Charlie Munger at Daily Journal 2020

Summary

Daily Journal is moving its core business to become a technology company - Daily Journal Technologies. Its software is automating and supporting legal processes for courts. Charlies remarks are that the business is more like building Price Waterhouse Coopers than other Software companies (FANGs). Software for legal processes are consulting heavy, thus costs more time and effort to grow the business.

The Daily Journal newspaper business is going to die. Only a few very large newspaper do survive (WSJ, NYT, FT). Thus the shift of DJ to technologies.

Index and Quant Investing gives active managed funds a hard time. In future Charlie sees that fewer and better portfolio managers will survive - yet a whole lot average portfolio managers will not.



Transcript

the meeting should now come to order
I'll give you some time to sit down
welcome to the Catholic cathedral this
is the most amazing place oh you haven't
ever seen it should go look at it from
the inside
it looks like hell from outside but
inside it's a startlingly good
architectural work and you it's quite
interesting
our director Peter Kaufman is on the
committee the runs in Cathedral and if
you want to be buried in the same column
of the ashes of Gregory Peck he'll
arrange it for $100,000 we have a very
commercial crowd
you can't even die without pain okay I
have a script I'm going to go through
and after we're through this script
let's take care of the formal business
of the meeting will answer questions in
the usual way after one brief little
explanation from the chairman I want to
first introduce the people who are here
I'm Charlie Munger chairman and the
other others are Rick garran vice
chairman wave Rick Jeri Salzman who
really runs the place Peter Kaufman how
many of you know I can't read very well
but that's a problem of age Gary Wilson
Wilcox and Mary Conlan our new director
Michelle Stevens vice-president of the
daily journal wave Michelle Michelle was
the one that ran the public the
foreclosure notice business who made all
the money
she is a hero and around here go to this
is our main financial accountant Mary Jo
Rodriguez who's a pillar of the place
and odenie
mani Domini I have a vice-president of
the journal Technologies Ellen Ireland
has been here forever and as a mother
pillar of the place
Ernest Miranda Andy Richardson Martin
cassis and guat Milner and these are our
accountants and having fired two
previous that comes we really love these
counting by the way it's really
difficult about what's not an easy
profession particularly a place like
this and I have the feeling that whoever
imagine whoever is auditing Boeing this
year is earning his money that's how
hard that would be to do I will now
proceed to the formal business of the
meeting and and then go on to the
questions if anybody has the proxy
haven't delivered ignore it because
we've got enough proxies anyway
Ellen will you please respond report the
number of shares presented at the
meeting on December 20th 2019 the record
date fixed by the Board of Directors for
determining the shareholders entitled to
vote today there were 1 million 380,000
746 shares of common stock of the
corporation outstanding I have a list of
the shareholders who were of record as
of that date certified by the
Corporations transfer agent a Quinnie
titre company I also have an affidavit
certifying the completion of the mailing
of the notice of this meeting the proxy
card and the 2019 annual report along
with a prepaid postage return envelope
to the shareholders the total number of
shares represented in person or by proxy
at this meeting is 1 million one hundred
ninety eight thousand nine hundred
eleven which is more than a majority of
voting power of all outstanding common
shock the stock of the corporation and
the meeting may proceed I will attach
the affidavits to the meet meeting
minutes and have a copy of the minutes
of the last Annual Meeting thank you we
will now proceed to the individual items
the first order of business is the
election of the Board of Directors we
have enough proxies to elect goli
directors when we've named I hereby
declare them all elected the number of
shares voting in favor of the directors
is rather interesting I do not leave the
list
and the single most useful person in the
places Salzmann has the lowest number of
votes but I haven't I'm fighting to do
as well as he does anyway that we all we
all got practically the same number of
votes it's rather interesting with some
previous occasion Price Waterhouse had
fired somebody and so somebody came to
the meeting and a long diatribe against
Price Waterhouse our auditor very
humorous annual meetings are very
peculiar in America and of course we now
have the the chief shelter directly
every big company in America is some
index huh and it's weird that the voting
power of America goes to much index fund
operators nobody planned it it just
happened and God knows what the
consequences will be alright the second
- Rosel is the ratification of the
selection the end of and public
accountants and again behalf proxies for
that and that is just passed the all the
committee of the of the Board of
Directors have selected Scott Milner be
the accountants and we need a
ratification of that and again we have
my proxies in that passes a third
proposal is to approve the amendment to
the companies Articles of Incorporation
to adopt a majority vote standard for
election of the directors the state of
California asked us to pass this and so
we're passing it and that is just passed
a reason though you so all the proxies
there requires
I don't need to go into exact numbers as
years the fourth proposal that proposed
was approved the one that the California
Assessor passed that's passing all over
America god knows what it does not much
I think fourth proposed proposal
concerns the Advisory vote what Jerry
salaries I know it's yeah and that also
passes there ever is anybody who earns
is pay around here it's Jerry the
approval requires of all or that stone
and
I'm coming to an adjournment oh yes we
now needed a motion to adjourn the
meeting and go on to the questioning
there a second on favor we are adjourned
I will discuss briefly the state of
affairs that's reflected in our reports
and then I will take questions the this
company of course started as a public
notice rag which made money by Pope
doing public notices and morphed into a
very successful legal daily newspaper
which had a monopoly I'm publishing the
opinions of all the appellate courts in
California and every law firm had to buy
it and there's a lot of other useful
things and was a small but very
profitable paper occupying an ideal
niche many of the newspapers in America
had similar niches where they just made
regular or substantial profits a very
easy simple business run of course
what's happened is that technological
change is destroying the daily
newspapers in America including the
little ones like like cars the revenue
goes away and the expenses remain and
the there they're all dying Berkshire
Hathaway owns what about a hundred of
them and the matter is they're all gonna
die
and there's nothing that can be done
with good management to save them and
it's a sad thing because those
newspapers were an accidental part of
the government they called them before
the state and each one had come into
being sort of by accident of capitalism
without any planning but
founding fathers and the people who ran
them became very powerful people due to
great American institutions one is
nepotism and the other is monopolies and
all those nepotistic monopolist many of
whom drank too much actually morphed
into a function where they were more
useful than our legislators and of
course we're losing them all and what we
get is these opinion services on TV that
everybody watches where everybody
believes some ridiculous version of
things that's led us as much as anybody
good and it's it's not a good thing in
America that we lose newsweek type
magazine and all of our daily newspapers
and get back
Rush Limbaugh and his ilk on the other
side and that's what's happened and it's
a sad thing nobody planned that we had a
Fourth Estate that was really a branch
of the government that worked very well
for us and that took pride in being
accurate and so on and nobody plans it
would go away it just happened
now daily journal corporation strangely
is not going to disappear all of our
business fails we still have a lot of
marketable securities so we're going to
do better than these other newspapers
I'm not counting the ones like there it
was regional in the New York Times or a
few that will survive no matter what but
basically they're all going away and the
daily journal is not going to go away
and leave the shareholders with nothing
because of our big barnable securities
we also have a second business which
we're trying to use to replace the
economic strength of the newspaper that
is imperiled and that's journal
technologies and that is a computer
