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Becky
Stephen, thank you very much, and welcome, everyone. We got a great number of questions that came in and I’ve tried to sort through as many as I could. We’ll go through as many of these questions as we can during the session. But first of all, Charlie, thank you for taking the time today. The first question that we have comes from Ryan Fusaro. And his question is related to journal technologies. He says, Can you give an update on the company’s new CEO Stephen Michael Jones, he was appointed as interim serious CEO nearly one year ago, how’s he performing? And when will the decision be made on selecting a permanent CEO?
Charlie Munger
Well, yeah, answers is Steve chose his own titles coming in, and will change whenever he wants to change.
Becky
That sounds fair enough. Yeah.
Steven Michael Jones
You know, I will say that when we were discussions a year ago, I told Charlie that I was committed to ensure the success of the business, but that I wasn’t sure I would be the right long term CEO. And I had incomplete information at the time. And I thought it was important that I have the optionality to hire someone better suited or promote from within if we just ended that be a better path. And, you know, I found it helped grow a geography software company, with no background in publishing or the legal and court sector. And what I can see now is that the parallels between the software company I built and general technologies are are remarkable, and I believe I can add value. I like the business and potential for it. So I expect more clarity on our long term approach sometime later this year. Okay,
Becky
thank you. The second question comes in and it’s in regards to capital allocation. This is from Paul in Lynwood, Michigan, Paul Pham. In the past year, you’ve just in the past, you’ve described daily journals unique position of being a newspaper, which generated enough excess cash in the past to invest in an equity portfolio. Now its fastest growing subsidiary journal technology is accounts for a large part of the company’s earnings. Is the technology business, a natural area to allocate excess capital for the best return on equity for the company has gone off. Oh, can you hear me darling? I’ll keep talking here. 12345. I’ll test this out. Maybe you guys can play me I don’t if there’s a voice of God, you could play to the floor there. But I’ll keep talking in the hopes that Charlie can pick up on this. And Charlie, just let me know, when you do hear this. This is a question again. Sounds like they’re not hearing folks. I don’t know the control room. If you guys have any ideas about what’s happening. Again, this is the annual meeting for the daily journal shareholders meeting. We have a lot of questions that have come in for Charlie Munger. And we’re gonna get into those questions as soon as we can get the audio fixed for this.
Steven Michael Jones
Sounds like Becky, we can hear you over someone’s brought a tablet over over the tablet for the time being.
Becky
Okay, Steven. Thank you, Charlie. I’ll just wrap up. I don’t know where you just got cut off. But this is from Paul Pham. He was asking about your little capital, capital allocation. And he’s just wondering if the technology business is a natural area to allocate excess capital for the best return on equity for the company? How should we think about or how does the current investment manager think about investing in the equity portfolio in relation to reinvesting in growing areas of the business where share buybacks or share buybacks?
Charlie Munger
Well, it’s all very simple. We made a lot of extra money out of the publishing business in its heyday. And that was about $30 million. And that was all made in the foreclosure boom. And of course, in the old days, we had information in monopoly on publishing the appellate Court’s decisions baleia newsprint, and the internet came along, it destroyed our, our position, our circulation went way down, and so forth. So we’ve had a drastic change in good fortune and our publishing business. And Steve actually ran a small software company and can Canada for years and years and years, which is quite similar to what Gen technologies does. And so that’s how we got together. The future. This business is not in the publishing side. It’s on the It’s on the general technology side. And the good news is that we’re in a huge market because all the courts of the world are in the stone age still, in terms of automating with modern technology. And so it’s a big market. And the bad news is, it’s a long, slow slog where you deal with a lot of bureaucracies, in response to RFPs requests for proposals, and it’s just a very slow, difficult business. So we got to slow down the old business of chewing our way into a huge market, that’s not going away with one big competitor in it. And that’s the future and like many Publishing Company, which use newsprint it’s a miracle when you arrive, if you look at the small and mid cap edition of the value laden books, you’ll find there two entries left one is going out, which used to own the monopoly newspaper, I don’t know 5060 100 different cities. And the executives are right around in giant aeroplanes, and be treated like Lords of England when they went to publishers convention in every newspaper publisher that, you know, it was it was a hugely powerful in his own community. And so they’re like the Lords of England, all these publishers. And now mighty caneta is just a pale shadow of itself. Newspapers shrunk down to a tiny little view and very limited assets, and so forth. So there’s been an unbelievable change in the technology and competitive outcomes in publishing ordinary newspapers, on newsprint. And by and large, the safe rule is they’re all dying, they’re just in different states of near death. And so if this place has a future, it’s in the general technology side, and that’s a long, slow grind. And the only reason we have a lot of marketable securities is we have the extra money, and we preferred the marketable securities to cash in an inflationary world. And so, of course, there’s been a minor miracle that we’ve got as much as we have in marketable securities, because our investments have done better than average. As a follow on, the good news is we’ve survived so far, and we’ve got some surplus wealth. And the bad news. It’s a long slow slog ahead in the main future isn’t journal technologies.
Becky
As a follow up to that this is a related question. It comes from Gareth more in Northern Ireland. And maybe you can both comment on this. He says that, given the extended amount of time, extended amount of time that it will take to digitise the court systems because of complexity, risks and bureaucracy and a fast moving world of software innovation. Shareholders be assured that journal technology solution remains cutting edge long enough to reward shareholders, and how you get about the risk of arriving in 2030 with a great software business, but which only lasts a few years until it gets disrupted by some new technology. Sure,
Steven Michael Jones
I mean, do you take that? Well, yeah. You know, of course, there are no assurances. And at the same time, you know, I do have some background dealing with this challenge, because I did it for 19 years with my former company. And we are consistent and appealing profits. And I expect the model still working well, for the folks who acquired us. You know, I think a key responsibility is to get technology change, working for us and our customers rather than against us. And it takes advanced planning and and in investment engineer software, with change over time in mind. And so it’s inherently upgradeable, and I think its model works works great if you can establish a sufficient licensee base to fund that proactive r&d To have all products in a way that manages technology change. So that and it also need to be highly repeatable. And I think all this requires a mindset that enterprise software development is an ongoing process and not a one time event, and so are our customer deployments.
Becky
Okay, let me move on to another question that comes from gauge Sanchez. Gauge writes in with a question for you, Charlie, two years ago during the 2021. Yeah, let’s try that. Okay, we can hear the speaker there. Okay. So gauge Sanchez writes in and says two years ago, during the 2021 annual meeting, you said daily journals $350, stock was selling way above the price that you would pay for the new shares. As I write this daily journals, trades for $305 A share a $420 million market cap with a total equity portfolio value of over $310 million dollars that Charles has covered several times over about the banks, dividends and journal technologies or financial statement value and huge markets, do you still hold the same belief?
Charlie Munger
Well, you accurately stated our circumstances. We do have a lot of surplus wealth, but we need it to attack this big market. These courts? What Why would they gamble on a little company with no note well worth the courts that are letting the RFP contracts? So what we’re using our network to help the business.
Becky
But does that get to the question of whether you’d buy the stock at $305 ?
Charlie Munger
Well, I don’t buy and I don’t sell. So that’s what the Mungers have been doing. You know. It’s not a crazy valuation considering what everything else is selling for these days. So I have no feeling that it’s almost foolishly high on some crazy mistake. Some people thought, well, it’s a small Berkshire, it’ll double like rabbits, you know. And of course, it’s not a small Berkshire. I’m 99 years old guys.
Becky
That question mentioned the bank dividends that you all have DJCO another. Another person wrote in Norman Bergman, who asks, Charlie Berkshire has unloaded the bank stocks if it’s not good enough for Berkshire shareholders, why is it good for us?
Charlie Munger
Well, I might have different ideas. If you own securities, marketable securities within a corporation, located in California, you pay huge state and federal taxes and you sell things in a big game. And that affects our willingness to sell some of those bank stocks I bought on the bottom tech in the foreclosure crisis. It literally was the bottom pick. And they’re practically all game. So I immediately give the government 40 numbers out of everything we sell out of that out of those bank stocks. So and of course, they’re producing tax, the dividends are almost tax rate. So based on what we’d get if we sold them and the return, we’re getting out of the dividends, it’s not so bad for us. The answer is it’s, we’re not in a normal position. All factors considered it, we’re willing to hold them for a while. And there is a big disadvantage. And in aggregate, huge layer of federal corporate taxes, and state taxes between us. And any money we make at a state like California, which is a very business friendly state, it might be about rushing to come out and incorporate in California. There are all kinds of states that have no income taxes, and deliberately use that lure to bring in corporations, California is trying to force its wealthy people and its wealthy corporations out of the state. And I must say it’s working fine. They’re leaving just one after another. And that’s just the way it is. But you know, if we succeed in the software business, it will all come go to the end. And if we fail, we have a crush under us in our real estate in our securities, which means we won’t lose so much from the present market price. So it’s not a crazy thing to to own it now at the market valuation but it’s not cheap, either.
Becky
Alright, this next question comes from Thomas Lang, who says he’s a longtime Berkshire shareholder, but a pretty recent daily journal shareholder. He says, Well, I know the daily journal is not a mini Berkshire, I’d suspected that there would be some shared principles in the area of governance. Specifically regarding the Board of Directors. I’m surprised to see such a small ownership, three of the five on zero shares a fourth owns 100 shares, Thomas says pretty unimpressive. doesn’t suggest misalignment between the board members and shareholders. He says he’s not trying to be rude, but he thinks it’s a fair question.
Charlie Munger
Well, what happened was we used to have Garen and Munger and we were the two biggest shareholders. And of course, we’ve been partners for years and years. And we took no fees, no, no directors, fees, no expenses, no nothing. And so it was a very user friendly Berkshire type place. Well, Garin died. And finally at age 90, so and, and so now we’re down to one less survivor, the old guard. And of course, we need a certain number of new directors and our new directors are pretty damn smart. And they’re all rich, by the way. So it’s still very Berkshire, like board. smarter, Gretchen. And thinking like a capitalist. We still we have that.
Steven Michael Jones
I would add that, you know, while I don’t have equity yet, I’m certainly keen to participate in future growth of business. What What should the timing of that be with someone? It was me, I think that’s interesting question. Thomas. I roll it out. Yeah, right. Now, I don’t think that’s impacting my my driver decisions. I already feel enormous skin in the game that Mr. Munger and the board entrusted me to take the reins of the business is something I take very seriously. It’s really
Charlie Munger
quite interesting to have a pile of securities him one interesting activity in a very high tech field, and with a lot of politics and travelling, and difficulty in it, but it’s a huge, huge market. And it isn’t like there a lot of other people that most of the big corporations, that would be our natural competitors are, are places where they they hate RFPs. In other words, one of the reasons the business is good for us is a lot of the big companies just hate what we’re doing. They want easier money today. So standard visa software, just repeat it over and over again. They’re spoiled. We’re willing to suck it out of the modem, all these little consulting contracts. And that makes us have really a few competitors in the field.
