I was invited by Guy Spier to speak at VALUExBRK 2024, an annual gathering of value investors held around the Berkshire Hathaway shareholder meeting in Omaha.
Guy and I first crossed paths during one of my more challenging investment experiences, the Horsehead Holdings equity committee. Despite that rocky start, we’ve stayed connected over the years through our shared interest in value investing and long-term thinking.
Learn more about the company we built and our journey building it.
For my talk, I decided to share a personal story about meeting Charlie Munger and what happened when we tried to help him with Daily Journal’s succession problem.
Table of Contents
Video
Watch the full talk on YouTube.
Or watch below:
The Beginning
The story starts in the summer of 2014. Andrew and I were waiting for a seaplane, scheming a plan to pivot from being serial entrepreneurs to becoming investors. Our goal was audacious: to create the Berkshire Hathaway of the internet.
As we sat waiting, we decided we needed another goal. One day, we wanted to meet our idol, Charlie Munger. It’s hard to underscore how unrealistic this seemed at the time. We were just two island bumpkins from Victoria, BC.
Meeting Mr. Luck
I’m a big believer in a simple idea: somewhere out there, there’s a person with the name tag “Luck” on their chest. The probability of running into Mr. Luck goes up if you’re leaving your house, if you’re not just sitting at home. Your odds go up further if you’re traveling, going for business, or attending conferences.
And that’s exactly what happened for us. By pure serendipity, we crossed paths with someone I’ll call Mr. Luck at a conference. This run-in blossomed into a friendship and partnership, leading us to co-invest together.
As our friendship with Mr. Luck grew over the years, he became very well acquainted with our admiration for Charlie. We had animated Charlie’s psychology of human misjudgment speech, and we even sell bronze busts of Warren and Charlie. Mr. Luck saw all of this.
Then one day, out of the blue, Mr. Luck approached us with unexpected news.
The magic of conferences and chance encounters is something I explore in The Power of Being Seen.
Charlie’s Problem
He said Charlie had a problem. Charlie was nearing 97, still at the helm of Daily Journal, with 83-year-old Jerry Salzman still managing as CEO. They had no real succession plan in sight.
Mr. Luck said he could organize a dinner where we could meet Charlie and maybe help with this problem. Our excitement was immense. I literally could have jumped through the roof.
Inside Charlie’s Library
Naturally, we dropped everything and flew to LA. The prospect of meeting Charlie charged every bone in my body. Those nerves continued as we arrived at Charlie’s house. His actual house.
I’ll never forget walking up to the doorbell. We were expecting stern security guards, but instead we were met by Oscar, Charlie’s warm and friendly helper, who eased our anxieties immediately. He told us Charlie was awaiting us inside his library, his sanctuary of wisdom.
We quickly discovered that Charlie isn’t one to ask questions. Instead, he sits back and waits for you to ask him. So we dove right in, peppering him with everything: incentives, raising kids, life regrets, the pitfalls of inheritance, Alibaba, the political climate in the seventies. I even asked him where he got his shirt.
His answer was L.L. Bean. No joke, as soon as I got back to Victoria, I went to the L.L. Bean store and bought a bunch of them.
When the time came to leave, Andrew and I did a Top Gun-inspired high five right there on Charlie’s driveway. We were over the moon. We had done it. We had met Charlie Munger.
The Negotiation
But Charlie’s problem remained. We went back to Victoria and decided to write him a letter explaining our story, how Andrew and I met, the influence Berkshire had on us, and our ideas for the future.
Soon we found ourselves in Charlie’s presence again, but this time there was a new depth to the conversation. Charlie was fully engaged, weaving aspects from our letter into his responses.
We told Charlie we were eager to help, but we’re not managers for hire. By this point, we owned about 30 to 40 businesses. For us to commit, we’d need to be meaningful owners in Daily Journal. The only way that could happen was if we merged.
Charlie was totally unfazed. He actually said he liked it. This kicked off negotiations with Charlie Munger. Words I still can’t believe I can say.
Charlie led with trust. He emphasized trust over profit, saying “I don’t need the last dollar on this.” When lawyers suggested professional valuations, Charlie retorted that we’d find drunkards to rubber stamp everything.
By late 2021, auditors and lawyers were everywhere. We were full steam ahead with this complex merger, all in the name of helping Charlie.
