Thread by @NeckarValue

Charlie Munger once sent a letter to Robert Cialdini with a single share of $BRKA
“Warren and I have read your books. We’ve made hundreds of millions of dollars. This is our way of saying thanks.”

Cialdini kept the share and is an avid reader of Buffett's shareholder letters.

"Every year, Warren establishes his credibility ... he mentioned something that went wrong that year. And then he says of course we learned from that, we will never do that again, and he moves on to of the strengths of the year all the things that went right"

"He establishes his truthfulness which makes me believe in what went right to truly process it deeply and believe it fully because he first was willing to tell me what went wrong. I now believe the next thing he said."

Cialdini's advice: "Mention a weakness relatively early [when you make your case] because that establishes your credibility for what you say next. And that’s the moment for your strongest argument, immediately after you’ve mentioned the weakness."

Cialdini's Influence was published in '84. In 1985, Buffett wrote: "Our Vice Chairman has always emphasized the study of mistakes rather than successes, both in business and other aspects of life."

“All I want to know is where I’m going to die so I’ll never go there.”

"You’ll immediately see why we make a good team: Charlie likes to study errors and I have generated ample material for him, particularly in our textile and insurance businesses."

Importantly, they don't only study their mistakes, they talk about them.
berkshirehathaway.com/letters/1985.h…

"We remained in the [textile] business for reasons that I stated in 1978."
"It turned out that I was very wrong. Though 1979 was moderately profitable, the business thereafter consumed major amounts of cash."

In 1989, Buffett wrote about his "Mistakes of the First Twenty-five Years"

"It's a good idea to review past mistakes before committing new ones."

berkshirehathaway.com/letters/1989.h…

"My first mistake, of course, was in buying control of Berkshire. ... If you buy a stock at a sufficiently low price ... I call this the "cigar butt" approach to investing. Unless you are a liquidator, that kind of approach to buying businesses is foolish."

"After some other mistakes, I learned to go into business only with people whom I like, trust, and admire. As I noted before, this policy of itself will not ensure success."

"Some of my worst mistakes were not publicly visible. These were stock and business purchases whose virtues I understood and yet didn't make. ... For Berkshire's shareholders, myself included, the cost of this thumb-sucking has been huge."

25 years later, in 2014, he returned to the topic.

"I have made plenty of mistakes ... The most gruesome was Dexter Shoe. It had a terrific record and in no way looked like a cigar butt. Its competitive strengths, however, were soon to evaporate because of foreign competition"

"Berkshire paid $433mm for Dexter, its value went to zero. This doesn’t come close to the magnitude of my error. I gave Berkshire stock to the sellers. The shares are now worth about $5.7bn. As a financial disaster, this one deserves a spot in the Guinness Book of World Records"

The letter to Cialdini also included Munger’s personal phone number. I wonder what other ideas they discussed over the years.🤔

From @ritholtz podcast

ritholtz.com/2021/06/transc…

ritholtz.com/2021/06/mib-ro…