Becky
Surely since you brought up Rick Aaron, oh, go ahead.
Charlie Munger
No, go ahead. Well, since
Becky
you brought up, Rick, Aaron, I’m gonna get to this question from Ronnie Pereira in Mumbai who says your friend Rick Aaron passed away about a year ago. He was your longtime friend and business partner for several decades. How was he as a person as an investor? And how do you remember his legacy?
Charlie Munger
Well, he was just terrific as a personal investor. And I missed him terribly. Of course, we were together for years and years and years, and we were together. And that creates a bonding.
Charlie Munger
When we met in 1961, we were both poor and struggling and young. We had a long ride together. And but all things end you know, that’s, that’s the nature of the human condition.
Becky
I get to a question from Lee. Just the first name from this shareholder wrote in a question about chat GPT and artificial intelligence and the impact on daily journals, the daily journals business model and civilization at large says, I’m not sure if you’ve tried to converse with chat GPT given all the rage in the news lately, briefly, it’s artificial intelligence, known as a language model is trained on trained on a large data set of texts like books and articles. What are your thoughts on AI is impact on daily journals business and more broadly, our civilization at large?
Charlie Munger
Well, I think artificial intelligence is very important, but it’s also a lot of crazy hype on the subject. Artificial Intelligence, it’s not going to cure cancer, it’s not going to do everything we want done. And, and there’s a lot of nonsense in it too. So I regard it as a mixed blessing all this artificial intelligence. Some people have used it in some things like insurance underwriting pretty well. But a lot of people try and use it in ordinary things like buy office buildings or something and I think that’s way more but I don’t think it’s gonna help anybody by offers really not very much anyway.
Steven Michael Jones
through the lens of daily journal Corp. AI is something that we started experimenting with in the summer, in the summer for certain types of writing certain types of articles. And something we’re certainly tracking very closely. I think in terms of complex work, I think it’s a long way off. But for many types of activities, especially routine things, I think we’ll I think it’ll be fascinating to see how disruptive it is over a relatively short time horizon for many types of work and activities.
Charlie Munger
We had our big disruption with technology kind of severely, and adversely affected our publishing business. And we have our opportunity in this new business. But it’s just a long, tough slog. There’s no short there’s no world road to success in what we’re doing.
Becky
Someone named Peter Ferland wrote in from Oakville, Ontario, and he had a question that he asked, he asked Chat GPT to come up with a question to ask you, Charlene. Here’s what GPT came up with. Mr. Munger, you’ve spoken about the importance of avoiding mental biases in decision making, in your experience, what’s the most challenging bias to overcome? And how do you personally guard against it? So I definitely answer that question. And then what you think of the question that Chat GPT wrote for you?
Charlie Munger
Well, what I by the name, one factor that dominates you in bad decisions, you would be what I call denial, if the truth is unpleasant enough. People kind of their mind plays tricks on them. And they get, it isn’t really happening. And of course, that causes enormous destruction of business where people go on throwing money into the way they used to do things like Oh, isn’t gonna work at all well, and the way the world is now having changed, and, and if you want to example of how denial was affecting things, take the world of Investment Management. How many managers are going to beat the indexes, all costs considered? I would say, maybe 5%, consistently beat the average. Everybody else is living in a state of extreme denial. They’re used to charging big fees and so forth. For stuff that isn’t doing their clients any good. It’s a deep moral depravity. If someone comes to you with $500,000, and you charge or one point a year for, you could put her in the indexes. But you need the the one point. So people just charge someone Oh, you know, a considerable fee for worthless advice. And the whole progression is for that kind of denial. It’s everywhere. So so I had to say it was I always quote the Maslow he’s a long time ago, and mostly that’s 2000, more than 2000 years ago. And he said, what people wish is what they believe. Think of how much of that goes on. And so it’s a of course, it’s hugely important. And you can just see it, I would say the agency costs and money management. There are just so many billions, it’s uncountable. And nobody can face it. Who wants to keep your kids in school, you won’t quit, you need the fees, you need the broker choices you need so that so you do what’s good for you and bad for them. Now, I don’t think Berkshire does that. And I don’t think Gary and I do that at Daily Journal here and I never took a dime of salary or directors fees or anything. If I have business, I talked on my phone or use my car, I don’t charge into the daily journal. That’s unheard of. It shouldn’t be unheard of. And it goes on in Berkshire. It goes out in the daily journal. But we have an assembly plant now in this journal technologies, and it has a million dollars for the day journal stock that did not come from the company issuing those shares. I gave those years to the company to use it compensating the employees. And I learned that trick, so to speak, from BYD, which is one of the securities we hold in our securities portfolio. And BYD at one time in its history, the founder chairman, he didn’t use the company’s stock to reward the executives. He used his own stock, and it was a big reward do well last year what happened, BYD last year made more than $2 billion after taxes in the auto business in China, who in the hell makes $2 billion was a brand new entered in the business for all practical purposes. It’s incredible what’s happened. And so there is some of this old fashioned capitalist virtue left in the daily journal and there’s some left in Berkshire Hathaway. And there’s nothing left at BYD. But most places everybody’s trying to take what they need, and just rationalising whether it’s deserved or not.
Becky
You bring up BYD so I’ll jump to a question from Stephen Spencer, who writes in from New York, New York. He’s curious why Mr. Munger prefers an investment in BYD to Tesla.
Charlie Munger
Well, that’s easy. Tesla last year, reduced prices in China twice. BYD increased its prices for direct competitors. Were so much ahead of BYD. I mean, BYD is so much ahead of Tesla in China, it’s like a. It’s just, it’s almost ridiculous. And if you look at BYD which most people never heard of, if you count all the manufacturing space they have in China to make cars, it would it would about to have a percentage of all over Manhattan Island. Nobody ever heard of them few years ago.
Becky
All right. Let me jump to another question. This one comes from Michael asset sale, who says this is my regards to some movement at Berkshire some sales of Berkshire stake holdings. The sale of some BYD and Taiwan semi shares have anything to do with the relations between the United States and China or was it for purely economic reasons?
Charlie Munger
Well, when he’s talking about 50 times earnings, that is a very high price. On the other hand, they’re likely to increase their auto sales by another 50% this year. So it’s, we sold part of ours by the way, years ago, not years, but about a year ago at a much higher price. And it’s only for now and we’re not a mini Berkshire, we’re not going to have a good correlation between us and what Berkshire does. And you can understand why somebody will sell Berkshire BYD stock at 50 times earnings at the current price will be why the stock level BYD is worth more than the entire Mercedes Corporation. Market capitalization, so it’s not a cheap stock on the other hand, it’s a very remarkable company. And by the way, I want to tell people, the great contribution I made to the success six as a BYD, I, we got into it through Li lu and and it was all company that knocked off the Japanese cell phones. And the chairman who’s got a genius salary by a bankrupt little crappy auto and go to the auto business from dead scratch when he’s making cell phones little tiny nothing company. And both Li lu and I talking about it, please don’t do this dumb thing. You get your head handed to you. The business little BYD is over. Last year, they made more than $2 billion in the auto business from that standing started to zero, it’s unheard of. But lately, we’ve noticed they’re all great because we tried to get them. We tried to talk about doing what works well, which shows that there’s some accident in life.
Becky
Charlie, this question comes from Michael Gallagher. He says, according to company filings, it appeared that Alibaba shares were purchased with leverage. And when the stock price fell last year, he was seemingly forced to sell he being you. Can you ask Charlie to confirm that it was bought with leverage? And if so why would he do that? As it seems to go against his philosophy? I got several questions that were similar to that.
Charlie Munger
Well, yes, it’s true. I operated with no leverage for long stretches of my old age and Warren is the same way. And, and recently, I use a little bit of leverage here in another place. Because the opportunities were so ridiculously good. I thought it was desirable to do that. So you’re right. It’s unusual for us. But we, we did find a few things. And by the way, if you go back early in my career, I use some leverage, I sometimes ask myself a mental question. I say, what is the appropriate percentage of your net worth? And you put it in the stock if you think it’s an absolute hit? Well, if you’re the kind of gal who’s right, if you think something is essential, the answer is 100%. Or maybe 150%. But nobody, nobody teaches people to think that way to finance but but if you ever do it, he’s great enough the logical answer is 100%. Or maybe 200%.
Becky
Somebody else wrote in and I don’t have the email in front of me the moment that he wrote in quoting you where you said the three things that really people are ladies liquor and leverage so why would you use leverage is one of the three things that can destroy somebody?
Charlie Munger
Well, I use a little out of my way up and so did Warren by the way, the Buffett partnership use leverage regularly every every year of its life would Warren would do was he would buy a bunch of stocks and then he borrowed and sold stocks need buy under these they used to call it a bit arbitrage, liquidations mergers and so forth. And that was not didn’t go down with the market that was like an independent banking business and Ben Graham’s name for that. That type of investment he called the Jewish treasury bills and it always amuses me that’s what he would call them but Warren use leverage to buy Jewish treasury bills went on the way up and it worked fine for him. I don’t think either it was everybody well, not only Berkshire has stock in Activision Blizzard. And you can argue that that’s whether they’ll go through or not, I don’t know. But but but that’s the Jewish treasury bill. arbitrage. Arbitrage play on Activision. Well, yeah, so we’ve had arbitrage but we sort of stopped doing it because it’s such a crowded place. But here’s here’s a little Berkshire doing it again and Activision Blizzard, and Munger using a little leverage of the Daily Journal Corporation. So is leveraged use that leverage to buy BYD? You could argue it’s the best thing I’ve ever done for the daily journal. So it’s leveraged the least evil of the three L’s I think most people should avoided but maybe not everybody play by those rules. I have a friend who says, the young man knows the rules of the old man knows the exceptions. Alright, another question. He’s lived right? You know.
Becky
Another question comes in from Brandon McKee. He’s also asking about some situations with Alibaba, he said, How should investors view geopolitical events in regards to their investment in foreign countries? How do you like the situation of the recent Chinese spy balloon in regards to the Alibaba investment?
Charlie Munger
Well, of course, it was a very interesting thing. Jack Ma was a dominant capitalist in Alibaba. And one day he got up and made a public speech where he basically said the Communist Party is horrible hockey. They don’t know the outcome of their elbow. They’re no damn good, and I’m smart. And of course, the Communist Party didn’t really like his speech. And pretty soon he just sort of disappeared from view for months on end. And now he’s out to BYD. It was pretty surreal, but it’s like poking a bear in the nose with a sharp stick. It’s not smart. And and Jack Ma got way out of line by popping off the way he did to the Chinese government. And of course, it hurt Alibaba. But I regard Alibaba as one of the worst mistakes I ever made in thinking about Alibaba, I got charmed with the idea of their position on the Chinese ever did. didn’t stop to realise it’s still a goddamn retailer. It’s gonna be a competitive business, the internet, it’s not gonna be a cakewalk for everybody.