But were we really helping him?
A Moment of Reflection
Back in Victoria, our egos were getting insufferable. We were musing every day that Forbes might call us “mini Mungers.” I can’t imagine what our friends thought of us.
We were telling Charlie that this time-consuming and costly merger was the only solution. But it wasn’t really. We weren’t actually helping Charlie. We were helping ourselves become successors to our idol.
It took a hard moment of reflection for both Andrew and me to own up to this. I’ll never forget the phone call when I called Andrew and we admitted we were going about this the wrong way. Saying it felt like releasing a breath I didn’t know I was holding.
The Right Solution
On that call, we agreed: if we wanted to really help Charlie, we should just offer him what we were actually planning to do. We weren’t going to run the Daily Journal business ourselves. We hire people to run businesses. So we should just bring in our friend Steven and tell Charlie about him.
We sent Charlie another letter calling the whole thing off. True to form, Charlie was very understanding. Never any guilt or stress. We then asked if we could meet again and bring Steven.
By now, we’d learned that Charlie’s love language was reading. So we encouraged Steven to write a letter of his own. The dinner we all had together sealed the deal. Charlie immediately saw what we had seen in Steven and offered to make him CEO and Chairman on the spot.
This journey of meeting Charlie, negotiating with him, and realizing our own poor intent is a chapter I’ll never forget. His approach, favoring simplicity and trust, has profoundly influenced me. I’m grateful to Charlie more than words can ever express.
I’ve shared more about our journey building Tiny on the HoldCo Builders podcast.
Transcript
Here’s the full transcript from my talk. You can also watch the video on YouTube.
Guy Spier: The next guest is somebody that I met in one of my worst investment experiences, we were both on the equity committee for Horsehead Holdings. But I think that Chris and his partner have been playing long-term games for a very long time, and some of the extraordinary things that you’re probably going to hear about are the result of them living in Victoria, the very west of Canada, and waking up every day and playing long-term games, I guess. But I can vouch for Chris in so many different ways, and I just have to take this moment to say that I can’t vouch for Chris and his coffee taste. Anyway, it’s a whole story.
Chris Sparling: He’s admitting he has terrible coffee taste. All right. Hello my friends. It’s good to be here. I’m actually incredibly excited and I really appreciate Guy for inviting me. I’m just going to try and tell a story. And this story starts in the summer of 2014. I was waiting for a seaplane with my business partner, Andrew, and we were scheming a plan. We were going to pivot from being serial entrepreneurs, starting as many businesses as we possibly could, to becoming investors. And our goal was to create the Berkshire Hathaway of the internet.
As we sat waiting for the seaplane, we tossed around names for this new company and we decided we needed a goal, an audacious goal. We wanted to one day meet our idol, Charlie Munger. It’s hard to underscore how unrealistic this goal seemed at the time. As Guy said, we’re two island bumpkins from Victoria BC and really, I think what we had, I kind of think no right to believe that this was possible. But I’m a big believer in a simple idea, and that is, somewhere out there, there’s a person with the name tag “Luck” on their chest.
And the probability of running into Mr. Luck goes up if you’re leaving your house, if you’re just not sitting at home. And your odds of luck or running into Mr. Luck goes up further if you’re traveling, if you’re going for business or you’re going to conferences. And that’s exactly what happened for us. By pure serendipity, we crossed paths with someone I’m going to call Mr. Luck. And this was at a conference. This run-in with Mr. Luck blossomed into a friendship and a partnership leading us to co-invest together. And as our friendship with Mr. Luck grew over the years, he became very well acquainted with our admiration for Charlie. We shared everything. We had a pet project where we animated Charlie’s psychology of human misjudgment speech, and we also have a side fun venture where we sell bronze busts of Warren and Charlie. And so, Mr. Luck saw this the whole time, and then one day out of the blue, Mr. Luck approached us with very unexpected news.
