth, trying to give you ideas that he felt strongly about in a manner that you would remember them. I remember when he got in trouble here not too long ago by claiming that Bitcoin was rat poison. Buffett was upset that he chose to describe one of the investment options for millions of Americans as something that you would kill a rat with. But he did, and he didn't care. And of course, it has been proven pretty much to be true. So Munger's lack of political correctness to me was a profound reminder that, hey, maybe we should all just be a little more honest, tell it like it is, not put a million disclaimers out there. Maybe the world would be a better place. Because Munger hated with a passion BS.

You'll see the very words, and I'll just say them, bullshit, one of his most common quotes, he applied it to almost everything. He said the people who talk about EBITDA relentlessly are just full of bullshit. He just hated hated hypocrisy. He hated people who used flowery words to try and hide the true narratives. So I'd like to end with just one of those quotes that I think best sums up the life of Charlie Munger. Here's what Charlie Munger said once, he said, "There are huge advantages for an individual to get into a position where you make a few great investments and then just sit on your ass." It's direct, it's politically correct, it's a 100% true. So I urge all of us to be a little more like Charlie Munger. Let's all be a little more direct. Let's be a little more politically incorrect. Let's just get down to the truth. Let's try to help people by giving them good advice and good information that they can understand easily and retain. This is Frank Rolfe of Mobile Home Park Mastery podcast. Hope you enjoyed this. Talk to you again soon.