Becky
Just about China in general. I have a lot of questions that came in regarding that. I’ll ask this one from Wilco. Wilco shots and Dorf. It’s coming in from Walnut Creek, California who just said previously stated that despite certain shortcomings, China was generally moving in the right direction. However, with the recent actions taken by the Chinese government, such as capriciously punishing technology in educational companies declining to import effective COVID, vaccines, escalating threats towards Taiwan, do you still maintain that China is a viable investment option for foreign capital? Or is China experiencing a similar regression as Russia has seen under Putin’s leadership that culminates in the invasion of Taiwan?
Charlie Munger
Well, that’s a very good question, of course. But I would argue that the chances of a conversation from China have gone down, not up because of what happened in the Ukraine. I think that the Chinese leader is a very smart, practical person. And it doesn’t rush into there you Ukrainians, it looks like a cakewalk. I don’t think Taiwan looks like such a cakewalk anymore. I think it’s off the table in general for a long, long time. And I think that helps the prospects of investors who invest in China. And the other thing that helps in terms of the China prospects are that you can buy the best, you can buy better, stronger companies, that cheaper valuation in China than you can’t the United States. So you’re getting the extra wet risk can be worth running, given the extra value you get. That’s why we’re in China, it’s like we prefer being in some foreign country. Of course, I’d rather wait in Los Angeles right next to my house, you know, it’d be more convenient. But I can’t find that many investments, you know, right next to my house.
Becky
Just to follow up on that, Alex, right. So Alex Romanski, I’m sorry, the very small print, right, and how have political events in China over the last few months affected your thinking on the country, several people, including me, were taken aback by the forceful withdrawal of former President who Jintao at the October 22 annual Congress, President Xi seems to have consolidated power. And his actions have indicated that he thinks very differently about the role of business and Chinese society.
Charlie Munger
Well, I have more optimism about the leader of the Chinese party than most people do. He has done a lot of things right too, and, you know, even a little bit of anti corruption drive, he’s done a lot of things. Right. So and I don’t know where this man lives. Where is there a place where the government is perfect in the world, seven zero. Democracies are that regularly run either. So it’s natural to have some decisions made by government that don’t work well. It’s natural to have decisions in each individual life that don’t work very well. We live in a world of sensor owners decision. That’s, that’s, that’s, that’s what human beings get to cope with in their days of life. So I don’t expect the world to be free, you follow you and mistakes and so forth. And I just hope I’m invested with people have more good judgments and bad judgement. I don’t know anybody who’s right all the time.
Becky
And keep from Cupertino, California writes in and this is in the same vein, but a little more focused. How should we think about the political and political climate around Taiwan and the long term impact on the semiconductor industry? Specifically, do you see the chips and the science of the chips and science act favourably?
Charlie Munger
Well, the semiconductor industry is a very peculiar industry. In the semiconductor industry, you have to take all the money you’ve made. And with each new generation of chips, you throw in all the money you previously made, so it’s compulsory investment of everything you want to stay in the game. Naturally, I hate a business like that. In Berkshire, we like a whole lot of surplus money to come into weakness, all the deals with. And, of course, now if you’re another head of it, like Taiwan Semiconductor is, that may be a good buy at these prices. I, it’s not at all clear to me that they’re not going to succeed mightily, but it’s, it’s a difficult, it’s a bit of an enormous promise for the big winner. But it’s a difficult business and requiring everybody to keep increasing the bets on and on with all the money. And so it’s not perfect that semiconductor business. But I remember when Intel won the World, Intel was once the Taiwan Semiconductor business of the world, they invented the damn business. And they dominated it for decades. And it’s not clear to me that Intel is going to have a very decent semiconductor business, getting as far behind as they are. No, it’s my answer is it’s not so damn foolproof as it looked.
Becky
Even with the incentives to build plants here in the United States, like Intel is doing in Ohio.
Charlie Munger
Well, of course, that will really help but they’re borrowing the money, there’s no indication the government is going to forgive the loans or something. It’s, it’s not like the reason why loads of business where they say, well, all your money, then then we’re here to keep the money. The government is not planning to do that with these new semiconductor loans. And so it’s not a field where I feel I have a lot of expertise. What the hell do I know about semiconductors?
Becky
Do you worry about any conditions that the government would put on companies that end up using any of that money, but then like semicon or anything else?
Charlie Munger
Well, of course, all of that it’s deeply intertwined with government policies that both China and the United States so I would rather have something that’s more foolproof myself. But I do think Taiwan Semiconductor is the strongest semiconductor company on Earth. So I, I have a big admirer of what they’ve achieved. It’s just incredible what they’ve achieved.
Becky
Speaking of things you like, better on,
Charlie Munger
maybe a wonderful investment, the fact that I don’t like it because I But old man and I don’t like learning new tricks. That doesn’t mean it isn’t right for some younger person that understands it better than I do.
Becky
Okay, actually, that’s I’m gonna switch gears. We’ll come back to this question in a minute. But that leads me to this question about crypto that Benjamin writes in. He says in 2007, at the USC law school, Charlie said, I’m not entitled to have an opinion on this subject unless I can state the arguments against my position better than the people who are supporting it. The question is, Does this also apply to your Wall Street Journal article on banning cryptocurrencies? And if yes, would you care to share the arguments against your position?
Charlie Munger
Well, I don’t think there are good arguments against my position, I think the people who oppose my position are idiots. So I don’t think there is a rational argument against my position. This is an incredible thing. Naturally, people like to run down and conceals where other people lose. And the people who invented this crypto crapple, which is my name for it. Sometimes I call it crypto crapple. And sometimes they call it crypto shit. And it’s just ridiculous anybody would buy this stuff isn’t. You can think of hardly nothing on earth. There’s no more go to the human race than currency, national currencies. They were absolutely required to turn me on from oh god damn successful ape. Modern, successful humans and human civilization has enabled all these convenient exchanges. So if somebody says I’m going to create something and sort of replaces the national currency, it’s like saying, I’m going to replace the national air, you know, it’s asinine. It is even slightly stupid. It’s massively stupid. And, of course, it’s very dangerous. Of course, the governments were totally wrong, Who permitted. And of course, I’m not proud of my country for allowing this crap. What I call the crypto shit. It’s worthless. It’s no good. It’s crazy. It’ll have nothing but harm. It’s anti social to allow it. And the guy who made the correct decision on this is the Chinese leader, the Chinese leader took one look at crypto shit. And he says not in my China. And boom, oh, well, there isn’t any crypto shit in China. He’s right, we’re wrong. And there is no good argument on the other side, I got cancelled. What
Becky
does that counter what you said, you shouldn’t have a position and
Charlie Munger
I don’t think you ought to be able to, you ought to be able to stay out a lot of issues you ought to be how big should the social safety net be? That’s the place where reasonable minds can disagree. And you should be able to state the case on the other side about as well as case you believe in. But when you’re dealing with something as awful as crypto, should you it’s just unspeakable. It’s an absolute horror, and that I’m ashamed of my country, that so many people believe in this kind of crap. And what the government allows it to exist is totally absolutely crazy, stupid gambling, with enormous house odds for the people on the other side, and they cheat in addition to the cheating and the betting. It’s just crazy. So that is something that there’s only one correct answer for intelligent people. Just totally avoid it. And avoid all people that are promoting it.
Becky
How do you feel about the gambling that took place at the Super Bowl and surrounding that in the legalised gambling taking place in the country at this point?
Charlie Munger
Well, it’s not as bad as crypto shit. I don’t think there’s much harm in bet betting a modest amount you can afford to have a Super Bowl game that that strikes me is pretty you know pretty we do it with a friend and not with a bookie. So I don’t, I don’t have the same feeling. I obviously don’t think you should have a gambling and bolting around betting against the odds. If you’ll take all the money that I bet against odds in my whole life. I don’t think it’s more than a few $1,000.
Becky
Alan Kay writes in and he says if I’m all in favour, buddy with the odds with the odds, yeah. Alan Kay writes, I’m sure he says if Mr. Munger thinks that Bitcoin and Aetherium are rat poison, has he ever profited by shorting them?
Charlie Munger
No, I don’t short. I have made three short sales in my entire life. And they’re all more than 30 years ago. An ad one was a currency and and there were two stock trades. It two stock trades. I made a big profit on one I made a big loss on the other and they cancelled out and I ended my currency bet I made a million dollars, but it was a very irritating way to me. I stopped
Becky
not worth the headache. I guess you could
Charlie Munger
laugh. But that’s that’s true. It was irritating. Because you were worried. Okay, like I’m asking you for more margin. I kept sending over Treasury notes. It was very unpleasant. I made a profit in the end, but I never wanted to do it again.
Becky
Charlie, I said I’d come back to this question. This was about something that you do like as an investment Amit Patel from Montreal, Quebec, right saying that you love Costco. So what do you think can hurt Costco is economic moat in the long term.
Charlie Munger
Well, as long as Costco keeps the faith, strong culture and their extreme low markup policy, I don’t see any stopping. The trouble was last goes it’s 40 times earnings. But But except for that it’s a perfect damn company. And it has a marvellous future. And it has a wonderful culture and it’s run by wonderful people and I love everything about Costco. I’m a total addict. I’m never gonna sell a share.
Becky
are the next question comes from David Cass, who’s a professor of finance at the University of Maryland. He says he’s a shareholder, the Daily Journal Corporation, I would appreciate it if you don’t answer one of these questions. The question that I’m that I’ll ask him is President Biden has proposed increasing the tax on stock buybacks from its current level of 1% to a new higher level of 4%. What are your views on taxing stock buybacks?
Charlie Munger
Well, I’m strongly opposed. Because I think if you’re a good culture has a lot of people that are good fiduciaries. And it is, is like stealing you do something dumb with the corporate money. Once you get more guys, your shoulders will buy back your own stock. And I like encouraging morality and decency and honour and some of your dealings with the people you’re the fiduciary for. And so I agree with our president on some things, but this is not one of them.
Becky
They at least disagree. What vehemently disagree, say it again, do you vehemently disagree?
Charlie Munger
Well, I’m not vehement because it’s not as bad as cryptocurrency it’s a forgivable error. But yes, I disagree. strongly. I think it’s a big mistake to to adopt that policy. But you know, I’m a Republican i i Sometimes vote for Democrats, but I am a Republican.
