WORKING TOGETHER

TOGETHER

WORKING

Why Great Partnerships Succeed

MICHAEL D. EISNER

with Aaron Cohen

WORKING TOGETHER. Copyright © 2010 by Michael D. Eisner. All rights reserved. Printed in the United States of America. No part of this book may be used or reproduced in any manner what-soever without written permission except in the case of brief quotations embodied in critical articles and reviews. For infor-mation, address Harper Collins Publishers, 10 East 53rd Street, New York, NY 10022.

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FIRST EDITION

Library of Congress Cataloging-in-Publication Data has been ap-plied for.

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Introduction xi

1 Frank Wells and I 1 Where I learned 1 + 1 = 3 (if not much more)

2 Warren Buffett and Charlie Munger 31 “Warren and I are kind of an historical accident.

It’s not a standard model.”

3 Bill and Melinda Gates 55 “Be smarter faster.”

4 Brian Grazer and Ron Howard 87 “We view the world differently, but we arrive at

the same conclusions.”

5 Valentino and Giancarlo Giammetti 113 “This isn’t a story about money or fashion or power.

It’s a story about love.”

CONTENTS

6 Steve Rubell and Ian Schrager 139 Two guys from Brooklyn

7 Arthur Blank and Bernie Marcus 163 “It was always about the business. Whenever we did

anything, the question was, Is it good for the business?”

8 Susan Feniger and Mary Sue Milliken 199 “A good partnership has to allow for a certain

amount of separation.”

9 Joe Torre and Don Zimmer 221 “Hit and run.”

10 John Angelo and Michael Gordon 251 “Smart as hell . . . and scrupulously honest.”

Epilogue 273 Happiness

2.

WARREN BUFFETT AND CHARLIE MUNGER

“Warren and I are kind of an historical accident. It’s not a standard model.”

Through all the deals, all the companies, all the money,

all the stock, all the interviews, all the plainspoken

advice, all the good spells, and even the few bad ones,

there’s one thing everyone should know about Warren Buf-

fett.

The man is having fun.

At eighty years of age, Warren is the rare senior citizen

who eats as much candy (chocolate is his fancy) and drinks

as much Coke (cherry, not diet) as he wants. We met up for

our conversation about this book in an airport, and as he

greeted me—excited as ever—he went straight for a nearby

ice cream sandwich. The economy was in shambles, his com-

pany, Berkshire Hathaway, was a few weeks away from an-

32 WORKING TOGETHER

nouncing that it had had the worst year in its history, and

flights were delayed hours because of snow, but to be with

Warren, you wouldn’t have known it. He talked excitedly

about ways the economy could be fixed, and spoke with real

concern about the millions of people who were hurting, and

how they could be helped.

He also talked, as he often does, about his businesses.

Something you can never forget about Warren is that he is

a businessman in the most classic sense, and through Berk-

shire, he owns literally dozens of companies, from insur-

ance companies (Geico) to underwear companies (Fruit of

the Loom) to paint companies (Benjamin Moore) to restau-

rant chains (Dairy Queen) to airlines (NetJets) and furniture

stores and jewelry shops and more. Berkshire also has major

stakes in corporations like Coca-Cola, Wells Fargo, and the

Washington Post Company. It was the middle of February

that day in the airport, the day before Valentine’s Day, and a

day after I broke my foot walking in Washington, D.C., talk-

ing on the phone and to my wife at the same time while

checking e-mails on my BlackBerry and not seeing the end of

the sidewalk. Talk about a twenty-first-century injury! After

the obligatory sympathy for my foot, Warren talked about

See’s Candy, his chocolate business, and how See’s was hav-

ing its biggest day of the year, with thousands, if not mil-

lions, of men all across the country scrambling to get their

wives and girlfriends gifts at the last minute. Warren talked,

and as always, I learned.

“The man just looks at the positive side of everything,” I

thought to myself, making a mental note to consider his ex-

ample the next time I got frustrated at the office. It’s a kind

of fun that doesn’t just come from having a lot (okay, a tre-

WARREN BUFFETT AND CHARLIE MUNGER 33

mendous amount) of money; believe me, I’ve met plenty of

people with more money than they could ever spend who are

miserable. It’s a different kind of fun, a fun that comes from

being able to share success—and, just as important, failure—

with someone else.

