by Janet Lowe
Because local workers were unfamiliar with the high-tech materials and equipment being utilized, Williams trained them himself. He arranged for manufacturer's representatives to cone to the yard and show the workers how to do things properly. Green Cove Springs is a rural area, and many of the workers had never held a job before that paid good wages and included employee benefits. Williams (with Munger's money) arranged for unemployment, health, and workers' compensation insurance. "They all became very loyal," said Williams.
The boat construction stretched out for three years. In that time King and Rachel Williams became well-acquainted with the workers and their families, and realized how important the job was to them. When the boat was finished, Rachel, who ran the office, called the large boat builders in the region in an attempt to find employment for the construction crew.
When she called, "They'd say, well, 'send a resume.' I'd say, 'why don't you come out and see what these people can do.' We used the Channel Cat as a demo to get all of the workers jobs before we left."
Undeterred by the Titanic jinx, Williams claims the boat, which has a range of 1,500 miles, is unsinkable. The hull is composed of cells and if a puncture occurs one place, the water will not spill into other cells. The Channel Cat has motorized sails, a global positioning system, autopilot, radar, and a weather fax. The boat has a customized computer system with compact disks containing the marine charts of all the seas and harbors in the world.
In addition to the upstairs salon, below there are two state rooms, a crew bunk room and a library/lounge. The boat can carry 149 passengers and six crew. Because it was built to sea-going standards, the Channel Cat is licensed to ply waters with paying passengers from Alaska to Cabo San Lucas, at the tip of Baja California.
The boat has two 350 horsepower Cummins diesel engines, plus two generators to provide electricity. The desalination system produces 500 gallons of water per day, plenty for the crew and guests to take regular showers. There is a four-keg beer cooler in the bar, plus a 35-case cooler and an ice maker capable of producing 200 pounds per day . The boat carries a state-of-the-art audiovisual system and can pick up satellite television and telephone anywhere on the globe.
The interior is fitted out with pale bird's-eye maple, leather furniture, and a soft green carpet from an imported material that allows even motor oil to be wiped up with a paper towel.
The etched windows at the entrance can be fiber-optically lit and gently, continually change colors. At a cost of $55,000, a Florida glass artist created a story etched in the decorative glass specifically for the Channel Cat with it theme of Santa Barbara coastal life. The entry door windows depict a kelp bed, then the partition in the foyer displays various sea creatures that might be found in the kelp bed, and the story in glass progresses throughout the boat to the downstairs bathrooms. There, a mermaid wearing a seashell bra, adorns the ladies' room door and Neptune, with a great flowing beard, designates the men's room.
"I've never in my life spent money foolishly like that. I said what the hell. It was a creative thing to do," Munger insisted. Although Munger will not say how much the boat cost, it is estimated by one expert that total expenditures must have run at around $6 million.
After the three years of construction, it took another year to deliver the boat and put it into service. The Williams, along with two other crew members, sailed the Channel Cat 7,000 miles to bring it home to Santa Barbara. They started the journey during the 1999 hurricane season, which turned out to be one of the most severe seasons in recent Caribbean history. Hurricane Mitch New through the area and the crew was forced to take emergency refuge in Havana, where they waited for 25 days at the Marina Hemingway for Mitch and other foul weather to pass. When weather permitted they sailed through the Panama Canal and started up the west coast of Central America, Mexico, and on to California.
Because of its size and passenger load, the boat must have two officers. King and his brother Rex, who once ran a charter boat service out of St. Thomas in the Virgin Islands, serve in those roles. Rachel and Rex's wife Michelle are the deck officers.
Charlie once claimed he would never spend a night on the boat, but when the Williams were bringing it around, he and Nancy flew to Cabo San Lucas to meet the Channel Cat. They spent three days in Baja California where they went whale watching and fishing.