Becky
And a question on stock buybacks comes in from Ed Princeville. in Morristown, New Jersey. He says Berkshire share repurchases slowed considerably from $3 billion in the first quarter of 2022 to a billion dollars in the second quarter and a billion dollars in the third quarter. Even though the price declined somewhat as to the general market, one would think that the buyback would increase with a lower stock price. Does Berkshire adjust its buyback price based on the intrinsic value of the approximately $300 billion stock portfolio or the quoted price.
Charlie Munger
I never pay any attention to how they do it. They’re, they’re cautious and careful people. And but if you take the amount that’s been bought back in the last three years, it’s a lot. And I thoroughly approve what we’re doing. And I don’t get it at all fair that we’re being taxed, or doing something good for our own shareholders.
Becky
The President laid out the case today, I think he said something like north of 90% of executives are paid with stock compensation, at least in part, he said maybe this was yesterday that he said this, he said that that’s not fair. The best way to goose your own compensation is to buy back your shares. So it helps the executives, it helps us hear about the shareholders, but it doesn’t help the employees or other constituents.
Charlie Munger
Well, there’s no question about the fact that he sympathises with the employees more, and that’s understandable. And a lot of people would have the President’s orientation on that issue. And I don’t have a big opinion about how wealth ought to be distributed in the country. I think. I don’t know the answer. I do think we need a capitalistic system. And we want to have a productive economy that makes it a little easier to advance.
Becky
Alright, the next question comes in from Michael and I think his last name is Moscow. But I’m going based on the address from the email and not given last name. He says he’s a very longtime Berkshire shareholder that who read an irritating recent Barron’s article that stated, Berkshire shareholders could benefit after Warren as the company could come under pressure to break up, I don’t see how we would benefit with our businesses being broken up as you and Warren have long stayed at the company as a whole is stronger than and one division could always add another division in need. He said he knows Warren and Charlie have said that the current structure and philosophies will be preserved after your departure. And I hope for a very, I hope not for a very long time, however, please offer our shareholders reassurance that the company would never succumb to these silly pressures to break it up.
Charlie Munger
Well, I don’t think it’s at all likely, it’ll be broken up for a long, long time. A lot of companies are worth more dead than alive. At the current price for whole businesses. You could sell things at higher prices, they only do it once shareholders would pay big tax, then you’d have the problem of what to do with the money and so forth. I think all factors considered and with Berkshire buying and selling shares when they’re reasonably priced. I think Berkshire is a pretty damn good bet for shareholders to hold long term in the future. And I don’t think it’s any hardship. It hasn’t been broken up. It works pretty damn well. Everybody that bought Berkshire held it for 20 years has done well. I think that will be true for those who buy those the current price.
Becky
What about the potential for pressure? I
Charlie Munger
don’t think it’ll be as good in the future as it was in the past but it will be okay, considering a poorly everything else is gonna do.
Becky
Why do you think everything else is gonna do so poorly?
Charlie Munger
Because the valuations start higher now. And because government is so hostile to business?
Becky
And that’s a view over the next 510 20 years, how far out are you thinking?
Charlie Munger
I would say it’ll fluctuate naturally between administrations and so on. But but but I think basically the culture of the world will become more and more anti business in the big democracies and and I think taxes will go up not down. So I think in the investment world is gonna get harder for everybody. And but it’s been almost too easy in the past for the investment class. It’s natural, it would have a period of getting harder might not worry about too much. He’s not going to be dead. No, it won’t bother me very much.
Becky
I guess you might want to people your 99 Nobody lives forever. That’s what you’re referring to. You’re not sick at the moment. Right?
Charlie Munger
Now I’m eating this good being a rebel. That’s what you want to do if you want to live to be 99.
Becky
We did get some people who wrote in
Charlie Munger
to advertise my own product, but this is the key to longevity.
Becky
I can see myself The bucks earlier, we didn’t get a lot people who wrote in questions just asking what your daily habits are, what you do every day, if you if you exercise if you think exercising a lot when you’re younger is important to longevity.
Charlie Munger
Well, that’s a very, I have almost no exercise, except when the Army Air Corps made me do exercise. I’ve done almost no exercise on purpose in my life. I enjoyed the activity like tennis, I would exercise. But for the first nine years, I’ve gotten by without doing any exercise at all.
Becky
And you’re not planning on changing that anytime soon.
Charlie Munger
No, no, I’m not changing.
Steven Michael Jones
Other people’s mileage may vary. Yeah.
Becky
I’m looking for one question that somebody wrote in because I want to word it properly. And it has to do with what you’ve just been talking about? If I can find it, there’s a lot of questions in here. Oh, here it is. Somebody said this came from a DD gone in Australia. What would the 100th day of your life look like? And how would you want to spend it when you step out of bed in the morning?
Charlie Munger
Well, I step out of my bed these days and sit down, sit down in my wheelchair. So I’m paying some price for old age, but I prefer it to being dead. And whenever I feel sad, maybe in a wheelchair, I think well, you know, Roosevelt ran the whole damn country for 12 years in a wheelchair. So I’m just trying to make this field here so they can last as long as Roosevelt did.
Becky
That’s good plan. I like it. Somebody else wrote in this is Adam Mead. And he said, Charlie, in your 1995 talk, the psychology of Miss judgement, you listed sentiments as a cause of his judgement. You said old people like me get pretty skilled without working on it at disguising age related deterioration, because social convention like clothing hides much decline. You went on to say that such decline was inevitable. He says, You’re my hero, Charlie, and I offered you this question with the utmost respect, but feel it needs to be asked when 71 year old Charlie just to trust the judgement, mental capacity of 99 year old Charlie?
Charlie Munger
Well, there’s no question about the fact that you lose some mental acuity as you get older, but somebody will get shrewder at adapting to their limitations, and they do pretty well. And so far, I’ve had plenty of decline, but I’m pretty shrewd about the way I handle it. And so far, the results have not been that bad in my old age. So I will be a different subject.
Becky
Well, I will point out to people, we have not given you any of these questions in advance. So you’re taking blind questions. For Laura. Yeah, for a large stretch of time on this too. Okay, how do I follow that up? This one’s another question. This gets back to investing what we were just talking about a minute ago. But Michael quarterly, writes in and says, given the increasing rate environment, what are the ramifications of moving away from a close to zero interest rate policy, Warren and yourself are frequently spoken about Aesop. And a bird in the hand is worth two in the bush to describe the essence of investment decision making. So what do you do now that the interest rate environments changing?
Charlie Munger
Well, there’s no question about the fact that interest rates have gone up, it’s it’s hostile to stock prices. And but they should go up but we couldn’t have kept them forever at zero. And, and I just think it’s just one more damn thing to adapt to him. Investment life is that there are there are headwinds and tailwinds. And one of the headwinds is inflation. And I think more inflation over the next 100 years is inevitable, given the nature of democratic politics, politics and democracy. So I think we’ll have more inflation. That’s one of the reasons the daily journal on securities instead of government bonds, owns common stocks instead of government bonds.
Becky
When you say the nature of democratic policies, and I forget exactly how you worded it, are you talking about the Democratic Party? Are you talking about democracy as
Charlie Munger
Trump ran a deficit that was bigger than the Democrats did it all democratic, all politicians in a democracy tend to be in favour of printing the money and spending it and that will cause some inflation over time? It may avoid fewer sessions, so it may not be all bad, but it will do more harm than good, I think from this point forward.
Becky
Okay, on that point, Ron. Tree rotolight Ron Tortola says should we mean continue to maintain a debt limit? The adjustment process seems to be a very simple and mechanical process. However, such a measure only seems to create an environment rife with political jockeying and sniping. What’s the purpose if we continue to budget beyond our means. And then the bill comes to?
Charlie Munger
Well, if you take the history of democracy in the world, and go back far enough, it fails a lot, and get succeeded by dictatorships and all kinds of awful things. And, as a matter of fact, the worst thing that happened to the human race in my lifetime, was an advanced civilization, like Germany, was taken over by a dictator as awful as Adel Hitler. That happened as a consequence of a big worldwide depression would never have happened if we hadn’t had the big depression. And once Hitler got into that, what that meant were World War Two was inevitable. And that could have worked out a lot worse than it did for the people like the United States. So the these things are quite important. And, and they’re not going to be done perfectly in the future, no more than they were done perfectly in the past. So So, of course, you gotta expect a certain amount of future trouble in the world and your government’s gonna do some things that aren’t exactly right. On the other hand, I would argue that the US government did some things magnificently right. I have said on many an occasion that if that makes me proud as to my own government, is the way we handled the sequel to World War Two. Instead of punishing the Germans and the Japanese, we made them into a zombie Best Friends on earth. Now that was a stunt. And it was to the credit of our country that that was done. And it was the only bipartisan basis. And I think we can all be proud of that that was a smart thing to do. It took some generosity, we had to give up some of our money to help them rebuild. And it was, it was a credit to our species that we behave that well on medication. And I don’t think our future behaviour will Alexa, similar episodes of some kind, but lacks similar episodes or something’s very right and Something’s very wrong. That’s, that’s the way that happens. Yeah,
Becky
that’s very church. I’ll ask right. They’ll try everything, all the wrong, wrong things and do the right thing.
Charlie Munger
No, I will. I will keep doing both Robin right. As far ahead, as you can see,
Becky
um, Charlie owl piton writes in from Chicago and wants to know, if you think we might have on and off waves of inflation like we did prior to when Volcker stepped in at the Fed. And 70s era
Charlie Munger
horses will happen some in the future? Yes. I think we’ll have some of that in the future.
Becky
Do you think we have immediately right now with what Jay Powell is dealing with? I
Charlie Munger
don’t I don’t I don’t, I don’t regard myself. I think I’m pretty good at long run expectations. But I don’t think I’m good at short term wobbles. I don’t know. The faintest idea is what’s gonna happen short term.
Becky
Well, let me ask this one as a follow up, it’s it’s similar. And you may not wanna answer this one either. But Jake Dillard says, Do you have faith in Jay Powell? Are you expecting a soft landing?
Charlie Munger
Well, here’s the way I feel about Jay Paul, is it I feel he’s about as good as we have any right to expect? I think he’s honourable and intelligent and doing the best he can. And I have no feeling that I know a lot of people who do it a lot better. So I have so I’m glad we have him.
Becky
Charlie, another question comes in from Chris freed of Philadelphia, Pennsylvania. He says you’ve recommended the use of an index fund for the average investor, as these index funds continue to expand in size, their influence on corporate boards, and ultimately management is ever increasing. This concentration of voting in the hands of a few index funds is alarming to me. Do you see this concentration as alarming as well? And what reforms would you suggest to address that issue?