software business that helps courts and
government
agencies replace human error-prone
inefficient procedures with simpler and
better procedures run by software that
is a very difficult business ordinary
software like the software teacher uses
to help teach a class or the software
that's used counting if your dealer and
Chevrolet's or something that stuff is a
gold mine because it's just standard and
you crank it out and everybody uses it
sufficient what we're doing is servicing
all these government departments of a
lot of different kinds and they all have
special requirements and they're almost
all quite bureaucratic and they're also
political and it takes forever they're
full of lawyers and consultants the RFP
process so it's a branch of the software
business is intrinsically very very
difficult where everything takes forever
it's very hard to do and so on and a lot
of people just totally avoided for that
reason you just want to crank out a few
bits of software and we're just
everything on the cloud whatever they do
and count the money and of course we're
in a business where you need our reason
people to help all these courts all over
the world automate probation officer
officer work or or court filings and so
on it's all going to happen so this all
this automation and and the effective
software is going to happen but it's
unbelievably difficult an RFP involving
a government and a bunch of consultants
is intrinsically very very difficult and
you have to keep good nature you have to
have huge patience and you have to have
huge talent and you have to just keep
rolling with it and then the money comes
in very slowly and has more bureaucracy
yeah it's very very difficult in spite
of all those difficulties and the fact
that everybody at the very top of this
company is very old we've done fairly
well and don't ask me why it was kind of
a miracle and but a lot was done right
just to make it to our present state and
it's a big market but it's not gonna be
easy and it's not gonna be fast and on
the other hand we all like customers I
fallen in love with the government of
Australia it just such nice people I
think it's wonderful let us drag you
once automated courts and I don't think
it's wonderful they're smart enough to
hire us imagine hiring a little daily
journal company for the courts of
Australia and my guess it's all gonna
work for them and for us it's a miracle
I figured out them this little company
it would be a pretty safe choice I think
part of the reason we've been successful
is so many of our competitors are so
awful
so we don't deserve as much credit as
we're climbing and but it's gonna take a
long long time and it's an everlasting
struggle it's kind of fun to watch
because we have the most unlikely cast
of characters and a lot of them are
quite successful Jerry just made a big
report to the Board of Directors it's
just amazing the goodwill with which the
people attack this very difficult work
and just keep everlastingly out of them
they have troubles let it go around or
somebody goes crazy they tell them no
you know there are many opportunities to
do this wrong and but I think it's all
going to happen I think we may end up
with a big share of it but it's all done
you shoulders veto of patience it's
really hard this is not the easy part of
the software business this is more like
trying to create another Pricewaterhouse
that would be difficult in and this is
difficult and of course we can't
guarantee that we will succeed but I
consider it like but I think it'll be
he's slow and awful I don't anticipate
any really easy times for a long time
but I suspect it'll keep growing Jerry
why don't you how well do you think
we're gonna do in the next two or three
years where's Jerry
yep I'm blind in my left eye so look
we certainly devoted a lot of energy and
resources to journal technology we have
approximately 250 employees in journal
technology and we have offices here in
Los Angeles obviously in Corona because
we acquired a company in 2013 with an
office in Corona California we have an
office in Logan Utah where we acquired a
company there in 2013 and we have an
office in Denver because our original
interest in this system of serving
courts started because our of our
interest in providing ever seen that the
court of Los Angeles - the largest in
the United States at least has
sufficient resources in a service
provider that's how we got involved in
1999 and we are seeing lots of changes
you take for example in Los Angeles Los
Angeles now uses our system to do
electronic filing attorneys to the
filing electronically if you go down to
the the courts in Los Angeles where
people used to have to stand in line or
have a service provider stand in line on
behalf of the lawyer there's nobody
there
also in conjunction with LA we were able
to enable lawyers to determine when they
would come to court and see the judge so
attorneys are now setting their own
schedule and then it reduces some of the
personnel requirements at the court
these are some of the innovations that
are taking place and if for example you
get a traffic ticket in in Riverside
you're using our system to pay for them
so die fast through
through Riverside and we make some good
inroads into other California courts we
have we have one basic system and we
have three four or five different
configurations of the system one for
courts one for public defenders one for
district attorneys and one for probation
officers so we have to only modify one
system and make sure the configuration
of other of the main system is
appropriate for other agencies this is a
big advantage when we come to the point
of doing installations and Charlie
mentioned the the people in are the
projects in Australia the government of
Australia we now have four or five six
or seven people down in Australia and
and we've worked for the state of South
Australia and Victoria at the present
time which is Melbourne so we have we
have most of the courts we have all the
courts in in those two states and they
they range from mineral courts to other
types of courts that we sometimes don't
see here Los Angeles in California in
each County only has one court if you
went to other states you'd find that
there was a probate court a civil court
a family law court just goes on and on
and on and in California they're much
more efficient than you can imagine when
it comes to by comparison where they
have all the administrators four or five
administrators and separate systems and
separate IT departments very inefficient
that's what we are confronted with all
the time as we move forward the the
financial results will depend upon the
number abusers in these various justice
agencies yes we do get implementation
fees but we can only take that in
to income but everything is delivered
and so we we focus of trying to get to
the point where everything is delivered
then then we can take it in to income
and reflected in the financial
statements this is a very important
thing we have no simple way of just
counting up ours and sending little
invoices to the government that's what
most consultants like to do is build
ours and we don't get the right to
collect money until the thing works and
we do that on purpose it reminds me of
one of my favorite tales which really
happened when I was young a lot of the
earthmoving was not done with bulldozers
it was done by teams of mules who were
guided by contractors who ran these mill
teams and their big plows that they and
it was a Latino contractor who had an
enormous number of mules and when the
war came the big builder called Emma and
said I've got a cost-plus contract with
the government I'm gonna make you costs
plus I want your rules start tomorrow
morning on this big project bus plus us
percentage it cost this Latino said oh
no he said I can't do that because why
not he said well he said I'd get
business all these years because I'm so
efficient and he said when I take a
cost-plus contract even my mule seemed
to know what they all go to hell
and that's the daily journals policy
we're trying to avoid deteriorating by
thank you miss awful contracting of
course man
and we're trying to be good like that
Latino contractor and my guess is this
is gonna work whether you have to be
very cheerful to take it because it's
agony I can't tell you how the people
like Microsoft and Google and soy they
don't want our branch of the software
business I kind of like it Peter kind of
likes it because he senses that Peter
Kaufman raise your hand Peter likes it
difficult if he thinks he will keep it
forever once he gets it and that's our
system but I certainly can't guarantee
it's gonna work it's a lot of a lot of
very difficult work and I would like to
tell you who we're just ask deepen
talent and we have four qualified people
for every job we're just the opposite
we're like a bunch of one-armed paper
hanger where you go way the stuff and so
far it's working and of course what's
happened in America of course is that
software has grown enormous ly you take
