Business first, management second

By | Investing

(Excerpt from Charlie Munger’s ‘Bag of Tricks’)

“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 it and it would do all right. Then we want that business which an idiot could run successfully to have a wonderful person in it running it. If we have a wonderful business with a wonderful person running it, that really turns us on, and it works very well. Now, we do make exceptions, but not many. It’s a 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. I had a friend when I practiced law and he said, ’If it won’t stand a little mismanagement, it’s not much of a business.’ We like businesses that stand a lot of mismanagement but don’t get it. That’s our formula. We can’t make it work perfectly, but it certainly worked better than most peoples.”

Charlie Munger

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