Charlie Munger
Well, of course, it’s a very serious issue, because it’s an enormous amount of power. And for a while always index funds got to feel like they were suddenly made godlike to clean up the world. And but Vanguard has retreated from that policy. And I think wisely so. And I have some hope that you think will follow. I don’t think it’s smart for for these index funds that don’t influence the policy and politics of the country. Just because they’re an index fund, I think they should be satisfied to eliminate some of the folly from investment management and do a better job for their clients, which I think they do very well. And I think they should be pleased with that and not try and run the whole damn country as a matter of corporate governance. I have no feeling that anybody at Vanguard or or Larry thinks operation has any special genius in how American corporations ought to be run. And the extent they asked me to do this, or that, I wish they’d stop.
Becky
That’s for sure to do what to Oh, to follow. They’re, they’re
Charlie Munger
just not interested in their views about Berkshire.
Becky
Alright, this next question comes from Carsten federoff, who’s an equity analyst analyst from Germany, Germany. And his question is, stock based compensation is a popular means of incentive compensation and many companies. In some cases, these take on alarming proportions, it feels like companies are competing to outbid each other. In some companies, 20% of sales are paid out in stock based compensation. How do you perceive this development in recent years? And what’s a heavy? What’s a healthy level of incentives?
Charlie Munger
Well, I think you will find in American corporations, very good incentive systems, and others that are too liberal, and others that are too niggardly. And what else would you expect of human nature, but a certain amount of variety. And I agree that some of this in many a corporation, everybody would vote to being allowed to have stock based compensation, you didn’t count in computing the earnings. They just want any damn way of making the earnings appear higher. It’s just human nature. Of course they want they’re like a little kid goes off to school, they want to have good grades, not bad grades. And so it’s sure there’s a big problem of excess Corporation. Pay in some places, other places like Costco, I would say the compensation system is damn near perfect. It’s it’s, and there’s a fair amount of stock, right? But we always buy enough stock in Costco to pay for the stock. We’re doing a lot of people in high tech the issue of the stock, and they don’t, they don’t buy it. And so it’s an illusion. I think there’s a lot that’s wrong in American compensation systems. And, but why wouldn’t there be by the way, when I was young, it wasn’t so bad. Like this is something that’s happened in the last 50 years. I don’t know it’s just a history of the way things came up and the greater hardship and the pioneering ethos or whatever it was, when I was young, nobody complained about executive compensation. Now frankly, everybody in the investment world thinks in many cases, executive compensation has gotten too high hit General Electric in its heyday think of all the big compensation packages, they paid and think of all they were phoning up the earnings and so forth to pay for it and it was disgusting. And and of course, if that kind of crap creeps in everywhere in our civilization, the civilization will perish. We need more honour, not less. And, but I haven’t any, I have no suggestion as to how to fix the places where it’s excessive. It’s a difficult issue really difficult.
Becky
Jeffrey Malloy writes in and asked this question, He’s from San Francisco. He says, Do you think Elon Musk’s ownership of Twitter specifically, his hands off approach to content moderation is good or bad for American society?
Charlie Munger
Well, you know, I don’t use Twitter. So I’m not a good judge on that subject. And my point was on Elan Musk is that he’s a very talented man, but also could peculiar and so I, I don’t buy him and I don’t sell him short. I just say, well, he’s a very unusual person.
Becky
He said some nice things about him the last time I talked to you and what he’s done with Tesla.
Charlie Munger
Oh, it’s unbelievable. Who else has done it except BYD just shows how tough capitalism is. Even if you’re a genius, genius, like Musk is in some ways. There’s always a little BYD that comes out and does better. Capitalism was not easy.
Becky
Right, this question came in from Jeremy Salzburg in Costa Mesa, California. He says Charlie last year in 2022, Missouri court awarded a victim $5.2 million in compensation from Berkshire subsidiary Geico, after a woman was infected with an STD in a car that was insured by GEICO auto insurance. The claimant says that the man was negligent and didn’t tell her about his health diagnosis. Your grandfather was a judge and you have a background in law. Did the Missouri court get this verdict? Right?
Charlie Munger
Well, I wouldn’t doubt it myself. But but it’s in the nature of things that not every court is going to be writing everybody, for every judgement. And, and I do think that allowing that you’ll get your raise a very tough subject. You will get occasional verdicts that are just totally outrageous. And and that’s inevitable. And of course, that’s what appellate courts are for but sometimes the appellate courts are very sympathetic with with with crazy verdicts. Again, I can’t fix everything that’s wrong with you in life, including a few crazy verdicts.
Becky
You put that in the category of a crazy verdict, though. Yeah, sure. This question comes from Stefan Armand, who is writing in from Toronto, there was a lot of excitement about the relationship between Berkshire and 3g for the Kraft Heinz transaction, as your perception of the private equity business changed on the back of that partnership.
Charlie Munger
Well, like every other human being on Earth, somebody else got better than others or 3G. They would love to have a way of going back and putting all their bad deals into good deals. Berkshire would like to have the same option if we don’t get it either. Average out 3G did pretty well. But recently there they’ve had some their approach hasn’t worked as well. In recent years isn’t as would be ideal. Again, welcome to human life It isn’t so damn too easy.
Becky
RT presser writes in and says the Florida governor and legislative body has recently taken a stand to try and control Disney’s exclusive self governing authority previously set up in Florida under the founder Walt Disney as your organisation I guess, by this I mean, DJ co still owns Disney shares. You think Disney shares are still a good investment given this backdrop?
Charlie Munger
We’ve never owned Disney shares. No, but Disney is an interesting case. Frankly, every business that Disney has, it’s gotten tougher than it used to be. Again, welcome to human life. Think about Disney once on the world. Lion King was running a long run on on the Theatre District of New York. They went from triumphs marching, marching, marching. All of a sudden on practically every front it’s more difficult. This is what happens. Imagine Kodak which totally dominated photography in the world, and the advent of this new ticket technology. Kodak wiped out its common shareholders.
Becky
You think Disney’s headed down the same path? Do you think that there’ll be able to pivot? I mean, I know you follow the
Charlie Munger
Disney has a lot of assets. But it’s unpleasant to have something. How would you like running the sports? ESPN now Disney compared to its heyday? It’s gonna be way harder for them. Movie movies look to me like it’s gonna be a bloodbath too. So it’s not about easy. It was easy. In the heyday of ESPN, Disney made nothing but money out of ESPN, the total goldmine.
Becky
What about other movie businesses, I’m thinking of Paramount, which is a huge holding that Berkshire now owns. recently.
Charlie Munger
I live within a few blocks of Paramount Studios. And I don’t even know anybody at Paramount. I have avoided the movies like the plague as an investor all my life. I’ve never made an investment in a movie business in any way, shape, or form. It always gives me the willows. I don’t like the unions. I don’t like the crazy agents. I don’t like the goddamn crazy lawyers. I don’t like the crazy movie stars. I don’t like the people who sell dope to them. Musicians. Everything about it is not my culture. I like those old English actors when they came over. You know, I grew up with him. And but basically, movies is not my same. So I’ve I’ve I’ve avoided it’s it’s always been very hard for the people or one of them. It may be a very good place to make a living as an actor or a writer or somebody or a musician. But it’s a hard place to make money if you’re an investor.
Becky
This one’s an interesting question. I came in from Eric how in Milwaukee, who says the population of the world is thought to increase by more than fourfold time, since you were born? Mind you, I’m not holding you personally responsible. But there has been that magnitude of growth. Is there a point where the biggest existential threat to humanity is the growth of the population and humanity? If so, how do we discern when that point has arrived?
Charlie Munger
Well, that’s an interesting subject. If you’d look at the way things have happened in the past, you would have concluded like, while they’re like dead, that the world’s headed for an absolute population disaster, but what actually has happened is quite different. What’s happened is that as the world has gotten more and more prosperous, including in places like China, the birth rate has gone down, down, down, down. And so that is actually sort of a population shortage in places like Japan. So the production of all the great experts based on extrapolating the past graphs that are not totally wrong. It now looks as though the world’s population in the advanced countries was sort of self limiting.
Becky
I mean, that kind of put you in the same camp with Elon Musk, he’s made some of the same arguments that it’s really a shrinking population, that’s a bigger threat to humanity.
Charlie Munger
As I said, he’s a smart man. Sometimes.
Becky
Danny Poland writes in and says, When assessing the character and competence of a business’s management, have you ever made a mistake? If so, when did this occur? And what did you learn from the experience?
Charlie Munger
Well, everybody makes mistakes. I’m one of the actually, one of the most interesting things that happened in my lifetime, was the rise of IBM, and the fall of IBM. IBM was the most admired company in America for most of my young life. They just marched from time to time And in the last 10, or 15 years, they slipped in there. They’re falling back in relation to other people in their field, as the apples and the Googles, and so forth, game ahead, IBM just, they kind of missed the boat. I think that’s almost inevitable. Kodak missed the boat have changed digital photography, too. And I’ve heard Bill Gates say that it’s almost a rule and really disruptive technology comes along the incumbent screw up their reaction to it. It’s hard to change your ways when they’ve been successful for a long time, and go into a totally different way of behaving. And thinking
Becky
right, this question where
Charlie Munger
we’re sitting with a daily journal Corporation, we’re adapting to the new world, no different it is publishing a newspaper, and, and being embedding software records to automate. These are two radically different businesses.
Becky
This question comes in from someone named Jean who says, Mr. Munger, do you think that currently in the United States we have systemic racism? We have what systemic racism?
Charlie Munger
Well, I suppose we got so I’m sure. Of course, you’re gonna have a certain amount of animosity, one group toward another, the whole history of the human race, we’ve had a certain amount of that. I think it’s gotten way better in my lifetime. However, I would argue the racism has gone down. A lot.
Becky
Charlie, this question comes in from Neil Das, who says, What, if any impact do you think the insurance industry will see because of climate change over the next 25 years?
Charlie Munger
Well, I’m not sure I only go to answering that kind of a question.
Becky
Are you raising rates in any of the Berkshire insurance companies? I don’t
Charlie Munger
think I don’t think I know particularly I well. I think there’s a good chance that climate change will be less important than all people think. That doesn’t mean it’ll be unimportant. But I think it won’t be an absolute fool button or capacity with no possibility into it. Just
Becky
wait, because sometimes when I wait, you say more on things. But I’ll give you time to. Okay. Let me get to this question from Tony Huang. He says that he’s teaching the introduction of personal finance and the introduction of corporate finance to undergraduates at Indiana University in Bloomington, most of the students are non finance majors. And this will likely be the only finance class that they take in college. What should he teach them incorporating as many writings and speeches that you’ve given over the years so that they have the foundations and common sense to effectively deal with their personal or corporate finance problems later in life?
Charlie Munger
Well, it’s actually a good question, because it’s a big question. And if you have good judgement, your life will work a lot better than if you have bad judgement. And you get good judgement gradually over time, partly by making bad judgments and having them work out poorly. So my counsel has always been a start trying to be better and keep doing, keep trying to improve all your life. And you got about have a chance. You don’t do that you got like no chance. And so I I used to say I can only teach what the other person almost knows. And I can just tell them over the break when he’s hanging on the edge. But if the guy is not within miles even starting, I never make any any public I never succeed. To enrol, we get easy I represent failure. I’ve never succeeded.