“You’ve got to enjoy it,” Warren told me that day. “It’s crazy.

I would have had a lot of fun over the years, but not nearly as

much fun without Charlie.”

Charlie is Charles T. Munger, Warren Buffett’s sidekick,

confidant, intellectual kindred spirit, and best friend. Offi-

cially, Charlie is the vice chairman of Berkshire Hathaway.

Unofficially, and more notably, Charlie has been Warren’s

partner in one way or another for pretty much everything

he’s done over the past fifty years. If you follow the business

world, and Berkshire, closely, you know who Charlie is, but

if you’re just a casual observer, you may never have heard

of the man, which is fine with him. Still, make no mistake:

every business move Buffett makes comes after close consul-

tation with Munger.

The partnership has added up to one of the most success-

ful runs in business in American history. But just as sig-

nificantly, as Warren says, “With Charlie, it’s basically been

nothing but a good time.”

� � �

Officially, when you consider all of the businesses it controls,

Berkshire Hathaway has thousands of employees scattered

throughout the country and the world. But in Omaha, Ne-

braska, the company’s headquarters is modest and nonde-

34 WORKING TOGETHER

script, with just a few dozen employees, including, of course,

Chairman Buffett.

“Take a look at this,” Warren said to me recently, reaching

into his back pocket and pulling out an old-fashioned pocket

date book, the kind people used to carry when a blackberry

was something you ate, not something you charged at night.

“It’s completely empty. I just sit in my office and read all day.”

I tried to call his bluff. “C’mon, Warren, it’s not completely

empty,” I said as I took the small book from his hand to thumb

through. I found an appointment filled in after a few pages.

“That’s one of my college days,” he explained. “I have six

business schools come in, limited to about thirty students

each, and I do a daylong seminar thing. I do about half a

dozen of them a year. Panel in the morning, question-and-

answer, they take pictures with me, and so forth. I love it.”

“Do you ever identify a kid who’s clearly really talented,

and hire him to come to Omaha to work for you after gradu-

ation?” I asked.

“I have, once or twice, but it really doesn’t work out too

well. There’s just not that much to do. If I want to talk to

somebody about something, I’ll just talk to Charlie.”

Charlie Munger and Warren Buffett grew up just a few

miles from each other in Omaha, and as a teenager, Charlie

actually worked for a short time at Warren’s grandfather’s

grocery store, Buffett and Son. But because they were six

years apart in age (Charlie is the older one), their paths

never crossed as kids. Instead, the first time Warren heard

the name Charlie Munger was in the mid-1950s, at a meet-

ing with a physician named Eddie Davis, whom Warren was

recruiting for his fledgling investment business. Warren

was in Davis’s house, giving a surely passionate sales pitch

WARREN BUFFETT AND CHARLIE MUNGER 35

to convince the doctor to let the twenty-six-year-old future

whiz kid invest his money. But as he gave Dr. Davis his best

shot that day, the older man stood in the corner of his living

room, seemingly barely paying attention, and leaving young

Warren to address Mrs. Davis, his wife, who appeared much

more engaged by the conversation. Finally, when Warren

had just about exhausted himself, Mrs. Davis turned to her

husband to get his thoughts.

“We’ll give him a hundred thousand dollars,” he said, sud-

denly looking up. “He reminds me of Charlie Munger.”

Warren had no idea who Charlie Munger was, but it was an

auspicious prologue to the relationship nonetheless.

The money did well (of course the investment would be

worth billions today), and Dr. Davis would invest more with

the young Nebraskan over the next few years, once even mis-

takenly writing a check to “Charles Munger” instead of “War-

ren Buffett.” And in 1959, the Davises succeeded in bringing

the two men together.