every big college in the engineering
department the most popular course is
computer science and if you are do
venture capital the most popular
investment is some kind of software and
I do not find venture capitalist backing
of software companies pretty because
there's just so much of it and there's
some wretched excess in following in
high prices and so on it's not a scene
that the tracks are normal where's your
Hathaway type I'm not saying it won't
work for a great man yet very well but
there's also gonna be a lot of
casualties
it's and
I don't like it when bad stuff comes you
I don't like it investment bankers talk
about evanov which I translate is
bullshit earnings and and I don't like
all those talk about J curves and all
these private sales of software
companies someone bet your capital to
another and Mark opposites it looks like
a daisy-chain to me so I think there's a
lot of wretched excess but it reflects
an underlying sound development which is
this huge growth software changing the
technology of the world but it's going
to have some unpleasant consequences
because there's so much wretched excess
Emma and I bet I know what I'm this room
almost everybody has somebody in
software in the family I got two people
in private equity in my family and
private equity has grown to than to the
trillions and of course it's a very
peculiar development because there's a
lot of promotion a lot of crazy buying
it's what I call fee driven buying much
of it where people are buying things to
get the fees I'm not used to I buy
things because I don't work for me for a
long pole as the owner I'm not thinking
about scraping fees off along the way
this is a very different very it makes
me very nervous to have all this fee
driven by and whatever this is all just
raise the fund that's twice as big as
the last one and throw more money at
more deals and of course with more money
and more overhead it's it's attending
the man for fees but will the world
provide wonderful results for always
people the answer is no it won't it's
gonna be a lot of tragedy huh
in the past the people who did well in
venture capital where the clients of
Sequoia which is one of the best venture
firms that ever existed in the history
of the earth but there aren't that many
Sequoia is and Sequoia had such a
wonderful record because it kept itself
small and and now everybody is trying to
be enormous ly large and to grow
enormously and hire more and more people
would like more and more fees and it's
it's weird and it's it's not gonna work
perfectly and I am trying to give you
the same service my old Harvard Law
professor gave me when he said tell me
what your problem is and I'll try to
make it more difficult for you by the
way the guy that told me that was do me
a favor
it's a pretty good way to proceed I have
this saying a problem thoroughly
understood as have solved it's hard to
understand that well and well I guess
that's enough for the daily journal
you're in for a long long difficult ride
and not only that the dam leaders look
like an old people's home
I'm 96 Rick is 90 our CEO is 80 I mean
you're not the crapper you don't belong
here and I think we will gradually work
things out in spite of this agent group
of directors after all we got a young
man like Wilcox's past retirement age
and and of course we've got a new
director Barry Conlon who are up here
partly to make the rest of us look good
or bad rather and but it is always odd
results in capitalism it is peculiar the
one little newspaper is all of
Margaretville securities and it's
probably not dying and advance was seen
in the business none of the people
understood not look people have named as
a computer software engineer and it's
it's weird
and yet you people who come from all
over the world to this place you're as
nutty as we are and if you ask me I
think it's slightly more likely it'll
work but not work and it's a very good
thing to be doing the world needs what
we're trying to to do and we're trying
to reward the right people and really
trying to serve the customers when it
comes to customers my mably my ambition
is to be as close to costco as i can
possibly be
I've never been associated with a
company that works harder than Costco to
make sure the customers are served well
I mean I just love success that occurs
that way and I hate success where you
deliberately trying to cheat people or
something it's not good
for them like gambling service and I'll
say yes by the way I'm not trying to
irritate our customers in Las Vegas I'm
doing it by accident anyway but I do
think there's something to be said you
have the option for selling stuff that's
good for people instead of stuff that
tricks them anyways that's our that's
our approach and I would choose that
approach even I made less money I in
fact I think you make more it reminds me
of Warren Buffett's favorite saying is
you'll always take the high road as it's
less crowded and that's the system I
think the politics of the country are
weirdly awful because of the excesses of
hatred that you see everywhere in
California with a gerrymandered house
the representatives they have the only
danger of getting tossed oh I just like
sure is if your left us somebody who
left you may come in if you're right if
somebody the writer you wake up into the
primary and and this gets too great so
awful legislature where the individuals
hate each other and they're maybe evil
we can sort of sensible Republicans and
ten kind of sensible Democrats in the
California Legislature and every ten
years he's not cases of the right and
left get together and throw all the
sensible people out back gerrymandering
them out because they all agree that if
you own their own party that are there
the Metalurh are horrible that is a
crazy way to be governed and it is not
pretty
and I have no solution it's just
interesting Warren said to me the other
day he said it's so interesting now he
says I would like to stay around for
another thirty years if I couldn't
participate if I could just watch and I
said I'd sign up for that too it is very
interesting it's weird and think about
different television is when it when
Cronkite is gone and we have all these
clowns and the opinion servers lying to
us in a very shrewd way and they're
really good at it you know the ability
to mislead people is greatly
underestimated any good admission good
magician can make anybody's see all
other things happening without happening
and not see a lot of things happening
that are happening and of course we're
all dealing with various people who
through practice evolution have been
good at misleading us and so it's very
very hard to be rational and stay sane
of course that's part of the reason that
some of the companies that I benefit
have been successful it's not that we're
so smart it's we've stayed sane because
a lot of what goes on is absolutely nuts
and and we all see it in politics of
course even so it isn't business
sometimes sometimes we we businessmen
try and get it into our share of the
stupidity it's and you people come from
all over the world to this thing out of
some deep hunger
I read you as nerds because I was once
one of you and I know a nerd when I see
one
and and you come here because some
fellow nerd has managed to succeed this
might ease defects and you need to
similar result and you know something
that's really odd you're right if you
could learn some of our tricks you'll
get more success of life than you
deserve that's what's happened to me and
and how did it happen I tell you how it
happened it's obvious that I got better
life outcomes then I deserve based on
energy or intellect and of course that's
an interesting process of everybody
would like more of it who doesn't like
to get a lot more than one deserves and
I stumbled into a few metal tricks
early in life and I just use them over
and over again I take the high road
because it's less crowded of course
that's a smart thing to do and and then
I I feel that there's a I was raised by
people who thought it was a moral duty
me as rational as you could possibly
make yourself and and that notion which
was just inherited basically from my
jeans and my surroundings has served me
enormous ly well it's like Kipling's if
you can keep your head when all around
you or losing theirs it's a big
advantage and and just think of all the
dumb things that are or are done by our
politicians that are business leaders
and and the wretched excess you see in
the system and and I can remember one of
the earlier crazy booms that caused one
of our earlier recessions all these
traders would go to Las Vegas some
people have
three stacks of chips and stripper ISM
that was our securities market I mean it
was grossly awful and a lot goes on now
that is grossly awful imagine
politicians who ever understood Adam
Smith
it would be like hiring an engineer to
design your airplane he didn't believe
in gravity well I laughed too but
they're tears in my laughter and but
this business of being determinedly
