Monday, November 17, 2008

The Sincerest Form of Flattery

“I think there is something happening in the American marketplace that has to be stopped,” Byrne said. “When it comes to light it’s going to make Enron look like a tea-party.” [Emphasis added.] — CEO Patrick Byrne in “Insights from an Outsider” by Chase Christiansen, from Weber State University address, Nov. 6, 2008.

Chapter 28: A Convulsion That Makes Enron Look like a Tea Party—From “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett” (eBooks on Investing, 2011).

On the one hand, we’re delighted Byrne read the book. On the other hand, we’re disappointed he doesn’t seem to be giving given credit where it properly belongs. That is, to Berkshire Hathaway Vice Chairman Charlie Munger, who made the Enron comment at last May’s annual shareholder meeting.

Here’s how we wrote about it in “Secrets”:

The questions have been uniformly friendly…. But when Buffett calls on the twenty-fourth question of the day, the pleasant mood quickly changes.

“I’m Dr. Silber of the Infertility Center of St. Louis,” the man starts off, in a bright, friendly voice. The arena collectively freezes. Here we go: the abortion question….

But the doctor isn’t going there at all. “We have three candidates, all of whom seem to be pandering to voters,” Dr. Silber says, referring to the presidential election campaign now in full swing. “What would you do as president?”…

Munger speaks in his crisp, didactic fashion. “I’d like to address the recent turmoil and its relation to politics…. We have had a convulsion that makes Enron look like a tea party,” he says. “Human nature always has these incentives to rationalize and misbehave. We’re going to have turmoil as far ahead as you can see.”

—Berkshire Hathaway Vice-Chairman Charlie Munger, quoted by Jeff Matthews in “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”. Emphasis added.

It is, indeed, a great line.

Jeff Matthews
I Am Not Making This Up

© 2008 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews.
Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.


Its_strange said...

The inability of our legal or regulatory system to stop a Patrick Byrne or Phil Saunders makes me think its more than just a great unwinding.

infoage said...

So Munger made his comment before Buffett's famous (perhaps infamous) "Buy America" NY Times opinion piece? Interesting...

Anonymous said...

Interesting that Patrick Byrne's father was one of WEB's heroes. Jack Byrne saved GEICO in the mid 70s when Buffett went "all in."

Jeff Matthews said...

Yes indeed, Jack Byrne indeed looms large in the Buffett pantheon. Read Roger Lowenstein's account of how bad a shape GEICO was in, and how Jack Byrne began the process of turning it around, in Roger's excellent 1995 biography of Buffett.


Jimmy Jacobson said...

I used to work for a certain company presided over by Patrick Byrne. Jack would host brown bag lunches where we could bring our lunch and listen to him talk and ask questions. The one I remember most was about how mortgages were being securitized and sold. At that time though, Mr. (J) Byrne's worse case scenario was China driving the dollar down with their currency control and ownership of large chunks of US citizen debt.

Anonymous said...

Jeff - I just finished your book. Berkshire looks like it's past it's peak and could be headed much lower. Should be an even better event next year in Omaha!

Anonymous said...

Perhaps the irony of Charlie Munger's quote is that he could be sitting in front of his own little "tea party"

Vol is King said...

Nate the great and the case of the missing puts:

Jeff saw you quoted in that Bloomberg article, I believe I solved the mystery of the BRK CDS spreads.

The cds spreads have nothing to do with the put sale there are a lot of high net worth individuals out there who own berkshire. But there are no options so everyone who's lost money on all their other stocks and are scared but want to hold on to berkshire (have you sold yours?) they turn to their broker at Goldman or Morgan Stanley or where ever and say please hedge some of this for me I don't want to be worth less than $40mn. The shares are hard to borrow plus a bunch of hedge funds are shorting Berkshire because of GE, Goldman, AMX so the only way for people long BRK to hedge is to buy CDS that's why the cds spreads have blown out like that.

The put sale is a red haring.

Joshua said...

It's a common (trite) phrase. Doesn't mean he read your book.

Anonymous said...


I'm kind of confused about your post. Are you trying to prove a case of plagiarism, sell books or talk about the scariest economic storm most Americans (and world citizens) have seen?

If it is (a)then what does it matter?, or (b)then well, that's a sad case of wrong place, wrong time, or if it is (c)then lets drill a little deeper into the reasons.

I for one, looking at the photo on Drudge of the Oracle frowning about losing more than $11000 per share value (about 12%) and a 77% decline in third quarter profits, tend to view this deepening economic crisis as a spiritual journey for both the haves and the have-nots. Whatever that means.

But I also believe that the root of the continued drop in the value of the stock market (now almost 50% off peak) is not a financial one but a political and spiritual one that was not fixed when America voted Obama as our 44th president, thus the continuing slide. In fact, I tend to view the probability of the election of Obama as a strong driver in the long slump over the last six months.

What say ye?

Jeff Matthews said...

"Anonymous" professes confusion about the post, mainly to launch into his own analysis about what this crisis all means, and the root cause.

In fact, the post had nothing to do with what this crisis all means, or its root cause. That's a book-length subject, not a blog-length subject.

As for his question, "What say ye?" I simply say "He's quoting the book!"