Munger had been living in Los Angeles, rising to promi-

nence there as a young Harvard-trained lawyer, all the while

spending time on side deals and outside work to augment

his income and reach his candidly declared goal of becom-

ing a very rich man. When his father passed away, he re-

turned to Omaha to tend to the estate, and Neal Davis, the

son of Dr. Davis and Charlie’s childhood best friend, insisted

on bringing together the two men who reminded so many

people of each other. So a lunch was scheduled at the Omaha

Club. Sure enough, the two men took to each other instantly;

Warren once told me that as soon as he saw Charlie “roll-

ing around on the floor laughing at his own jokes,” he knew

they’d get along great. A few nights later, before Charlie left

36 WORKING TOGETHER

town, the men got together again with their wives in tow, and

for the second straight meal, stayed at the table talking long

after the waiter had cleared the table.

It was 1959; the men stayed closely in touch through old-

fashioned snail-mail letters. Charlie was the older man, but

Warren was the one succeeding in a more substantial way, at

least if substantial meant accumulating some wealth.

“ ‘Charlie,’ I’d write,” Buffett told me, “ ‘law is okay as a

hobby, but a guy with your brains, you’re wasting your time.

You’ve got to manage money.’ ”

And gradually, Warren pulled his new best friend into the

investment business.

“It made no difference if we weren’t investing together in

the same pot,” says Warren. “If he was interested in some-

thing, and wanted to talk it over, I was as interested in it as if

I had my whole net worth in it.”

And over the next few decades, they’d talk over virtually

all of their decisions and deals, and sometimes invest in

the same companies, most substantially Blue Chip Stamps.

They’d use that position to buy a series of other companies,

including See’s Candy, and in 1982 they finally officially

joined together financially. Since then, Munger has been

the vice chairman of Berkshire Hathaway, operating from

his office in Los Angeles at the law firm he helped found,

Munger, Tolles, & Olson. The pair’s most well known public

get-togethers have long been at Berkshire’s annual meetings,

gatherings in Omaha that shareholders and Buffett devotees

attend with the zeal of a religious revival. Together, each

year, Warren and Charlie hold court in front of thousands,

offering a well-rehearsed and familiar brand of salt-of-the-

earth midwestern ethos. Warren does most of the talking,

WARREN BUFFETT AND CHARLIE MUNGER 37

and when he’s done making a point, he turns to Charlie for

an addendum. The response is always the same.

“I have nothing to add.”

Nothing could be further from the truth.

� � �

The offices of Munger, Tolles, & Olson are located in down-

town Los Angeles on Grand Street. Charlie Munger has not

actively practiced law there in several decades, but, in his

mid-eighties, he still dresses like a lawyer with his crisp suit

and tie. He has long had trouble with his eyes, and a few

decades ago, lost one of them. I bring this up only because

of the joy Warren took in telling me the story of Charlie pop-

ping out his glass right eye at the DMV in California for rea-

sons that were lost amid my “You’ve got to be kidding me”

response. There are also Charlie’s frequent appearances for

the Harvard Westlake School in Los Angeles, where he and

my wife share board seats. Some of the meetings are way up

at the top of the Los Angeles hills, along tiny windy roads.

And at the end of each one, close to midnight, Charlie exits

to his car and heads off into the night alone, eighty-six years

old, no driver, one eye, no request to be dropped off, and no

fear. The man in the thick glasses and pristine Brooks Broth-

ers suit has a mind as sharp as it’s ever been, and like his

partner, he favors simple and homespun over complicated

and pedantic.

“If you want to get a good partner, the way to do it is be a

good partner. Though Warren and I are kind of an historical

accident. It’s not a standard model. It’s a mental partnership,

38 WORKING TOGETHER

an intellectual partnership. We don’t even live in the same

city, so we’re not interfacing that much and so forth. This is

like two academics who sort of stumble into the same ideas

and like one another. It’s quite peculiar.”

So to hear him tell it, the conversation that began at the

Omaha Club on that Friday afternoon in 1959 has just contin-

ued for half a century, with Charlie still in Los Angeles, and

Warren back in Omaha. I’ve never been able to figure out ex-

actly how often they talk—I imagine it varies somewhat—but

apparently those conversations are the crux of the decision-

making process of Berkshire Hathaway when it comes time

to do a deal. Then again, the talks are also the culmination of

what Warren and Charlie do when they’re not on the phone

with each other, which to hear them tell it, is very simple:

they read.

“If Charlie and I were stranded together on a desert island,”

Warren says, “and we somehow had the Library of Congress

available to us, we’d both be very happy for a long, long time.”