Becky
What would you push in that direction, if you’ve got a class full of finance students in college, maybe one of the few lessons I would teach
Charlie Munger
to the people who could learn in the elders couldn’t keep up the hill with them can’t be improved can’t be improved. I just I don’t believe anybody my head against the wall. And that by the way, that’s where most education works. They just throw out those who can’t keep up. That’s the way academia works. That’s the reason it gets so good at the top. I talked yesterday on zoom with a law professor at a great place. I got this is an admirable guy. He’s just so goddamn smart and bounces. Incredible. But he’s a very senior law teacher, one of the great law schools of the world. So I would expect him to be pretty good, but he was more than pretty good. He was awesome. And I thought I got academics quite competitive. You know, by the time you get to the top of the professor’s in a good place, you’ll find some very remarkable people. And, but what they can’t, there’s a limit to what they can accomplish. One of the reasons they turn out such good people is they take in such good people, that’s their secret. They can’t fix the clouds. Nobody can. Tough love an old saying dominance dominance forever.
Becky
Diamond diamonds Alejandro Salcedo writes in he says reading many entrepreneurs and famous people, they always say that you have to dream really big. Instead, you say, Charlie, that the secret to a happy life is having low expectations. Could you please expand on that?
Charlie Munger
What Yes, you climb as hard as you can by just advancing one inch at a time. That’s the secret of life. And now there’s always somebody who’s a little nuts who succeeds. But that’s the for every guy who’s exceeds their 1000 failures.
Becky
Is this an under promise over to over deliver situation to?
Charlie Munger
Well, of course, who in the hell is right? Mine would like going around making a lot of commitments and failing time after time after time, but doing what you promised to do. Everybody would hate you, right? There’s no more guaranteed way to make people hate you than to fail, and they’re reasonable expectations. So, of course, you want to live a life where by and large, you’re meeting the reasonable expectations of other people. That’s what civilization requires of all of us.
Becky
Charlie, someone named Joe Rodin from China, and he says he’s an investor from China. He’s sorry, that he can’t see you face to face this year. He wants to ask you a question about life during the pandemic. He says I always give bits of advice to the elders in my family, like avoiding high temperatures and falling down at home. But during the pandemic, especially since China reopened, I can sell them give them any advice except stay at home and get vaccinated. So as a wise elder yourself, did you get COVID during the pandemic, and how do you stay healthy? What’s your advice to these elders?
Charlie Munger
I did get COVID. But I got it after I was vaccinated, and I had like a tiny sniffle for about 10 minutes. That was my COVID. But I tested positive during that time. And, and in terms of the general idea of cautious adjustment. I’ve had a lot of elderly friends who either died or had terrible injuries from falls. And so when I got older myself, and it got time to use something to avoid falling down. People tried to sell me on the cane. But I noticed that my friends will use canes would fall down occasionally. So I did I never use the goddamn cane. Instead, I bought one of these modern walkers and wherever I was worried about falling down, I pushed my walker, I did that for six and a half years. I never fell down once in six and a half years, just because I was more cautious. That is my advice to old people just be a little more cautious. Now I’ve gotten to the wheelchair. And I’ve got another six and a half years probably. But I’ve already used up and and I’m just as cautious with my wheelchair. What is the harm of having a little extra caution?
Becky
It makes sense. When I pivot to a question from Frank Wang and Houston, Texas, this question about Berkshire, he said Berkshire previously took a position in Exxon and then exited fairly quickly. If I recall correctly, he says I believe you had stated that Berkshire thought it was a good alternative to cash at the time is the same type of thinking with Berkshires new position and Occidental and Chevron. Is it the same type of thinking? Or is it likely to be more of a long term type of holding for Berkshire going forward?
Charlie Munger
Well, that is a very good question. And I think having a big position in the Permian Basin, through those two companies is likely to be a pretty, pretty good long term hold. So I liked that aspect of that position. And Ben Graham used to say if it’s a good investment, that may be a good speculation, and I think that’s generally true, but I don’t do those short term speculations, at least not very often. But I liked the big position that Berkshire has in the Permian through those, I kind of admire both places. A lot. Both Occidental and Chevron are very admirable places. And, by the way, if you didn’t start like that, you go back 30, 40 years off, he wasa crook. And it’s a, it’s evolved into a wonderful place, but it started as a sleazebag.
Becky
Who was running at 30 or 40 years ago.
Charlie Munger
A man named Armand Hammer. Oh, before your time, Becky, you’re too young.
Becky
I know. Armie Hammer the younger one. Yeah, yeah. Anyway. All right, Paul, D writes in, and I believe it’s all Dan mcop says, Charlie, you’re largely credited with Warren Buffett’s evolution to buying great businesses at a reasonable price or in simple terms a willingness to pay up for a great business, given Ben Graham’s exceptional insights and understanding of investing how or why did he himself not evolve to foresee the inability to scale his net net cigar butt approach? What do you attribute your early willingness to pay up stems from?
Charlie Munger
Remember, a lot of Ben Graham’s rise in life was during a period when there was plenty of low hanging fruit among mediocre businesses that were way too cheap. And he was relatively rare and in doing his hunting in that garden, and so he made a pretty good living for himself by knees. It what happened is that, that low hanging fruit eventually went away as the aftermath of the Great Depression went away. And then Graham actually made more than half of all the money he made in his life out of one stock. And that stock was Geico, which was a great business. So if you actually look at the great man’s own life, you’ll see that what he taught wasn’t the way he got rich himself. By the way, he told that story on himself late in life. He carefully computed how much he made it, compared to everything you’ve ever done this previous life. And so you could argue that Ben Graham himself woke up once.
Becky
What? Why do you think that you so early on, were willing to come up with this idea of paying up for great businesses?
Charlie Munger
Well, because it’s so obvious, and I’m good at doing things that are obvious. Of course, it was obvious if you wanted to have a good result you had to a great company, you know, I I recognised that greatness wasn’t good, you know, big deal. Charlie Munger, genius recognises greatness as good. Course greatness is good.
Becky
Paul, he from Toronto, Canada writes, and he says, when you’re evaluating a company for potential investment, what do you place the most emphasis on the business or the management? And do you differ with Warren, when it comes to what you place first?
Charlie Munger
No, no, it was the same. I think we like the business great first. And then second, we want a great manager. But we we have not made a huge success by investing in great managers, they go over lousy businesses, that is not the way we rose.
Becky
Matt McAllister
Charlie Munger
with a lousy manager, you’re really you really need a great business.
Becky
And can a great business be run by a lousy manager? The inverse.
Charlie Munger
So sometimes, Coca Cola was run for years by a man with very severe mental impairment. And the directors just assumed he was drunk. And today, they’re, you’re up here. Now that’s mighty a wonderful business that you can be mentally defective and wrote pretty well, that was Coca Cola in its ad.
Becky
How far back are we talking?
Charlie Munger
Well, 25 years.
Becky
Let somebody else do the math on that figure out the timing. Matt McAllister writes in and says, Charlie, you’ve described too much diversification as the worst suffocation being at best an average return for producing strategy. And light of that thought, if one was allowed only one stock to hold for a very long time. And it would be the most important asset to him and his family and their future well being, please describe what you would look for in that stock or company, and also talk about the features that you would consider most important when you’re trying to figure that out?
Charlie Munger
Well, it helps to have somebody that said, let’s get into a good position. So a great business, it’d be what you’d like. And of course, you’d like great management to. And occasionally, we’ve had both the ride together for a long, long period. And but of course, everybody’s looking for the same thing. And the trouble with it is you will find when you get those good businesses, and places picked over and analysed this, American stocks are, as you can imagine, the amount of time spent thinking about American stocks. And you will find, by and large in America, what’s really a great business, it’s at least 25 times earnings, and maybe 30, or 35, or something. So that makes it that much harder, of course, because if something goes wrong, you can lose a lot of your investment. And, and, of course, that’s what makes investment so difficult is the fact that the good business, the good businesses don’t stay cheap. You have got to somehow recognise a good business before it’s recognisable as a good business. That’s very hard to do. Some people get good at it, but not many. I don’t think I would want 95% of the people who are America’s professional asset managers, I wouldn’t want working for me that hard. Either you need to be in the top fibres zone. To have a reasonable chance. It’s it’s very difficult. Now it’s not difficult. Just buy an index and selling your asset that that’s the great default position your assets. And by the way, that’s that’s if you said look at the daily journal Corporation, we just put it in a 401 K plan. What are the investment options for the people that work? Zero? It’s all index funds. And if you what percentage of American what percentage of American 401 ks To have our plan index funds required above zero, am I right? Or am I wrong? Of course I’m right. That’s a logical thing to do.
Becky
Okay, so percent worth two and 20.
Charlie Munger
Sometimes sometimes be worth doing plenty, I would say. That is way less than 5%. No man is worth two and 20. That is really that’s getting gets getting very rare indeed, purely under modern conditions where every niche is occupied. It’s you really, if you take early stage venture capital, like Sequoia does, how many people have a Sequoia like record? I don’t think there’s one in 100 Desert square that record.
Becky
Chris Reed from Philadelphia, Pennsylvania writes in and says you’ve said previously that
Charlie Munger
even even Sequoia makes an occasional mistake. You know, everybody does.
Becky
But overall, you think it’s worth it? Okay, so Chris Reid writes in from Philadelphia and says, You’ve previously you’ve said previously that you should destroy at least one good idea that you have each year what good idea did you destroy in 2022, and anything in 2023 so far?
Charlie Munger
Well, the idea that I destroyed this, it was, it wasn’t a good idea was a bad idea. When the internet came in, I got overcharged by the people who were leading in the online retailing. And I didn’t realise it’s still retailing, you know, it may be online retailing. But it’s also still retailing and I just, I got a little out of focus. And that had me overestimate the future returns from Alibaba. And, and so I have never gotten twice, eliminate mistakes.
Becky
I think I just lost Charlie’s
Charlie Munger
rubbing my own nose in my own mistakes I’m doing now, because I think it’s good for myself.