"Charlie wanted a dual purpose boat," said Williams. Designed as a day-sailing party boat, Munger hopes that half the time the Channel Cat will be rented out for corporate board meetings and the like. The other half of the time it will be donated to organizations for fund raising events. Munger envisions whale watching tours, lobster fishing parties, and cruises through the Channel Islands, location of the evocative book and movie, Island of the Blue Dolphins. King and Rachel hope to conduct 50 charter events each year and 50 charity events each year.
Partly because local tour boat owners objected, and partly because of its large size, the boat has not been granted its own license to operate out of Santa Barbara. It has, however, been used for its intended purpose in other ports and sometimes sails under a sublicense out of Santa Barbara. The Williams staged a Buffett Group party in Monterey, California, attended by Buffett, Bill Gates, plus other well-known members of the corporate elite. A seven-course banquet for 65 people was served on the boat. The dinner was catered from land, though the boat has a full-service galley including double convection ovens. Emilie Munger held her fortieth birthday party aboard the boat in Newport Beach, California, and her friends flew in from all around the world for the event.
After the boat was finished, King Williams and Charlie were walking through a parking lot at a boat marina when a car backed out of a parking space and shot toward them. Williams yelled at the driver, who slammed on the brakes just before hitting Charlie.
Munger said to Williams, "You probably saved my life."
Williams replied, "Charlie, I'd never let anything happen to you."
Charlie snapped back, "Then you're walking on my wrong side," referring to his blind left eye.
THAT MnNGER Bi i ur A $6 MILLION boat for the sheer fun of it seems remarkable, if not somewhat quirky, to his family and friends, even to King Williams.
"Charlie is very practical," said Williams. "We were driving along one day and Charlie said, 'I've got to show you this house I built.'" Munger directed Williams to drive to the top of Hot Springs Road in Montecito, where he pointed out a mansion with a sweeping view of the Pacific, a lap pool, extensive gardens on so much land it took a golf cart to get around. "I said, Charlie, your retirement home! Charlie replied, `Naw, I'd never live in a place like that.''
"He is very distrustful of emotions." observed Molly Munger. "We heard a lot of messages about how emotions can lead you to do dumb things. I'm trying to think of a time he said, 'Go with your gut, feel the vibes. Lose yourself in the moment.' That's not where he is."
Yet Molly says there always were signs that her father could be frivolous. At the same time, that dry of a person wouldn't have that spring in his step. After something is checked out and you can feel safe, he gets very devoted to people," said Molly. "A good argument can be made that he's a very emotional person-that it is an achievement that he brought a large psyche under control. A unique mix of an (emotional) personality under wraps."
A Postscript
When they were younger, Warren Buffett often told inquisitive shareholders that if anything happened to him, Charlie Munger would take the helm at Berkshire Hathaway. As time passed and age crept up, Munger deflected questions of corporate succession in the standard midwestern way, with humor. "They asked George Burns when he was 95, 'What does your doctor say about you smoking these big, black cigars?' And he said, 'My doctor's dead.'"
But now that Buffett is around 70 and Munger is passing his mid-70s, that reply doesn't work as well.
"In due course this corporation will have a change in management," said Munger. "There is not a way to fix that."
Both men say, however, that the
re is a successor (or possibly two, one for operations and one for investments) who will be revealed at the appropriate time. Furthermore, Berkshire Hathaway was built with a long tenure of effortless management in mind. "The one place a death will hurt is we're not likely to get as good an allocator of capital as Warren in the next CEO, whoever that is. But it still will be one hell of a business.'ki
Munger said he and Buffett aren't "obsessing" about their successors yet. "Fortunately, Warren plans to live almost indefinitely."
One shareholder asked, who is the next Charlie Munger? "There's not much demand," declared a matter-of-fact Munger.
Unable to resist a ghoulish joke, Munger said that when he dies people will ask, "How much did he leave?" The answer will be, "He left it all."
APPENDIX A
WHEELER, MUNGER
PARTNERSHIP
Annual Percentage Change
APPENDIX B
INTERVIEW LIST
Otis Booth, Be] Air, California, November, 1999.
