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Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations by Tobias E. Carlisle

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Chapter 3Warren Buffett: Liquidator to OperatorHow Charlie Munger and Phil Fisher’s Scuttlebutt Pushed Buffett Beyond Graham

“It’s like a finger pointing at the moon.

Do not concentrate on the finger or you will miss all of the heavenly glory!”

—Bruce Lee, Enter the Dragon (1973)

Warren Buffett first heard about Charlie Munger on a Sunday afternoon in 1957. He was meeting with two potential investors for his nascent investment partnership, Dr. Edward “Eddie” Davis and his wife, Dorothy, in their home. Sitting in their living room, the young Buffett—he was 26 but looked 18 according to Eddie—laid out the ground rules for an investment in the partnership. For over an hour Buffett described his philosophy on managing money and the unusual terms of his proposed investment partnership—Buffett would have absolute control over the money and would not tell his partners how he was invested; they would get an annual summary of his returns and could only withdraw the money annually on December 31. All the while, Eddie Davis sat in the corner, doing nothing, and not, so it seemed to Buffett, paying attention to him. When Buffett finished his high-speed soliloquy, Dorothy, who had been listening very intently, turned to Eddie and said, “What do you think?”1 Eddie responded, “Let’s give him a hundred thousand dollars.” Politely, Buffett replied, “Doctor Davis, you know, I’m delighted to get this money. But you weren’t really paying a lot of attention to me while I was talking. How come ...

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