He said Charlie had a problem and Mr. Luck said that he could organize a dinner where we could meet him and maybe we could help him with this problem. Our excitement was more immense than you can imagine. I literally could have jumped through the roof. Charlie’s problem was this, it was Daily Journal. He was nearing 97 and he was still at the helm and 83-year-old Jerry Salzman was still managing as CEO and they had no real succession plan in sight. Naturally, we dropped everything, and we flew to LA. The prospect of meeting Charlie charged every bone in my body. Those nerves continued as we arrived at Charlie’s house, his actual house. I’ll never forget walking up to the doorbell and we rang the doorbell, and we were expecting like stern security guards, but instead we were met by this warm, friendly face Oscar who Charlie’s helper, and he helped ease our anxieties immediately.
He told us Charlie was awaiting us inside his library, his sanctuary of wisdom. It didn’t take us long to discover that Charlie isn’t really one to ask questions. Instead, he sits back and waits for you to ask him questions. And so, we dove right in. We peppered him with everything you could possibly think of both to fill the silence and to gleam. We asked him about incentives, raising kids, life regrets, the pitfalls of inheritance, Alibaba, the political climate in the seventies. I even asked him where he got his shirt, and his answer was L.L. Bean. And it’s this one right here. No joke, as soon as I got back to Victoria, I went to the L.L. Bean store, and I bought a bunch of them. We asked him everything you can imagine. Eventually the time came for us to leave, and I kid you not outside of Charlie’s house right there on his driveway, Andrew and I did a top gun spot inspired high five. We jumped into the high five. We were over the moon. It was a moment of peer unabashed triumph. We had done it; we had met Charlie Munger.
But Charlie’s problem had remained. We did ask about Daily Journal, but it was unclear how we’d still help. So, we went back to Victoria with this problem on our mind. We were unsure how to really proceed, and so we decided to write Charlie a letter. In this, we told him our story, how Andrew and I met, the influence Berkshire had had on us, and a few different ideas on what we saw as the future of us and them. Soon we found ourselves in Charlie’s presence again. This meeting felt both familiar and strikingly different. Oscar, the ever-friendly face greeted us at the door, and we found ourselves once again sitting in Charlie’s living room and dining room, peppering him with questions. But this time there was a new depth to the conversation. Charlie was fully engaged. His responses reflecting a thorough understanding of who we were. It was really cool. We asked him questions, but now he recalled aspects from our letter, and he weaved them into his story or into his answers with us.
We told Charlie we were eager to help, confident that we can make a significant difference, but we’re not managers for hire. By this point, my partner and I owned about 30 to 40 businesses. And for us to commit, we’d have to be meaningful owners in the Daily Journal. And the only way that could really happen is if we merged. We thought this was being a bit of a bold idea, but Charlie was totally unfazed. He actually said he liked it. And this kicked off the negotiation with Charlie Munger, which are words I still cannot believe I can say. Charlie led with trust. He opened up the kimono immediately on the Daily Journal and we worried that Charlie, who was nearing a hundred, wouldn’t understand our software businesses. So, we tried writing many letters explaining each one of these businesses, how we got the capital for each one and how it all worked.
And Charlie instinctively knew what mattered and how to cut complexity. So, he just simply called us and said, “Don’t worry about each business. Tell me about the two to three important ones and things that you’re excited about.” And so, we did, and our straightforward discussion extended to valuations where Charlie emphasized trust over profit. He’d say, “I don’t need the last dollar on this.” At every juncture Charlie kept it simple and flowing. When lawyers suggested professional valuations, Charlie retorted saying that we’d find drunkards to rubber stamp everything. By late 2021, auditors and lawyers were everywhere, and we were full steam ahead with this complex merger all in the name of helping Charlie. But were we really helping him?
Back in Victoria, our egos were getting insufferable. They were really swelling. We were amusing every day that Forbes might call us mini Mungers. I can’t imagine how our friends thought about us, like we were truly insufferable. We were telling Charlie that this time consuming and very costly merger was the only solution, but it wasn’t really. We weren’t actually helping Charlie; we were helping ourselves to become successors to our idol. And it took this really hard moment of reflection for both Andrew and I to own up to this, and I’ll never forget the phone call when I called Andrew and we just admitted that we’re going about this the wrong way. Saying this felt like I was releasing a breath I didn’t know I was holding. On that call we agreed that if we wanted to help Charlie and I mean really help Charlie, then we should just offer him what we were actually planning to do. When we actually took over, we weren’t going to actually run the Daily business, we hire people to run these businesses. And so, we said we should just bring in our friend Steven and tell Charlie about him.