“That’s part of the secret,” Munger says, a thousand miles

away from his partner, but talking as if he’s nodding along to

what Buffett would say. “You could hardly find a partnership

in which two people settle on reading more hours of the day

than in ours.”

“Look,” Warren continues, “my job is essentially just cor-

ralling more and more and more facts and information, and

occasionally seeing whether that leads to some action. And

Charlie—his children call him a book with legs.”

Maybe that’s why both men agree it’s better that they

never lived in the same city, or worked in the same office.

They would have wanted to talk all the time, leaving no time

WARREN BUFFETT AND CHARLIE MUNGER 39

for the reading, which Munger describes as part of an essen-

tial continuing education program for the men who run one

of the largest conglomerates in the world.

“I don’t think any other twosome in business was better

at continuous learning than we were,” he says, talking in the

past tense but not really meaning it. “And if we hadn’t been

continuous learners, the record wouldn’t have been as good.

And we were so extreme about it that we both spent the bet-

ter part of our days reading, so we could learn more, which is

not a common pattern in business.”

It’s not how you’d think it would work. You’d think Buffett

and Munger would have the smartest young business school

graduates locked to their desks, obsessing over figures and

going blind in front of computer monitors, and then coming

to them with proposals about which new companies and in-

vestments to look into.

“No,” says Warren again. “We don’t read other people’s

opinions. We want to think. We want to get the facts, and

then think.”

And when it gets to the thinking part, for Buffett and

Munger, there’s no one better to think with than their part-

ners.

“Charlie can’t encounter a problem without thinking of an

answer,” posits Warren. “He has the best thirty-second mind

I’ve ever seen. I’ll call him up, and within thirty seconds,

he’ll grasp it. He just sees things immediately.”

But Charlie himself sees it as an acquired, rather than nat-

ural, genius, thanks to all the studying he does.

“Neither Warren nor I is smart enough to make the deci-

sions with no time to think,” Munger once told a reporter.

40 WORKING TOGETHER

“We make actual decisions very rapidly, but that’s because

we’ve spent so much time preparing ourselves by quietly sit-

ting and reading and thinking.”

He added to that thought when I met with him in his of-

fice.

“Warren knows an amazing amount, and he thinks very

rapidly, and he talks very persuasively. I’m very similar in

many ways. You get two people like that who really like and

trust one another, and have been together for a long time,

you’re going to learn a lot from each other, and you’re going

to advance faster. So the learning machine is working faster.”

Any two businessmen, though, could talk over decisions

on the phone, no matter how big, and not have the track

record Buffett and Munger have. Yes, these two are damn

smart, but there’s more to this match than that. This pair

may both be fans of campy jokes, and may say they think

the same way, but their differences—or more specifically,

their different roles in this partnership—are integral to their

success.

� � �

We’ll start here: Charlie isn’t just a partner, he is a teacher.

Early in his career, Buffett was a strict and passionate dis-

ciple of a Columbia economics professor named Ben Gra-

ham, whose theory of investing advocated buying stock in

companies selling for less than their assets were worth, and

then, when the market price of these companies improved,

selling them. Professor Graham will always be one of the

most important people in the Warren Buffett biography, but

WARREN BUFFETT AND CHARLIE MUNGER 41

Charlie Munger added another component to the Buffett, and

Berkshire, strategy: buy and hold. Buy strong, well-run com-

panies, and hold on to them for the long run.

For Charlie, that may have been common sense, and it also

may have been because of the simple way he learned about

money and investing: he taught himself. During World War

II, which came in the middle of his time at the University of

Michigan, he enlisted in the ser vice, but attended the Univer-

sity of New Mexico and Cal Tech on the side, earning credits

in meteorology. After the war, he found a way to get himself

into Harvard Law School without technically ever getting his

undergraduate degree. Then, once he was a lawyer, to hear

Warren tell it, he got frustrated “because he thought he was

smarter than everyone else he was working for. So he decided

he was going to do something smart for his most important

client—himself. He was going to sell himself what he deemed

the best hour of the day to work—six to seven in the morn-

ing—and think about nothing else besides matters for this

client—himself—during that time. And through those surely

intense early-morning sessions with himself, he got himself

into real estate, built some apartments, and expanded his

moneymaking beyond the law.” Soon after, in Omaha, he met

Warren, one of the few people on earth who shared his rabid

hunger for knowledge and unending desire to learn. And the

self-taught Harvard graduate, if there is such a thing, con-

vinced the hotshot young investor of the virtues of a new, if

totally logical, investment strategy: buy companies that are

well run and well conceived. Their value will hold up and, in

times of prosperity, grow.