rational does work you usually keep
everybody at it because it's harder to
say just saying then there's all
credible of course I one of the things
that's wrong
with the present system is the way the
heads get cabbage DUP by the activity
and the owners of the heads don't know
what's happening one of my favorite
actors from I was young mr. Cedric
Hardwicke was such a good British actor
he was knighted by his monarch Sir
Cedric Hardwicke heart we got old of
course he kept acting right and toward
the end of his life he made one of the
great statements in the history of
acting he said I have been a great actor
for so long that I no longer know what I
truly think on any subject you stop to
think about it that's exactly what's
happened to most of our politicians
except they don't know it it's just
every heart rate at least knew is brain
a bit nerdy cabbage where's our
politicians they like cabbage anyway and
so yeah and of course the young people
want to shout out their resentment of
this that you know I always say what
they're doing is pound
get in nobody's listening to the money
shout out they're just pounding a lot of
nonsense in it's a big mistake to to
pretend that practically anything
because you become what you pretend to
be now sometimes that works I knew a
couple of no-goodniks in my youth who
became leading philanthropists and they
did it just to mislead people but after
they don't for a while they became
religious philanthropist and that always
gave me the gig hypocracy really is
better than most people think it does
change you that constantly pretend one
thing is another and of course it
changes you to say something repeatedly
I always felt that Ronald Reagan was
shifted from Democrat to Republican Oh
his acting career filled and he was
hired by General Electric tour around I
give right wing speeches of course he
became a real good and and but no world
where that's the way your own mind
tricks you of course if you have some
prophylactic measures where you're more
cautious about your views thank you how
we all love to have a bunch of children
and we're a little more cautious about
their views I've got some children in
the audience they're fine large a pretty
good bunch but if I had my druthers
there's a thing or two I would change
and a good laugh but that's the way life
works well I have to know who
ruminations of one imagine coming to
listen to some 96 year old man amazing
I'll take questions now from anybody go
ahead
we probably have to wait for a
microphone
they have my Gribble in Syria hello oh
okay good morning everyone
mr. Munger Bill Brewster here thanks for
doing this in the past you've referred
to value investors as a group of cod
fishermen and suggested that they may be
fish in a different pond
conversely you've also discussed how
over a long enough time frame and
investors realized return would mirror
the businesses return so given that many
of the highest-quality businesses are in
the u.s. wouldn't some of our time be
best focused analyzing the quality of
the businesses here in the US and I
understand that the odds offered on the
bet matters a lot so I'd be curious to
hear in your mind how you weigh the
quality of the horse versus the odds
offered on the horse thank you
well both are important but basically
all investment is is value investment in
the sense that you're always trying to
get better prospects that you're paying
for and so but you can't look everywhere
at once any more than you could run a
marathon than 12 to earn states at once
and so you have to have some system of
picking someplace to look which is your
hunting ground but you're looking for a
value in every case and and what is
interesting to me is you talk about the
yes I don't agree with you I think the
strongest companies are not in America I
think the Chinese companies are stronger
than ours and they're growing faster I
have investments in them and you don't
and and I'm right you're wrong
well you can laugh but I just spoke a
simple truth it was here I saw his face
in the audience he's the most successful
investor in the whole damn room where
does he invest China and boy was he
smart to do that and is he good at it oh
that it really helps if you know which
hunting ground to look in fact well we
all do better hunting him when we
hunting where the hunting is easy I have
a friend as a fisherman he says I have a
simple rule for success in fishing fish
where the fish are that's you want to
fish where the bargains are that simple
the fishing is really lousy where you
are used well we look for another place
to fish somebody else
dear mr. Munger my name is Vishal Patel
I'm a portfolio manager from Toronto
Canada working for dynamic funds it's my
third year here and I love coming back
each year I want to thank you for your
time over the years you've shared lots
of comments about India and China I
would love to hear any and all insights
you have about your friendly neighbors
to the north
whether it's our Canadian political
system banking system housing sector
resources industry health care system
any and all insights wisdom on Canada
would be much appreciated I'm very
partial to Canada and I think there's
always medicine system work it's I think
they're wise to have it and I think
they're wise to pay their pharmaceutical
prices instead of ours and I think it's
wonderful that we've gotten along with
Canada so well all these years and I
think you should be quite pleased with
Canada I don't think it helped you to
have two different like we just spoken
that was an unfortunate accident
but I basically like basically like
Canada and I think in some ways you do
better than we do good morning miss
Jerry points out that we we have
customers in Canada he's encouraging me
yes go ahead
good morning mr. Munger RJ Manuel II and
I'm a attorney just like yourself
following in your footsteps I had a
question regarding investing with
computers and artificial intelligence
rapidly getting better at investing than
humans
what should analysts and portfolio
managers and the investment management
industry do to remain competitive thank
you
well that's a very good question I think
what people in the investment management
industry ought to do is prepare for
tougher times ahead
I think this indexing thing is gonna run
and run and run and I think that the
their wretched excesses in a lot of
well-paid hedge funds and private equity
businesses that will in due time result
in a lot of troubles that give pain Oh
everywhere I see the endowment managers
have the same mantra they want fewer and
better investment managers that's not
going to be good for investment managers
and the rest of the people are indexing
now do you want any other cherry news
the cherry news is that if you think the
way we nerds think and keep at it long
enough you'll do all right but but if
you if you go with this crowd I think
there's pain ahead a Charlie on your
left my name is Jonathan bird and I'm
from Phoenix in the past you've
recommended index funds from
people seeking wealth accumulation and
in the past Warren Buffett has
recommended using this sell-off strategy
for income as opposed to chasing
dividends if we synthesize those ideas
it seems like the best course of action
for investing over a lifetime is to use
index funds for accumulation and the
sell-off strategy for income in
retirement would you agree with that and
if so what benefits do you see in using
that strategy thank you well I think the
reason it's growing is that for most
people it does work better and on the
other hand there's a huge proclivity to
gamble it's very interesting to play in
a game where the returns are variable
and so there's a huge lure that comes to
gambling in China the ordinary holding
period or the individual investor is
short they love to gamble in stocks this
is really stupid it's hardly a match I
do imagine anything dumber than the way
the Chinese or the old stocks and
they're so good at everything else
it shows how hard it is to be rational
but I I don't think investment
management is going to I think there are
lots of troubles coming it's too much
wretched excess Charlie my name is Bart
Chaudhary I'm an investor from India
once again when I thank you so much for
the time that you spend with us and give
us so much of your time I had a question
regarding the Stoics it's something I've
read after you've started you you
actually mentioned it there is a great
anybody who's read your life you're a
testament to the idea that to not be a
victim but to be a survivor and it's an
attitude that has helped me in my short
life so far could you perhaps expand on
that idea how it's helped you and how
that is perhaps one of the greatest ways
to live your life out regardless of what
happens to your course some people are
victimized by other people and if it
weren't for the indignation
that causes we wouldn't have reforms
that we need but that truth is mixed
with another it's very counterproductive
for an individual to feel like a victim
even if he is best attitude is just to
