In 1959, a doctor named Edwin Davis invited two of his acquaintances to dinner in Omaha. One was Charlie Munger, a sharp-tongued lawyer who had grown up in the city but now lived in Los Angeles. The other was Warren Buffett, a twenty-eight-year-old money manager who couldn't stop talking about compound interest.
They talked for hours. By the end of the evening, Munger was laughing so hard he could barely breathe, and Buffett had found the partner who would help him build the greatest investment record in history.
This episode traces the making of that partnership and the philosophy it created. We begin with young Warren in Omaha, a boy obsessed with numbers who sold Coca-Cola door-to-door at six and counted bottle caps at the racetrack to calculate market share at nine. We follow him to Columbia Business School, where he discovered Benjamin Graham and learned that stocks weren't lottery tickets but fractional ownership of actual businesses.
But Graham's approach had limits. He bought companies only when they were so cheap that liquidation would turn a profit—what he called "cigar butts," stocks with one puff left in them. Munger taught Buffett to think differently: forget the cigar butts, buy wonderful businesses at fair prices and hold them forever.
We watch that philosophy in action. The American Express salad oil scandal of 1963, when most investors fled and Buffett walked into Steakhouse after steakhouse, watching customers pay with their American Express cards, then bought the stock. The See's Candies acquisition that taught him about pricing power. The Coca-Cola investment that turned five hundred million dollars into twenty billion.
The lessons compound: Be fearful when others are greedy. Be greedy when others are fearful. Time is the friend of the wonderful business. It takes twenty years to build a reputation and five minutes to ruin it.
Warren Buffett and Charlie Munger proved that the best investment philosophy is also the simplest: find great businesses run by honest people, pay reasonable prices, and let time do the work.
The snowball is still rolling.