“Charlie didn’t go to business school,” continues his part-

ner, “but he was a natural. As a young lawyer, he always

42 WORKING TOGETHER

wanted to know as much about the business of his clients as

possible—and eventually, would feel he knew more than the

client.”

In the years since his salad days as an attorney, and since

that early lesson in investing, Charlie has continued to learn,

which fits perfectly into the structure of his partnership with

Warren.

“He works harder,” says Munger about Buffett, very mat-

ter-of-factly. “I have always wanted to improve what I do,

even if it reduces my income in any given year. And I always

set aside time so I can play my own self-amusement and im-

provement game.”

That self-amusement and improvement game is chiefly

about learning. Charlie’s idol is Ben Franklin, perhaps the

most celebrated Renaissance man in American history.

Charlie’s friends and family even cajoled him into publish-

ing a book called Poor Charlie’s Almanack: The Wit and Wis-

dom of Charles T. Munger, in the model of Franklin’s classic

Poor Richard’s Almanack. It’s been sold at Berkshire’s annual

meetings, a five-hundred-page coffee-table-size volume filled

with various Mungerisms like “Take a simple idea and take

it seriously,” and “The way to win is to work, work, work, and

hope to have a few insights.” In following the example of Ben

Franklin, Charlie has never stopped learning, even into his

eighties. And all that knowledge means that when you ask

Charlie about something, he’s much more likely than not to

know what he’s talking about. And he uses that vast array

of knowledge in his decision-making. Charlie has something

he calls “The Lollapalooza Effect.” No, it has nothing to do

with rock music. In the Almanack, it’s defined as “the critical

mass obtained via a combination of concentration, curiosity,

WARREN BUFFETT AND CHARLIE MUNGER 43

perseverance, and self-criticism, applied through a prism of

multidisciplinary models.” In other words, it’s the process of

coming to a decision after examining any number of factors

in any number of areas. I have personal experience here, as

my wife has for those fifteen years been with Charlie on the

board of the Harvard Westlake school. Once, after Charlie

made a very generous donation to build a science building,

Jane asked me to loan Disney’s head architectural planner to

the school to offer some design choices. I did. Charlie was not

very interested. He just went ahead and helped design the

building himself. So yes: this is a guy who donates buildings

to schools—and then helps in all aspects of the process. The

school, incidentally, loves the building.

Some teachers nurture their pupils, encouraging them

along the way. Charlie may not exactly be the nurturing

type, but he is a teacher and a collaborator who is far from a

superficial cheerleader. Quite frankly, the last thing Warren

needs is someone encouraging him. Buffett has been quoted

himself as saying, “CEOs get into trouble by surrounding

themselves with sycophants. You’re not going to get a lot of

contrary thinking.” Charlie is anything but that. You will get

contrary thinking with Charlie.

“It’s beneficial,” he says, “to have a partner who will say,

‘You’re not thinking straight.’ When I call Charlie with an

idea, he has three reactions. One is, ‘Warren, that’s a dumb

idea.’ Then, we put one hundred percent of our net worth

into the idea. If it’s, ‘Warren, that’s one of the dumbest ideas

I’ve ever heard,’ we put half of our net worth into the idea.

And if it’s, ‘You’ve gone out of your mind, and I’m going to

have you committed,’ then we pass.”

He’s laughing as he says it, but you get the sense there’s a

44 WORKING TOGETHER

lot of truth behind what he’s saying. This is the partner serv-

ing as skeptic, hugely important in the business of invest-

ing. I got an up-close look at this aspect of their partnership

when Disney bought Capital Cities/ABC in 1996. I, of course,

was ecstatic about this great new property for Disney. Mean-

while, Berkshire Hathaway was the controlling shareholder

in Cap Cities, and in that we made half of the deal with Dis-

ney stock, I realized quickly Berkshire would become one of

our largest shareholders. That was great news for our com-

pany, but I knew Charlie hated the entertainment business.