Becky
I can hear me but I can’t hear you. You dropped out during that last question. Can you do me a favour, just raise your hand if you can hear me you can hear me, I’m not hearing him. So if you guys can call in, I’m hooked in directly to the line. Now I’m hearing programme, not this programme. I’m hearing live on your programme coming from your music that’s coming in. Charlie, I’m gonna ask you another question just so that everybody else doesn’t have to listen to that, to me talking this through, we’re gonna try get this fixed here in the control room. But this question comes in from, let’s see, let’s go to this one. Chris Varanasi who asked the question about he says, Hi, Charlie, a notable theme during the last daily journal conversation revolved around positive and negative trade offs between different systems, frameworks and choices. Can you discuss your views on the healthcare industry, specifically, the trade offs between capitalist systems like the United States and single payer systems like Canada in the UK? And I’m asking this single payer health care question, because for those who don’t know, you serve for a long time as chairman at a hospital in Los Angeles. So you do have some insights into what this situation is, and feel free to talk a long time while they’re fixing this. Well, yeah. So
Charlie Munger
when somebody asked Warren, what happened when their experiment with JPMorgan Chase and Amazon and so forth, and they were gonna change, improve the what was wrong with American medicine and its cost? And, and when they gave that up as a total failure, Warren just said the tapeworm one. And that’s what happens if the American system is cost way too much. Can you hear me?
Becky
Surely I see your lips have stopped moving. So I’m gonna ask another question. Yeah, I’m hearing power lines on my ear right now, if anybody’s paying attention, the control room. But this question comes in. From Brad heck, Brad, heck is in South St. Paul, Minnesota and says, Charlie, I’m a big fan of your disciplined approach to life. Do you get up at the same time every day and go to the bed at the same time? And finally, what’s the first thing you focus on each day?
Charlie Munger
Well, I vary a little in my time, but I’m pretty regular. And I’m a pretty good sleeper in my old age, so I’m very lucky in that respect.
Becky
See, your lips have stopped moving. So I’m gonna. Got you. I got you. Oh, finally. I hear you. Okay, Charlie, let me ask you this question got sound again? Yeah, I’ve
Charlie Munger
got your technology. Yeah, no, I
Becky
think we sometimes it works. Jim Well writes in and said, If you could integrate anyone for President in 2024, who would you choose?
Charlie Munger
Well, I think I’ll duck that one. I don’t want to get into presidential politics.
Becky
Okay, I hear that. I can understand that. Charles writes in and says, first of all, I wants to thank you Charlie for gifting some DJ co shares to establish that newly that new daily journal management equity incentive plan. He talked about that earlier on, he said additionally, he’s excited about the rumoured new edition of poor Charlie’s Almanack. First of all, is that true, but the real question he has for you, he said, you said that you admire Benjamin Franklin, and can you please elaborate on the subject and highlight the qualities that you admire in Ben Franklin?
Charlie Munger
Well, Ben Franklin, was a genius. It was a small country, but memory he started in absolute poverty. His father made soap out of the carcasses of dead animals with stank that is a very low place to start from. And he was almost entirely self educated two or three years of primary school and after that, he had to learn grow and so will arise from that kind of a starting position and become a tiny diet. He was the best inventor in his country, the best scientists in this country, the best writer in this country, the best diplomat in this country. You know, thing after thing after thing he was the best there wasn’t a whole United States. He was a very unusual person, and he just got an extremely high Whew in a very kind of pithy way of talking that made him very useful to his own citizens, and he kept inventing all these things. Oh, man, imagine inventing the Franklin stove and bifocal glasses and all these things that we use all the time. I’m wearing bifocal glasses, as I’m looking at you. These are Ben Franklin glasses, but they have kind of a man that just goes through life. And it’s a it gets a little perfect. He invented the goddamn bifocals. And it was just one of his many inventions. So he was a very, very remarkable person. And, of course, I admire somebody like that. We don’t get very many people like Ben Franklin. Thinking the library system is the best writer in his he was the best writer in his nation, and also the best scientist, and also the best and better record that ever happened again. Yes, yes. All these other things. Yes.
Becky
So is there a new edition, unfortunately,
Charlie Munger
we played four different musical instruments. And one of which he invented was the way he invented the glass thing that remedy singers. Oh, my God. They still play it occasionally. Yeah, we’d like different lay overs. But he actually played on four different instruments.
Becky
Yeah, and he’s a diplomat, and helps Yeah, make the rules the country and taught us about compound interest with the the trust that he set up for both Philadelphia and for Boston that still hundreds of years later or paying out?
Charlie Munger
No, he was a very amazing person, because the country was glad that we were lucky to have him.
Becky
Is it true? Is there a new for Charlie’s Almanack coming out?
Charlie Munger
Well, they’re creating an online edition. Okay. You’ve talked about some of the way the Chinese edition Sold Way more than one the United States, and there’s more people there. That’s not the sole reason why else. Well, a ritual man looks like Confucius. And their system. There’s nothing better than a ritual man. Yeah.
Becky
Charlie saying Park. Right. So the question, and this is about delayed gratification taken to the extreme, how rational is it for a person of your age and wealth to practice delayed gratification? If it’s not rational at your age? How is it rational to delay gratification for the average adult? So what’s the rational point in life to live with no delayed gratification to I’m still,
Charlie Munger
I’m still doing it. Now that I’m older, I buy these apartment houses, it gives me something to do. And we’re doing it we run them the way everybody else runs them. Everybody else is trying to show high income so we can hike distributions. We’re trying to find ways to intelligently spend money to make them better. And and of course, our apartment who better than other people do, because the man who runs them doesn’t so well for me, the man or two young men, they do it with me. And but it’s all deferred gratification. We’re looking for opportunities to refer other people are looking for ways to enjoy it’s a different way of going at life. Did you start out that way? Or you get more enjoyment out of my life doing it my way than theirs?
Becky
Did you start out having to work at delayed gratification? Or is that just how you were born?
Charlie Munger
No, I learned this trick early. And you know, I’ve done that experiment with two marshmallows with little kids. Yeah. Wait, yeah. And they’ve done. Watch them how they work out in life by now. And the delayed grasses, the little kids who are gonna, during the marshmallows are all also the people that succeed in life. It’s kind of sad that so much is inborn, so to speak. But you can learn to some extent to
Becky
so go home and test that out of my kids.
Charlie Munger
I was very lucky. I just naturally took the deferred gratification very early in life. And, of course, it’s helped me ever since.
Becky
Matt McAllister writes in and says, first, thank you for sharing your wisdom. Those of us fortunate enough to listen have benefited significantly. We’ve come to know that Warren Buffett, we’ve come to know Warren Buffett as a learning machine because of your candid descriptions. Aside from this quality, what others would you credit to Warren that has helped make him one of the greatest investors and compounders of the world’s ever seen?
Charlie Munger
Well, Warren is not only a very good good thinker, and a good learner, which is important. But Warren has a big, strong, fiduciary gene, he cares about what happens to the shareholders. Warren and I were lucky, and that’s the early shareholders or people who trusted us and we were young and didn’t have a reputation and so on. And naturally, we feel an exceptional loyalty to those people. And of course, naturally, they’re all dead now. But we’re still loyal to them. Warren and I still care what happens to the Berkshire shareholders a lot. And I think that helps us I think, it helps if you’re good at loyalty.
Charlie Munger
Go ahead, Becky.
Becky
Okay, so Bala syrup pen and Baucom writes in and says that many large companies, including meta, which owns Facebook, and various insurances are choosing to self insure against liability either for directors or for the business risks. If it’s carried to extremes, it would note as it no doubt will be over time. This could cause potential systemic issues. Would you share your thoughts on this, please? He says he’s been a shareholder of Berkshire Hathaway for 16 years. Thank you for your stewardship and sharing your thoughts generously with the younger generations.
Charlie Munger
In my own life, I’m a big self insurer. And so as Warren it’s ridiculous for me to carry fire insurance on my houses because I could sell it easily rebuild a house that burned down. So why would I want to bother fooling around with the claims process and all kinds of things. So if insurance is you should insure against things you can’t afford to pay for yourself. But if you can afford to take the bumps you know, someone usual expense coming along doesn’t really hurt you that much. Why would you want to fool around with some insurance company? If your house burned down? I would just write a check and rebuild it. And, and all intelligent people do it my way. I won’t say all but maybe I should say all intelligent people should do it my way. There should be way more self insurance in life. There’s a lot of ways you’re paying, like you buy insurance for the other fellows frauds. And there’s a lot of fraud in life. And you can afford to take the risk yourself and not fool around with claims and this and that, and commissions and time, of course itself, insurance simpler and so forth. Think of what I’ve saved in my life. I never. Okay, I never carry never, I think once I. But with one exception, I never carry collision insurance on my car. And once I got rich, I stopped carrying fire insurance on houses. I just opened Sure.
Becky
It’s a little bit of a surprising take for the insurance that is the right way to do it. Well, that’s a little bit of a surprising take from a guy who’s a vice chairman of Berkshire, which has so many insurance companies.
Charlie Munger
Well, but I’m not. I’d rather tell it the way it is. And until it in a way that helps Berkshire, I’m not going to tell it differently than I think it really is just because it’s better for Berkshire. Even though it’s bad for Berkshire, I want to tell you if you can afford to self insure self insure
Becky
even on things like medical, or I just think you might think you
Charlie Munger
know that that is never insurer pays the doctor in the hospital is a small fraction of what you pay. So that’s a different kind of calculus. Everything in medicine is the cost of American medical care and medical insurance, it’s a disgrace. If you go to Singapore, you will find that they do the whole thing better than we do when it costs 20% of what we pay. And again, I my audio, by the way, I have no idea of how to get from where we are to where Singapore is. Because all the people are getting all that extra money fight like fierce Tigers hold on to it. And they control boards and cities and states and our yoga. So I don’t I don’t know how to fix the cost in American health care. They’re totally under control. And I weren’t ready to fix it with Amazon all that stuff. He failed to everybody’s failed. Every American has a marvellous record failing and handling our cost of medicines.
Becky
Matt McAllister writes in and I realised these last couple questions, I didn’t realise this was a repeat sentence. But I like the questions. He said, What are some of the most important things that we need to know about Greg Abel? Have you experienced examples of him also being a learning machine? And if so, could you share one?
Charlie Munger
Yeah, well, Greg is just sensational at being a business leader, both as a thinker and as a doer. And he’s also sensationally good at smoothly getting things done through other people. So he’s a very remarkable human being. And Berkshire is very lucky to have him. And, and he’s also always has a tremendous learning machine, you can argue that he’s just as good as Warren is learning all kinds of things. And one of the interesting things about Greg is there’s some things he’s better at than Warren is, and more knows that, and he just keeps dumping on to Greg, everything that Greg can do better. And it’s a lot. And, and so the system at Berkshire is working right now. Well, we’re very lucky to have a 92 year old is as good shape as Warren anyway. And we’re very lucky to have us, a chief executive like, Greg, Greg is very remarkable. Greg is trusted by insurance regulated by utility regulators, and rightly so he is trying to run all those utilities as if he were the regulator. Now, many people think that way. But it’s such a smart way to think.
Becky
Even just from a show of good faith.
Charlie Munger
Yeah, why not play here? Why not do it the way that you’d want it done? If you were on the other side of the transaction? How can you fail if you treat other people with what you’d like if you did it to yourself? It’s the golden rule. Of course, it works.