David and Molly Borthwick, Star Island, Minnesota, August, 1999.
Hal Borthwick, Los Angeles, California, May, 1999.
Warren Buffett, Omaha, Nebraska, October, 1997.
Robert Denham, Los Angeles, California, December, 1998.
Stephen English. Star Island, Minnesota, August, 1999.
Carol Munger Estabrook, May, 1998, Omaha, Nebraska.
Katharine Graham, Washington, D.C., November, 1998.
J.P. "Rick" Guerin, Beverly Hills, California, October, 1998.
Lenny Gumport, Star Island, Minnesota, August, 1999.
Roderick Hills, by telephone from Houston, Texas, October, 1999.
Charles Huggins, South San Francisco, California. October, 1999.
Andrew Leeka, Los Angeles, California, November, 1999.
Stan Lipsey, Buffalo, New York, August, 1998.
Ira and Martha Marshall, Palm Springs, California, November, 1999.
Barry Munger. New York City, October, 1998.
Charles T. Munger, Omaha, Nebraska, May, 1997; Santa Barbara,
California, October, 1997: Omaha. May, 1998; Los Angeles, California, May 1, 1998; Omaha, May, 1999: Star Island, August, 1999; Los Angeles, May and November, 1999; Los Angeles, March, 2000.
Charles T. Munger, Jr., Star Island, Minnesota, August, 1999.
Emilie Munger, Mill Valley, California, October. 1999.
Nancy Munger, Omaha, May, 1998 and May, 1999; Star Island, Minnesota, August, 1999.
Molly Munger, December, 1998, Los Angeles, California; Star Island, Minnesota, August, 1999.
Wendy Munger, South Pasadena, California, December, 1998.
Chuck Rickershauser, Los Angeles, California. December, 1998.
Ronald Olson, Los Angeles, California, December, 1998.
Gerald Salzman, Los Angeles, California, November 8, 1999.
Willa Davis Seemann and Lee D. Seemann, Omaha, Nebraska, May, 1998.
Louis Simpson, Rancho Santa Fe, California, December, 1998.
James D. Sinegal, Issequah, Washington, August, 1998.
King and Rachel Williams, Santa Barbara, California, May, 1999.
APPENDIX C
TIME LINE-THE LIFE
AND CAREER OF
CHARLES T. MUNGER
He began practicing law in Los Angeles at Wright & Garrett, which later became Musick Peeler & Garrett.
Wesco Financial Corporation was incorporated.
Otis Booth and Charlie Munger began their first real estate development.
Buffett started buying shares in Berkshire Hathaway, a beleaguered New Bedford, Massachusetts, textile manufacturer.
Munger, Rick Guerin and Buffett began buying shares in Blue Chip Stamps.
Buffett accumulated enough shares of Berkshire Hathaway to take control of the company.
National Indemnity Company and National Fire and Marine Insurance Company, sister companies, were acquired for approximately $8.6 million.
Buffett started to liquidate Berkshire Hathaway's assets and restructure it as a holding company.
Munger became a trustee of Harvard School in Los Angeles, which later merged with Westlake School.
The 100-member Berkshire Partnership was terminated at end of 1969. Investors had multiple choice-take cash, take shares in Berkshire Hathaway, in Diversified Retailing, or invest in the Sequoia Fund.
In March, Buffett and Munger purchased the Illinois National Bank.
Rick Guerin and Munger acquired controlling interest in the Fund of Letters and changed its name to the New America Fund.
Berkshire began investing in The Washington Post Company, becoming the largest shareholder outside the family of Katharine Graham.
Buffett and Munger bought Wesco Financial, the parent company of a Pasadena savings and loan association.
Munger became chairman of Blue Chip Stamps.
Berkshire's equity interest in Blue Chip Stamps was increased to 36.5 percent at the end of the year.