I had heard many times in conversations with him over the

years in Los Angeles how he hated “the waste,” “the lack of

stable management,” “the insane fees paid to talent,” and a

business run by “one’s gut rather than one’s mind.” I was hop-

ing—even praying—that Charlie knew that at Disney, and be-

fore that at Paramount, we tried to run things differently,

with intelligence in place of ego, but still I asked Warren the

day we closed the deal for his thoughts on the future of their

investment.

“Are you planning, Warren, to hold your Disney stock after

the deal closes?” I asked.

“Well,” he quickly responded, “I never make a decision to

sell and buy the same asset on the same day.” That was it. But

I knew it was only a matter of time until Charlie’s influence

would prevail here. Berkshire reduced its holdings in Disney

stock several years later, quietly and with no negative public-

ity. I wasn’t angry at Warren, or Charlie. Warren had slyly

hinted what would probably happen in a way that actually

made me like him more. What a great attribute—to like a

man when he gives you bad news as much as when he gives

you good news. It reminds me of Frank Wells.

WARREN BUFFETT AND CHARLIE MUNGER 45

In my conversation with Warren, he told me about one

time when he called up Charlie with an idea, saying they

should buy stock in the Pittsburgh and West Virginia Rail-

way. The response was less than enthusiastic.

“Well, I don’t like railroads,” Charlie started. “I don’t like

businesses with a lot of labor content. I particularly don’t

like when they’re unionized. I don’t like capital-intense busi-

nesses. I particularly don’t like eastern railroads. But if you

are telling me that you’ve researched this thing from A to Z,

that you’ll follow it twenty times a week and you’ll keep track

of it and take full responsibility for it . . . then I’ll just shut

my eyes and say no.”

In this instance, the chairman listened to his partner—

though several months later, he did make a big railroad pur-

chase, paying $26 billion for the Texas-based Burlington

Northern Santa Fe.

But you get a sense of how these conversations go, always

with a verbal twist at the end, almost as if a playwright had

written the dialogue.

“You have to have someone who tells the truth,” says Buf-

fett. “There’s just no way that Charlie would not tell me the

truth.”

Munger’s role as the ombudsman fits him well; though

both men admit they will exaggerate their differences for

amusement from time to time, generally, Charlie is more

pessimistic, and Warren more optimistic.

“Charlie thinks exactly like I do,” says Warren, “but he puts

things through a tougher filter than I do. There are only two

things he’s ever liked better than I liked that we’ve done. One

was the tool company Iscar. I loved it—but when Charlie falls

in love with something, forget about it. Also, there’s a deal

46 WORKING TOGETHER

with a Chinese car company, BYD, we did recently. I wasn’t

so sure about it. Charlie tells me the Chinese guy running

the company, Wang Chuanfu, is the Henry Ford of China.

I’m still not jumping. Then he says he’s the Thomas Edison

of China. Still no. Then, the Bill Gates of China. Nope. Then,

his trump card. He’s the Warren Buffett of China!”

But usually it’s Warren doing the selling and Charlie the

listening—and the questioning, playing the role of gentle

skeptic. In fact, Warren once told me with a laugh that a fa-

miliar refrain at the end of a Buffett-Munger conversation is

Charlie saying to Warren, “Look, you’ll end up agreeing with

me because you’re smart . . . and I’m right.”

Still, often, Warren gets his way, and Berkshire Hathaway

takes a risk that Buffett wants and Munger fears.

� � �

Warren told me another story when we chatted. Several years

ago, Charlie Munger was testifying at an arbitration hearing,

and getting grilled about a recent board meeting. He claimed

he didn’t recall what the lawyer was asking him about. “Mr.

Munger,” the lawyer said, “you are reputed to have a very

good memory. Are you really telling me you don’t remem -

ber it?”

“Well,” Charlie is said to have responded, “I only listen

when I’m the one talking.”

Indeed, Munger is not the standard model for the kind of

partner who prefers to lie low and fade into the background.

Everywhere else in his life, Charlie Munger plays the alpha

role—with his family, in board meetings for the variety of