2015: Did Munger try to talk Warren out of buying IBM?

BECKY QUICK: This question is for Charlie. It comes from John Baylor (PH).

He says, “Charlie, you broke Warren of his cigar butt buying habits. With the significant innovation that is occurring in technology, is IBM similar to those textile mills in the 1960s, and did you try to talk Warren out of buying IBM?”

CHARLIE MUNGER: The answer is no.

I think IBM is a very interesting company. It totally dominated Hollerith machines, you know, the punch card computing. And then when they invented electronic computing, it dominated that for a while.

It’s very rare that when a technological change comes along that people adapt as successfully as IBM did that time.

Well, now they have the personal computer, and that’s been a mixed bag. And — but I think IBM is a very credible company.

We own a lot of companies that have temporary reverses, or once were mightier in some ways than they are now.

IBM is still an enormous enterprise, and I think it’s still a very admirable enterprise, and I think we bought it at a reasonable price.

WARREN BUFFETT: When we bought it, it was a two-to-nothing vote. (Laughs)

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: OK. (Laughter)

WARREN BUFFETT: Incidentally, there’s one thing I always find interesting.

We get asked questions about investments we own, and people think we want to talk them up, you know, or —

We have no interest in encouraging other people to buy what — the investments we own.

I mean, we are better off, because either we or the company is likely to be buying stock in the future. Why would we want the stock to go up if we’re going to be a buyer next year, and the year after, and the year after that?

But the whole mentality of Wall Street is that if you buy something — even if you’re going to buy more of it later on, or if the company is going to buy its own stock in — the people seem to think that they’re better off if it goes up the next day, or the next week, or the next month, and that’s why they talk about “talking your book.”

If we talked our book, from our standpoint, we would say pessimistic things about all four of the biggest holdings we have, because all four of them are repurchasing their shares, and, obviously, the cheaper they repurchase their shares, the better off we are. But people don’t seem to get that point.

Do you have any idea why, Charlie?

CHARLIE MUNGER: Warren, if people weren’t so often wrong, we wouldn’t be so rich. (Laughter and applause)

WARREN BUFFETT: He’s finally explained it to me. OK. (Laughter)