be cheerful about everything and keep
plugging along and therefore I don't
like politicians to get ahead by trying
to make everybody else feel like a
victim and they make my flesh crawl and
I just don't believe it of course wants
to be a victim instead of a survivor of
course we want and but feeling like a
victim you can recognize your position
as bad and try and improve it that's
okay but to have a deep feeling of it
wouldn't it's all somebody else's fault
is a very counterproductive way to think
oh people don't even like being around
it it's really stupid and yet our
politicians build on it and friend make
their careers work by doing something
that's very bad for all the people are
talking to and they think they're doing
the world's work you know it's crazy
it's absolutely crazy
I'm mr. Munger it's a privilege to be
here with you my name is Paul Smith from
Boulder Colorado Daily Journal and
Berkshire around a lot of the very large
banks I suspect many people in this room
do I know I do it's kind of tailgating
you and mr. Buffett my question is
concerning some of the thin Technica
FinTech technologies coming up your
position on crypto is very clear but
some of the other FinTech technologies
my question is do you see them as being
a threat to the long-term profitability
of those large banks well I don't know
much about crypto technologies except to
avoid them so and by the way I have a
lot of things at work I call the too
hard pile and if your here's my too hard
pile I throw you into my to heart I
don't think about them now every once in
a while like
take something on or drift into
something really difficult and then I
continue doing it just because and
perverse the daily journal was basically
a ridiculous Enterprise it's really
difficult and I'm an enormous ly rich
and I'm 96 years old you know I care
terribly how it works out a little
insane I don't wanna hurt you why would
you come here I'm talking to a nutcase
like me but no I I hate things like
Bitcoin I mean I hate things that are
intrinsically antisocial of course we
need real currencies and one of the
interesting things about the current
condition is that the Americans have
created the reserve by accident have
created the reserve currency of the
world and the world needs a reserve
currency and I don't sense any great
sense of Trustee ship among my fellow
Americans for behaving very well in our
responsibilities to the rest of the
world with our own currency all right
we'll do what pleases us that's not my
view I think once you get a big
responsibility to other people anything
on you you all think about them too mr.
Munger we have record record budget
deficits record unemployment and record
expansion of the balance sheet why do
you think we don't have inflation and
secondly could you recommend some good
books you've read the last year well you
know the economists of the world thought
they knew a lot more than they did what
has happened is weird but in response to
the Great Recession all the nations of
the world are printed money like crazy
and have bought all kinds of investment
assets
and they've done things that nobody in
the economics profession would have
recommended on this scale even favor so
years ago and yet the inflation has been
very low I think we all have a lot to be
modest about when we talk about
economics Lyndon Johnson said that
giving a talk on economics as well I'm
pissing down your leg he says the feets
feels hot to you but it doesn't
influence anybody else very much and I'm
afraid I can't do much better than the
London Johnson cooks Oh
I people send me books more than I can
read and I've gotten so I skim a lot of
them very rapidly and I'm not sure I'm
the right one anymore to do books are so
important to me all my life but I find
that my mom I used to read fewer books
and read them better than I do now
because I don't see very well so maybe
you should talk to some younger man
about your books hi Johnny
my name is young Lee I'm an investor
from New York thank you so much for this
great platform to learn from you and
sharing your wisdom
my question is about your outlook for
global market and economy especially
given the slowdown in global economy
driven by Chinese economy and also the
rising geopolitical risk so what's your
take a market and economy going forward
thank you
well I am mildly optimistic about China
for a variety of reasons nobody has ever
taken a big nation they had as fast as
China has come ahead and I think they've
done a lot right so I'm I'm a big
admirer of what's happened there
if you stop to think about it they were
in am L to Z entrap and they prevented
500,000 babies are being born they did
it by methods that we wouldn't like in
the United States but I think they were
doing the world a favor and I think that
what they did was admirable so basically
I don't have this hostility toward China
I really admire what the Chinese people
have achieved and I think considering
that they started as communists
their leaders are pretty good and it's
amazing imagine a communist country
creating this enormous period of growth
and prosperity and lifting 800 million
people out of poverty and oh I like
what's happening in China and I think
the united states all they get along
with China and China ought to get along
in the United States and regarding the
the global situation it's so peculiar
they have negative interest rates
another thing I greatly admire is and
this will strike you as very peculiar
there's one modern nation which has had
like 25 years of stasis how can anybody
admire 25 years of stasis I think the
Japanese have handled 25 years of stasis
with magnificent skill and philosophy
pan is not going to hell they don't like
25 years of stasis but they take it like
men and they aren't bitching and wailing
and they don't act like victims and so I
really admire the way the Japanese have
handled their adversity and I don't
think the adversity came from a lot of
mistakes
I think the adversity to Japan they were
an export powerhouse and up came China
and Korea of course they had some
troubles we'd all have troubles we had
way tougher competition
and so I think that's my I don't know I
don't think Japan's stasis was Japan's
fault I think it just happened and I
think they bear up and magnificently
well in order to be greatly admired and
of course they got into this defect
three manufacturing ethos in a big way
and led the world in it so I think the
United States there's a lot to learn
from Asians thinking house everything's
clean in Japan you know see the homo
sleeping I'm a defecating in the street
either oh I guess a lot to be said for a
Japan Carly thank you very much for
having us here today and sharing your
wisdom and your beliefs I was hoping
that you might share with us some
examples of how you've used
disconfirming evidence to change some of
your important to terminate determinedly
held beliefs
well of course being able to recognize
when you're wrong is a godsend if you
take good bit of the Munger fortune came
from liquidating things we originally
purchased because we were wrong of
course you have to learn to change your
mind when you're wrong and and I
actually work at trying to discard
beliefs and most people strand cherish
whatever idiotic motion they already
have because they think it's it's their
notion that must be good and I think of
course you want to be reality what you
previously thought particularly when
disconfirming evidence comes through and
there's hardly anything more important
than being rational and objective just
think of all the dumb things you can do
in life think of the brilliant people
who are just utterly brilliant who do
some of the dumbest things you want any
trouble thinking of examples
active you most of us can know what we
are on accident last year - and we can
all pull up an example or - it's hard to
be rational
good morning mr. Munger thank you so
much for teaching us I also want to
thank mr. Kauffman here comes my
question I recently watched a
documentary that introduced the economic
masters Keynes and Hayek I would like to
know your comments on both of them and
which economic theory you would prefer
and to take a step further if applied to
personal goal setting which model would
you advise us to follow between planning
and flexibility thank you very much well
Keynes of course was a very interesting
man and he probably had more influence
on the economics profession anybody
maybe excepting Adam Smith and and of
course I lived in the great depression
and his ideas were exactly right for
fixing the Great Depression and what
happened was we got out of it finally
week because accidental Keynesianism
came in courtesy of Adolf Hitler in
World War two oh I don't see how you
could study economics without Keynes
heck is is more complicated and I don't
think I'm the world's best understander
of a peg I've read him and I and the
rather admire him but I'm not sure I
totally agree with him it's too tough
for me
therefore I quit clever to you I mr.