Becky
Alright, so my name Jim writes in and I asked this question, because I got a lot of similar ones just in terms of investments. But this one is probably a question that a lot of people as they start to get up 65 and beyond start to wonder, he just says, Would you recommend I take Social Security when I’m 67? Or wait till I’m 70? When I’ll receive more per month?
Charlie Munger
Well, I can make that choice for you. It’s It depends. You know, you’re gonna be dead pretty soon, I go ahead and have more money to spend. You think you may live a long time you will have a different calculus. And I would say that most, most people who are healthy and so forth, and they’ll have a pretty good life expectancy. Generally, they’re wise to defer the Social Security taking and take more money later.
Becky
I guess it’s optimistic thinking too. If you’re thinking that you’re living long time, that’s the way to play it out.
Charlie Munger
Well, what do you do, Becky?
Becky
Well, I’m not 65 yet, so I haven’t thought about it yet. I’m waiting. My guess is I would
Charlie Munger
I don’t think you’re gonna need social security. Becky, I’m not worried about you.
Becky
I think I would work longer. I’m naturally conservative. So loping Will Young right then you urged the US government to ban cryptocurrencies as China has done I have a more general question with boom and bust cycles and different countries in history. What should a good government do and not do for economic growth?
Charlie Munger
Well, what you got to do if you want growing GDP per capita, which is what everybody should want, you’ve got to have most of the property and private And so the most of the people who are making decisions about our properties to be cared for on the property in question that makes the whole system so efficient that GDP per capita gross system, we have easy exchanges, digital currency system, and so on. And so that’s the main way of civilization getting rich is having all these exchanges, and having all the property in private hands. If you like violin lessons, and I need your money, when we make a transaction, we’re gaining on both sides. So of course, GDP goes like goes like crazy when you got a bunch of people are spending their own money and owning their own businesses and so on. And nobody in the history of the world that I’m aware of has ever gotten from Hunter gathering, to modern civilization, except through a system where most of the property was privately owned. A lot of freedom of exchange. And, by the way, I just said something that’s perfectly obvious, but doesn’t really talk that way. In most education, even though you can take a course on economics in college and not know that what I just said. They don’t teach it exactly the same way. Anyway,
Becky
that would be your your best.
Charlie Munger
Okay. Yeah, yeah.
Becky
This one comes in from Matt. And he says, throughout your experience with Berkshire Hathaway, what are a few of the things that have surprised you most based upon some of your previous rational thoughts and ideas? Also, how have you used some of those surprises in your quest to become a better learning machine?
Charlie Munger
I would say the things that some of the things that surprised me the most was how, how much dies The business world is very much like the physical world, where all the animals die in the course of improving all the species, so they can live in niches and so forth. All the animals die on, eventually all the species die. That’s the system. And when I was young, I didn’t realise that that same system applied to what happens with capitalism, dollar businesses, they’re on their way to dying as the answer. So other things can replace them in lieu, and causes some remarkable death. Imagine having Kodak die. It was one of the great trademarks of the world, there was nobody that didn’t use film, they dominated film, they knew more about the chemistry of film than anybody else on Earth. And of course, the whole damn business went to zero. And and look at Xerox is once you own the world, it’s just a pale shrink, it’s nothing compared to what it once was. So practically everything dies, if you aren’t big enough time scale, when I was young enough, that was just as obvious then I didn’t see it for a while, you know, things that looked at her and only been around for a long time, I thought I would like to be that way when I was old. But a lot of though disappeared, practically everything dies in business. None of the eminence lasts forever. Think of all the great departments who are saying about long, they were the most important thing in their little community. They’re way ahead of everybody in furnishing credit, convenience, and all seasons, you know, convenience back and forth use in banks of elevators and so forth, multiple floors, it looked like they were eternal. They’re basically all dying, or dead. And so that, once I understood that better, I think it made me a better investment investor, I think.
Becky
I mean, the same can be said for managers. I’ve talked with Doug McMillon of Walmart, who carries around in his wallet like on him, he carries around the list of the top retailers over the decades. And nobody’s ever saying, you know,
Charlie Munger
we’re gone. Yes, yes, of course. Retailers live in terror. Because you can die. So we got to become a better way of doing it. And you just die. Like those department stores? Did.
Becky
The ones that you invested in early on even the Baltimore
Charlie Munger
Well, no, most of them think a little bit warmer stores that are gone just chain after chain after chain and big data, that they’re not weakened, they’re dead. They’re gone dead. And, and tam IBM have a huge position at once they had in terms of utter dominance. And now it’s just one of the also RANS. It’s still an admirable place. I’m
Charlie Munger
sure they have a lot of talent left and IBM doesn’t help you die even though you’re talented and hardworking.
Becky
Arthur Kahn writes in and he’s a daily journal shareholder who lives in Toronto. And he says Mr. Munger, well, many of us admire you and look up to you. I want to ask Who were some of the people you most admired and looked up to? What was it about them that made them so special?
Charlie Munger
Well, some of the best people, I would argue that Jim Senegal at Costco was about as well adapted for the executive Gary got. And by the way, he didn’t go to Wharton, he didn’t go to the Harvard Business School. And he started work at age 18, in a store. And he rose to be CEO of Costco. And in fact, he was a founder, under a man named Sal price. And I would argue that what he accomplished in his own lifetime was one of the most remarkable things in the whole history of business in the history of the world. Jim Senegal, in his life, he’s still very much alive. But he’s, but you know, one business further, it’s all life, basically. And he just got so damn good at it, there was practically nothing he didn’t understand, large or small. And there aren’t that many Jim Snuggles. And somebody else for a job that have the kind he has. Greg a bow in a way, it’s just as good as Greg sound, because you guys are gonna have a genius for the way he handles people and so forth and problems. And I can’t tell you how I admire somebody who has enough sense to kind of run these utilities. And so he were the regulator. He’s not trying to pass on the cost because he can’t do it. He’s trying to, he’s trying to do it the way he’d wanted it done. If he were the regulator instead of the executive. Of course, that’s the right way to run the utility. But how many are really well run that way? So there’s some admirable businesspeople out there, and I’ve been lucky to have quite a few of them involved in my life. The guy who ran TTI was a genius. TTI is a Berkshire subsidiary of New Delhi general feel that things are lucky you’d be if we still had our monopoly on publishing our cases or something, we’d be like PTI Well, TTI is just hard sometimes to drown.
Charlie Munger
And it was run by a guy, he got fired and created the business. Got fired from where he invented the whole general defence contractor, I forget which one. Yeah, I can’t remember exactly. But he was a terrific guy. And, and he ran the business for us, he wouldn’t let us raise his pay. How many people have the problem with their managers? They won’t let them they won’t allow you to raise their pay. It’s pretty rare. Yeah.
Becky
Charlie, I spoke with a friend of yours yesterday and his question that he had for you is what quality has helped you the most in life?
Charlie Munger
Well, that’s easy rationality. If you’re just not crazy If you have a big advantage over 95% of the people, because most of you will have all kinds of crazy patches, and if you just are consistently not crazy, you have you got a big advantage in life. If you’re patient and the gratification differ in addition to being not crazy, that’s practically essential. And if you’re exceptionally good at satisfying, you’re kind of other people that you got, you just automatically improved your resources and your chances in life enormously, and so simple. And why don’t more people do it? It’s an interesting question. I don’t think you can educate your children to do it automatically. I’m telling you, if you have 10 children, you’ll have some that are a lot better than others doing this.
Becky
That harder with success, age, wealth, to hold on to rationality.
Charlie Munger
I think it’s, it’s always hard, but you get better at it. If you get good at it young keep practising. But it’s never easy. If you had to question somebody asked, what one sock would you buy? If you had to just rely on that one sock only for your sole living expenses? You weren’t allowed to have any income at all. You just had to invest a million dollars and live on that one stock? How many people would give an intelligent answer to that question in America? I don’t think it’s more than 100. I think it would even ought to begin.
Becky
I think one of my favourite things that I’ve heard you say and it’s something I repeat often to a lot of people is whatever you are age and wealth makes you more so I came up with that a while ago. What led you to that? You have of course yeah. Do you have any?
Charlie Munger
I think that’s true that we all tend to we all we all tend to get a little more so in every way. And
Charlie Munger
I thought of that when I woke up this morning and put on my trousers. I thought you know I really economise in buying those trousers. Why am I economising and my trouser buying habit is just so great. I can’t stop.
Becky
And I’d like to circle back to a question on daily journal to wrap things up daily journal and some of your holdings. This question comes in from Moshe sable who says in a previous shareholder meeting back around 2018 You spoke about BYD and said journal technologies is not quite BYD, but added that, by the way, it might work out just like BYD now a few years on Do you still find Gerald technologies can turn out similar to BYD
Charlie Munger
but won’t be as fast I guarantee you, and I won’t be as great. I can also, frankly guarantee that BYD is one of the most remarkable venture capital drives excesses in the history of the world. He was the eighth son of a peasant. I had an older brother that right now is this young kid was kind of a younger brother was a genius. And the older brother sacrificed himself to get this peasant son into some good engineering school when he became an engineering professor and then an entrepreneur. How many times you get a story like that, and imagine buying a little bankrupt auto company in China and turning it into something that this year that can sell more electric cars than anybody else in the world at a time when electrical cars are hot. And it’s a remarkable story. But again, a very unusual human being one shampoo. And by the way, in his case, it wouldn’t have happened if one shampoo hadn’t been so unusual. Unusual how he’s got MGE is a damn genius. And he’s been thinking about the right things 17 hours a day all his life. He’s a workaholic, and he can do things that ordinary human beings can’t do.
Becky
That the favourite stock you’ve ever purchased, BYD or Costco.
Charlie Munger
Well, I would say yet, I’ve never helped do anything at Berkshire. That was as good as BYD. And I only did it once. Are $270,000 investment, there’s worth about a billion now or maybe nine. And that’s a pretty good rate of return.
Becky
Yeah, I’m pretty good.
Charlie Munger
Yeah, we don’t do it all the time. We do it once in a lifetime. Now we have to add some other successes too, but, but hardly anything like that. We made one better investment. You know what it was, we paid an executive recruiter to get us an employee and he came up with it chain. The return that He has made us compared to the amount we pay the executive recruiter, that was our best investment at Berkshire was was a big executive recruiting firm to get to get us onto the chain. But again, it only happened once.
Becky
Now, that’s a quite an investment to Charlie, I just want to thank you for all your time today.
Charlie Munger
All right, we’re all through I guess, and being so generous because our meeting is over and we’ll turn it back over here to do one more with you people. We’ve been at this quite a few years. So my best all of you.
Becky Thank you. Thank you. Thank you, Steven. Thank you, Charlie.
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