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31 August 2023
By
Jeannine Mancini
Billionaire Charlie Munger Said, 'If
You Mix Raisins With Turds, You Still Have Turds'
– His Insightful Reminder To Be Selective In Your Investments ... And
Your Life
The investment world was at a crossroads in 2000.
The dot-com bubble was in full swing, drawing investors to internet-
and tech-related stocks. Traditional investment wisdom seemed to take
a backseat as the allure of quick gains took center stage.
Amid this speculative frenzy, Charlie Munger, legendary investor
Warren Buffett’s esteemed partner, delivered a memorable analogy at
the Berkshire Hathaway Inc. annual meeting.
“If you mix raisins with turds, you still have turds,” Munger said,
cautioning against the perilous practice of blending promising
investments — the raisins — with speculative and irrational ones — the
turds. Even when combined, the flaws inherent in the speculative
assets could outweigh any potential merits, ultimately leading to
unfavorable consequences.
Munger’s analogy is still relevant today, as investors are constantly
bombarded with new investment opportunities, including companies like
Masterworks. The platform allows people to invest in art, which is a
tried-and-true asset class.
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In the backdrop of the dot-com bubble, the internet was rapidly
reshaping industries and societies. Even seasoned investors like
Buffett were grappling with the uncertainty and potential disruption
that the new technology could bring. In 2000, the internet remained an
enigma, and its impact on businesses was a subject of concern and
speculation.
During the same year, a child at the Berkshire Hathaway annual meeting
posed a question that encapsulated the growing apprehension about the
internet. The child asked whether the internet would harm companies
like The Washington Post or the Buffalo News, which were part of
Berkshire Hathaway’s investments. Newspapers, traditionally reliant on
print distribution, faced an impending threat from the internet.
Buffett recognized the fundamental challenge the
internet posed to the newspaper industry. For centuries, newspapers
had been the primary source of information and entertainment, with a
business model rooted in printing and distribution. But the internet
was poised to disrupt this centuries-old model by offering content at
incredibly low costs, thereby threatening traditional revenue streams.
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Buffett acknowledged the potential impact the internet could have on
Berkshire Hathaway’s portfolio companies, noting that some businesses,
like Geico, could be significantly affected. Munger, in his
characteristic straightforward manner, concurred with the child’s
question about the internet’s potential harm. He said they were
concerned about the internet’s impact.
Fast forward to today, and Berkshire Hathaway’s portfolio tells a
different story. Apple Inc. constitutes 40% of Buffett's portfolio.
Buffett’s stance on technology companies has undergone a significant
transformation. He has not been reticent about his admiration for
Apple, referring to the tech giant during Berkshire’s 2023 annual
meeting as “a better business than any we own.” The statement carries
immense weight, considering that Berkshire holds stakes in around four
dozen securities and has acquired roughly five dozen companies over
the years.
The lessons from Buffett and Munger’s experiences in 2000, coupled
with Munger’s memorable analogy, serve as timeless reminders. In a
world where investment opportunities change often and the excitement
of making quick money can be tempting, investors need to be careful
and make wise choices. The principle “mixing raisins with turds, you
still have turds” serves as a broader metaphor applicable to life’s
many choices and decisions.
Just as Berkshire Hathaway adapted to the rise of technology, today’s
investors must balance the allure of innovation with a commitment to
sound investment principles. They should remember that mixing raisins
with turds can still yield undesirable results, highlighting the
importance of critical assessment and a long-term perspective in the
face of change.
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