Munger yeah over this side my name is
Glen tongue thank you for this wonderful
meeting and especially for serving food
this year I want to ask you about Tesla
the company has a market capitalization
of about a hundred forty billion dollars
it traded last week about two hundred
billion dollars in stock and traded
about five hundred billion dollars in
options and the stock moved about 20
percent a day meanwhile mr. musk seems
thrilled to stoke this volatility I
wanted to know what your thoughts are on
this situation and particularly what
your thoughts are on mr. Musk's behavior
my thoughts are - I would never buy it
and I would never sell short
[Applause]
have a third comment so the man found
nothing Los Angeles for years named
Howard Amundsen you once said something
that I've taken to my heart never
underestimate the man who were estranged
himself
I think Elon Musk is peculiar any you
may overestimate yourself but he may not
be wrong
hi mr. manga my name is Joe I mean my
sister from China I do the venture
capital and three things first I really
thank you for are you encouraging so
many investors around the world and I
hope you'll keep up all the well and do
this a little longer and it is how to
questions first place what do you think
of the value investment in next fifty or
hundred years and second question is do
honey
Hawaiian otherwise on the industrial
research all the industrial investments
thank you well I don't think I've got
any wonderful comments to make about
industrial investment I do have the
feeling that the world may change and
two changes though I think are possible
yeah I think they may extend five
average life duration by fancy tricks
and I think they may reduce cancer
deaths by fancy mouths well I think
weird things may happen they don't
intend to make money any of it happens
to me I think think that what's already
happened in technology imagine the whole
internet developing whole different
things and although
sold companies all the daily newspapers
dying and and total change in
manufacturing processes and it's been a
lot of change and of course this caused
a lot of lost people who own stocks and
I do have the feeling that whether it
was really important this probably
already happened it's gonna happen from
this point forward how much better can
it be what you have enough to eat meat
you like and a few other things you know
what is extra money gonna do for you so
I i yeah i do think that but i
generation had the the best of all this
technical change no we are children stop
dying living standards are way up
air-conditioning came just there are
million good things that have medicine
greatly improved they could replace your
aching joint women it caused that unique
i i don't think we're gonna get as much
improvement in the future cuz we've got
so much already
mister mugger on your right earlier in
the media you mentioned the benefits of
taking the high road treating the
customers the right way etc there's a
sense which may or may not be true but
there is a sense that in china there's
more moral flexibility in business less
respect for the rule of law and less
transparency than there is in the west
you share that concern
well I'm naturally more comfortable in
my own country with its traditions that
I haven't do what's evolved out of
Chinese communism
and of course I but I admire considering
where they were mired in this Malthusian
poverty and and I also mired in some
ignorant and that leader who said I
don't care if they get his black or
white I want to know if it catches mice
that was one smart leader and I think
that that smart leader yesteryear has
other leaders now who are smart and I
think they're gonna keep improving
I even think the Chinese may yet over
there crazy Lobo gambling I once talked
to a bunch of Chinese leaders I say I
got the Feng Shui and I said get over it
your superstition good morning charlie
hey how are you I'm your right-hand side
all right and quick question any
cigarette on Jeopardy
and how many hours do you work a day how
do you stay like so occurring with all
the information a lifelong learner oh I
don't think I deserve any credit for
longevity it just happened
I don't have any there's no male in my
family that ever lived any such age and
it's weird oh I can't help you
okay okay hey Charlie
good morning it's Jason leader of
Bellaire Texas thanks for your time and
also thanks for your perspective you
mentioned earlier that some mental
tricks have been helpful to you one was
taking the high road the other is being
perfectly rational what other mental
tricks have been helpful to you during
your life and also you've mentioned you
touched on excesses and you're worried
about some excesses whether it's in
venture capital private equity political
sphere and also I guess in government
debt
what other excesses do you see in the
system right now I think the opioid echo
that I don't think the wide use of
opioids has helped us either there's
always some miserable excess and it's a
very complicated subject you remember
how the Chinese emperor got rid of
opiate addiction when something like one
male and eight or something like that in
China was an opium addict you didn't
have to kill very many people he just
had death penalty for users no
exceptions no way went is addiction
problem I think somebody will may try
some of that stuff sooner or later if
things get awful enough yeah it may not
be either worse way to handle it that
cheery note I'll go to the next
mr. Munger over here on your left side
yeah I'm a father of three young
children under the age of fourteen and
my question to you is what would you
recommend to teach children to teach
children on how to prepare them to be
successful in life I think the best
thing any parent can do is be a good
example
pitching doesn't work rather damn there
are over 10 trillion dollars of
securities around the world with a
negative yield and by the president's
Twitter feed it seems that he wants to
bring negative interest rates the United
States are you for negative interest
rates or against them make me very
nervous
however I don't think the authorities
had much choice it's politically
impossible to do big stimulus rapidly
and the only weapon they had in a crisis
was to print money and and and change
interest rates and I think it was
probably the right thing we done of
course it makes me nervous I think
having worked once
people will overdo it and that's the
nature of governments and people and of
course that makes me nervous I don't
know what to do about this hi Charlie
I'm in the back of the room on your
right I'm Cameron hamidi my question is
about the effects of low interest rates
on insurance lower returns on float may
be causing a tighter supply of insurance
for example there used to be three main
underwriters insuring all the taxicabs
in Southern California now it is heading
towards just one underwriter who will
have a monopoly on all commercial taxi
insurance in Southern California you
have access to sea
of Geico and Wesco and a Rolodex that we
can only dream of so do you see 10 years
of low interest rates posing a systemic
risk to the supply of insurance
insurance I am made uncomfortable with
the idea of extremely low interest rates
or negative interest rates even more
extreme lasting a long time I don't
think anybody knows how those work
oh if you are a little uneasy welcome to
the club
I think it's I think it's dangerous and
peculiar well I think we had to do what
we did other words I don't have any good
solution for you I think you're right to
be worried about Charlie um it's okay to
talk I'm Steve Houseman I've been in the
broker business since 1966
I came to your meeting back in the 80s I
think we had 25 or 30 people at your at
your annual meeting the question I have
with the deficits so high with interest
