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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