Berkshire invested $10.9 million in Capital Cities Communications.
Berkshire's stake in Blue Chip Stamps increased to 58 percent, requiring that the company be fully consolidated into the balance sheet and statement of earnings of Berkshire.
Berkshire Hathaway textile mills were permanently closed.
Buffett and Munger acquired Scott & Fetzer, parent of World Book Encyclopedia, Kirby vacuum cleaners and other companies, for $315 million, virtually snatching it from the hands of Ivan Boesky.
Berkshire Hathaway invested $1.3 billion in three companies, Gillette, USAir and Champion International. Munger negotiated Berkshire's investment in Gillette. In July, Berkshire bought $600 million in preferred stock, which later was converted into 11 percent of Gillette's common.
Berkshire bought Borsheim's Jewelry Store in Omaha from the Blumkin family, who also founded the Nebraska Furniture Mart.
Munger's sister Mary died from Parkinson's Disease.
Mutual Savings and Loan Association was liquidated.
In January, Munger and Buffett joined the board of troubled U.S. Airways.
Dexter Shoe was acquired by Berkshire for $420 million in stock.
Munger and Buffett stepped down from U.S. Airway's board.
Berkshire acquired FlightSafety International for $1.6 billion and International Dairy Queen for $585 million.
Salomon Brothers was sold to Travelers Group for $9 billion. Berkshire's share of the deal was about $1.7 billion.
Travelers merged with Citicorp, forming the world's largest financial service firm.
APPENDIX D
CHARLES T. MONGER'S SPEECHES
Multidisciplinary Skills: Educational Implications*
Today I am going to engage in a game reminding us of our old professors: Socratic solitaire. I will ask and briefly answer five questions:
1. Do broadscale professionals need more multidisciplinary skill?
2. Was our education sufficiently multidisciplinary?
3. In elite broadscale soft science what is the essential nature of practicable best-form multidisciplinary education?
4. In the last fifty years, how far has elite academia progressed toward attainable best-form multidisciplinarity?
5. What educational practices would make progress faster?
We start with the question: Do broadscale professionals need more multidisciplinary skill?
To answer the first question, we must first decide whether more multidisciplinarity will improve professional cognition. And, to decide what will cure bad cognition it will help to know what causes it. One of Bernard Shaw's characters explained professional defects as follows: "In the last analysis, every profession is a conspiracy against the laity." There is a lot of truth in Shaw's diagnosis, as was early demonstrated when in the sixteenth century, the dominant profession, the clergy, burned William Tyndale at the stake for translating the bible into English.
But Shaw plainly understates the problem in implying that a conscious, self-interested malevolence is th
e main culprit. More important, there are frequent terrible effects in professionals from intertwined subconscious mental tendencies, two of which are exceptionally prone to cause trouble:
1. Incentive-caused bias, a natural cognitive drift toward the conclusion that what is good for the professional is good for the client and the wider civilization; and
2. "Man with a hammer" tendency, with the name taken from the proverb: "to a man with only a hammer, every problem tends to look pretty much like a nail."
One partial cure for man-with-a-hammer tendency is obvious: if a man has a vast set of skills over multiple disciplines, he, by definition, carries multiple tools and therefore will limit had cognitive effects from "man with a hammer" tendency. Moreover, when he is multidisciplinary enough to absorb from practical psychology the idea that all his life he must fight had effects from both the tendencies I mentioned, both within himself and from others, he has taken a constructive step on the road to worldly wisdom.
If "A" is narrow professional doctrine and "B" consists of the big, extra-useful concepts from other disciplines, then, clearly, the professional possessing "A" plus "B" will usually be better off than the poor possessor of "A" alone. How could it be otherwise? And thus the only rational excuse for not acquiring more "B" is that it is not practical to do so, given the man's need for "A" and the other urgent demands in his life. I will later try to demonstrate that this excuse for unidisciplinarity, at least for our most gifted people, is usually unsound.