rates interest rates in more of a bubble
situation and I remember back in the 70s
we had the nifty 50 is our technology
stocks in the same criteria as it is now
as it feels like there's 1015 stocks
everybody's investing the value
situation has been down for the last
four or five years I was also looking at
a couple stocks that your own Kraft
Foods with your 26% in the company how
come is it make sense to you for your
company for a purchase or Hathway to buy
out Kraft fooled completely and take
advantage of the low price but Berkshire
Hathaway might do next what price but
nifty 50 is an interesting question at
the height of the Neff t-50 craziness
which was created by the morgan bank of
all places in a home
towing company was all your 50 times
earnings all the sewing great God we are
not that crazy yet oh I don't think that
I think that a lot of what's happened is
not crazy
I think these companies are very
valuable well they may be thought to
high prices but home sewing was sure to
fail I don't think our leading tech
companies are all sure to fail well I
think it's not nearly the current
situations not nearly as crazy as well
after you've helped you was absolute
dementia so hi mr. Mergen Munger my name
is Nicholas gonntchev I'm currently
pursuing my MBA at USC Marshall many of
my classmates are considering careers in
private equity and venture capital
you yourself mentioned that some of your
family are because are having careers in
private equity you also mentioned that
you see a lot of excess in that sphere
what advice they give to your family
that is starting careers in private
equity and what advice do you give would
you give to young people as a whole
starting careers in those sectors thank
you and I respect their disinterest and
but I do think we've got way too much
registered access any time you have any
new names to sort of mislead people like
adjusted a bizarre but think of the
basic intellectual dishonesty that comes
when you start talking about adjusting
epidural
it's you're almost announcing you're a
flake
and yet our respectable people talk that
way and charge fees for talking that way
it's ridiculous and so I don't like the
wretched X
don't lay all these transactions where
one private equity group sells to
another and the guys who really honor
they're just sort of raising the fees
higher and higher ever owning the same
in the intellectual mix it's it's a lot
that's financed by its nature but the
temptations are too great in it it goes
to wretched excess of course I I don't
like it I don't think it's good for the
country I would argue that the wretched
excess that led to the Great Depression
which led to the rise of Hitler I think
we pay a big price eventually for
wretched excess and stupidity and greed
and so forth I'm all versed in control
other words for behaving a lot more good
morning mr. Munger thank you for having
us it's a privilege to be here my name
is Alan Chung I'm from San Francisco my
friend Tony Huang wanted to be here and
asked this question himself but he's
currently stuck in China so he's asked
me to ask this on his behalf mr. Munger
is well known that you're an avid and
voracious reader Tony wanted to ask do
you ever reread books that you've
already read before and if so which
books do you reread yeah I do
let me give you an example of something
I want to reread that I haven't reread
yet the other day I was musing over the
current situation and popped into my
head that I had read a poem about 80
years ago by George Sand and George Sam
was a female writer but you know writers
to get ahead in those days sometimes use
men's names George says and wrote a poem
and it was an ode to the goddess of
poverty
she said hail to the goddess of poverty
wonderful goddess of poverty she tells
the fields she Minds the Mayans and so
on I remember right toward the end the
goddess party-party said
you trying to banish me you'll live to
walk me back I kind of agreed with this
poll but I'd like to see it again I
don't know how to punch notes on the
internet and get George sands poem to me
so somebody will send me or Paul mile
but very much like it but I'm telling
you this because it's an antidote to our
politicians who want to tell us they're
gonna about while he's all poverty it's
a stupid idea you know it's like saying
we'll all be riches in a modern
civilization or a relative thing its
status where we want it we need more
beans and the throw of reaching for
status is that the bottom 90% are always
gonna contain exactly for some of the
people no matter how hard we work around
much pieces to succeed and we actually
need some tough incentives in a
civilization to make it work in other
words George Sand was right the goddess
of poverty is not all bad she's partly
good and of course I like thoughts that
I have that are different from everybody
else and I think that a billionaire who
talks about the glories of the goddess
of poverty is making a contribution but
only a bunch of nerds like you will
appreciate it mr. Munger yeah I'm here
in the back thank you once again for
taking our questions today really
appreciate it
just wanted to ask you a quick question
about the fact that you are an early
proponent of electric vehicles
specifically your investment in BYD I
wonder if from your perspective today
other technologies like hydrogen fuel
cells or others that may come to mind
are equally important in terms of their
emerging capabilities and what sort of
impact they may have well I think
electric vehicles will be more popular
than high
hydrogen fuel cells getting the sun's
energy transferred into electricity
electricity under the vehicles it's
basically a good idea for the long pole
and I think all the technology is going
to work and so it's actually improving
we may get a lithium battery that's
actually quite safe and more energetic
suppose we have now and I think I think
that's although the good act here in
California when I came to California
Petroleum Club
we had wildcatters we had a little bit
go in there's a little like Texas I
think we found any new oil to speak of
and by California decades I think it's
dangerous to rely on hydrocarbons for
for energy of course we've got to take
more about directly from the Sun I think
that Texas will eventually get to be
like California mr. Bundy good morning
I'm Sergio from Dominican Republic and
my question is do you think is necessary
for America to recover a positive trade
balance to keep its prosperity in the
next century the answer is No
dear charlie my name is Liang Hong my
visit discharged today from Tokyo Japan
where I work for one of your investees
to borrow words from another blind
philosopher John Milton Berkshire Costco
and Daily Journal please be long
choosing and beginning late this
question is for my five children who may
be watching later how do you not your
kids and grandkids to hold on to their
shares for as long as possible for you
my children seem to do pretty much what
they please and I find I'm happier if I
just do the best I can by my children
and take the results as they fall I
wouldn't sweat too much about how do
children hold the stock you know good
morning mr. Munger I'm a student at USC
and I just had a quick question
um you know I'm eighteen right now I'm
in college and sometimes I lose interest
in what I do and you're 96 and you're so
passionate about what you do so what
what keeps you going like what is your
how do you still have the motivation
thank you well maybe I've been lucky I
like what I do I have wonderful partners
and friends I have a nice family
my problems are interesting to me I have
been a very fortunate man I don't know
how to make everybody else lucky I could
have had a different hand and then some
miserable alcohol like throwing up and
they got her it's I don't think I
deserve any great credit for having
stumbled into a reasonable amount of