So, we sent Charlie another letter suggesting the whole thing off, and true to Charlie’s form, he was very understanding. He never went about anything with guilt or any kind of stressful tone. It was such a pleasure. We then asked Charlie if we can meet and bring our friend Steven. By now, if you can’t tell, we thought Charlie’s love language was reading because it’s hard to really convey your story with him in person. And so, we encouraged Steven to write a letter of his own. And the dinner that we all had together sealed the deal. Charlie immediately saw what we had seen in Steven and offered to make him the CEO and Chairman on the spot. Obviously, it took a bit more time, but Charlie leaps quick. This journey of meeting Charlie, negotiating with him and realizing our own poor intent, it’s a chapter in my life I don’t think I’ll ever forget. His approach favoring simplicity, trust has profoundly influenced me. I’m grateful to Charlie more than words can ever express. Thanks.
Guy Spier: I’m hugging you on behalf everyone. So, we’re trying to catch up on time that we lost, but we could spend a whole afternoon with Chris asking him questions. And just for everybody to know, part of why I think this format works is that we allocate the 10 minutes to everyone, and it means that there’s something for everyone. So, I would’ve loved to have done a three-hour deep dive here. It would’ve been fascinating. But I want to get a couple of questions from everyone else. I have my own, but if you want to ask a question, go to the mic I think is the best way to do it. And let’s say we’ll do two because we’re going to try and catch up as well. But that was beautifully written.
Chris Sparling: I literally wrote it on the flight over yesterday and I timed it out yesterday and I was at 12 minutes, and I practiced again just before this, and I was at eight. And I was thinking I’ll probably be about three minutes as I’ll actually be on stage and run through it.
Guy Spier: But there’s also, do you feel Victoria coming through? There’s this quiet calmness to Chris and he’s properly dressed whereas I’m really badly dressed. But two questions, Aiden and then Matthew, and then we’ll move on to Robert Hagstrom. Go ahead Aiden.
Audience Member (Aiden): Thank you. So, this might be a very easy one. Firstly, thanks for teaching us about the importance of proactive serendipity, but second, can you truly be a value investor if you don’t make your coffee using AeroPress?
Chris Sparling: I wholeheartedly agree.
Audience Member (Aiden): Thank you.
Chris Sparling: A coffee that tastes like the coffee bean smells.
Guy Spier: Thank you, Aiden. Matthew, just let me explain to the audience here. So, one of the companies that Chris acquired is called AeroPress and I actually have one, and if you’re traveling somewhere far away from Italy and you don’t have access to good coffee, you can probably make a decent coffee out of it. But Chris and I have a fundamental disagreement on what makes a great coffee and Aiden was trying to scratch that and it’s a subject that will go on for a very long time. But go ahead, Matthew Peterson.
Audience Member (Matthew Peterson): Chris, thank you so much. Thank you, Guy. I’m curious, I understand Andrew’s going to publish a book and I know you’re very involved and I’m curious if you could maybe give us a little bit of insight in what might come out of that. Or if you have any thoughts on what we’re seeing on the 13Fs of Daily Journal or if you have anything you can share with the group. Because there’s a few things that are changing now that Steven’s involved that I know you kind of have some information.
Chris Sparling: I do. I’m not able to weigh in on Daily Journal just for a variety of different reasons. I would say I’m more excited about the direction of Daily Journal though than ever before and I really do believe and have high conviction in Steven. He’s an incredible individual, very successful entrepreneur and he has a great grasp on what would need to be true in order to make that a competing business with Tyler. In terms of the book, it’s kind of this, it’s Andrew and I’s story as well, and it’s the realization of, I’d say the mistake of putting certain things on a pedestal and believing achievement of those things will lead to happiness and trying to upend that and his personal journey to that realization.
Audience Member (Matthew Peterson): Beautiful. Thank you, Chris. I appreciate it.
Guy Spier: Every time I spend time with Chris, I wish I spent more time with him because I think that just spending time around him you learn a better way to be in the world. And it’s just interesting that you came after Luca because I really do believe that what you and Andrew have been doing is playing long-term games. And suddenly you get this explosion of results 20 years into it and it’s really fun to watch. So, thank you for coming. Thank you for doing this.
Chris Sparling: Thanks for having me.