felicity I do think that trying to be
rational helped
that's the only thing you got if you're
a fellow nerd there's no point in your
you're not gonna be a sex object you may
have to rely on your rationality hey
Charlie my name is Brian lacs I'm from
Los Angeles there's a lot of talk these
days about the climate and the
environment and funds divesting fossil
fuels and countries trying to figure out
how to generate electricity without
polluting the environment could you give
us your thoughts on on nuclear power I
know of Bill Gates has been a pretty
vocal supporter of it and I read that
Warren used to invest in uranium back in
the 50s and you know he more recently
helped fund a uranium bank in Central
Asia so if you had any comments on that
as well thank you well I admire Bill
Gates who feels a duty to throw money
it's tough it's unpopular elsewhere and
that might possibly work oh I think it's
an admirable charitable effort by Bill
Gates and one for which he's very
well-suited I don't know whether we're
gonna get safe little Adam Lance or
something but I think it's certainly
worth thinking about problem with it of
course is that how much other there's no
wool material do you want a bunch of
crazy humans to have I don't know the
answer to that question and regarding
energy of course we're gonna have to get
more directly from the Sun and so forth
and it's all the good than everybody's
everybody's going into that in a big way
I miss monger away I would be in favor
there were no global warming problem I'd
be in favor of substituting getting
power directly from the Sun for fossil
fuels
starting today even if we didn't have a
goal warring brother I think it's a good
idea to conserve hydrocarbons and and
and use more solar energy that is by the
way not the normal attitude of other
people but I'm right and they're all
wrong
I'm assuming err on the left my name is
Ray and currently a student is a OE so
my question is on universal basic income
so it is a government or public program
for a periodic payment delivered to
everyone without any work requirement so
I'm just curious about your opinion
playing like this thank you well enough
but you'd totally ruin everything a
little of it we can afford what the
exact makes is will be determining
through the political process forever
hello mr. Munger my name is Chris
Antonio I'm from Marin County and my
question is you talked frequently about
having the moral imperative to be
rational and yet as humans we're
constantly carrying this evolutionary
baggage which gets in the way of us
thinking rationally
are there any tools or behaviors you
embrace to to facilitate your rational
thinking the answer is of course I
hardly do anything else and one of my
favorite tricks is the inversion process
and give an example when I was a
meteorologist in World War two they told
me how to draw weather maps and predict
the weather actually doing is clearing
pilots to take flights and he just
reversed the problem I inverted I said
suppose I wanted to kill a lot of pilots
what would be the easy way to do it and
I concluded the only easy way to do it
to get the planes into icing the planes
couldn't handle or to get the pilot into
a place where he'd run off fuel before
he could safely land so I made up my
mind I was gonna stay miles away from
killing pilots for by either icing or
getting them on the sucked in conditions
when they couldn't land I think that
helped me be a better meteorologist in
the world war two I just reversed the
problem and if somebody hired me to fix
India I would immediately say what could
I do if I really wanted to hurt India I
figure out all the things that would
most easily hurt India and then I figure
out how to avoid him now you'd say it's
the same thing it's just in Reverse that
works better too frequently to invert
the problem
if you're a meteorologist it really
helps if you really know how to avoid
something which is the only thing that's
going to kill your pilot's and if you
can help nd a best if you understand
what will really hurt
nd of the easiest and worse I'll show it
works the same way every grade algebra
asked inverts all the time because the
problems are solved easier young beings
should do the same thing in the ordinary
walks of life it's constantly emerged
you don't think what you want you think
when you want to avoid or in your
thinking what you want to avoid you also
think about what you want and you just
go back and forth all the time
Peter Coughlin who's here today he likes
the idea that you want to know how the
world looks from the top looking down
and you want to know what it looks like
the bottom looking up and you don't have
both points of view your reality
recognition is lousy Peters right and in
the version is the same thing just such
a simple trick to think how does this
look from the people above me how does
it look from the view but evening how
can I hurt these people I'm trying to
help all these things help you think it
through and there's such simple tricks
there like the lever they really help
and yet are great educational systems
advanced degrees they don't teach me
beliefs how simple tricks they're wrong
they're just plain wrong hello mr.
Munder hungry right my Clara Shaggy I
have a question about you know if you
were researching a new company that
you've never heard of how would you
approach the research process how much
time would you spend if you perform to
the intrinsic value estimate and the
company was expensive would you still
continue following the company closely
and and researching it or do you kind of
try to get to evaluation pretty quickly
and if it's if it's not cheap kind of
move on how do you balance the time you
spend on companies well of course
it's complicated technical
technologically I tend to leave it to
others I'm an a an occasional variation
on that but basically I just don't do it
I want to think about things where I
haven't advantage over other people I
don't want to play a game where the
other people have an advantage over me
so if you have a pharmaceutical company
and you're trying to guess what new drug
is gonna be invented I've got no
advantage other people were better than
that than I am I don't play in a game
where the other people are wise and I'm
stupid I look for a place where I'm wise
and they're stupid and believe me it
works better there's you know it's God
bless our stupid competitors they make
us rich yeah that's that's my philosophy
in it and I and I think you have to know
the edge of your own competency you have
to kind of know what this is too tough
for me I'll never figure this out
I'm very good knowing when I can't
handle Ignazio jarate San Francisco Bay
Area my question is about electric
vehicles and BYD
why are electric vehicles sales at bi
BYD down 50 to 70% while tesla is
growing 50% and what's the future holds
for BYD well I'm not sure I'm the
world's expert on the future of electric
create except I think they're coming
generally and somebody is going to make
them new IDs B sales went down because
the Chinese reduced the incentives they
were giving to buyers of electric cars
and s Lowe's sales went up because you
know honest convince people he can cure
cancer
hey Charlie on your left side it's
always a joy being in this room and
thank you for creating his community for
us to do so one of the more surprising
opinions I've heard this year is that we
never really had journalistic ethics
that the news has always been colored
yellow with the voice of their
proprietors with nine decades of
observation under your belt does that
ring true or does the recent business
model shift from subscriptions towards
the networked news and Time magazine and
Newsweek and and the monopoly newspapers
I think those people were pretty good in
this current bunch are deliberately
lying because uh it sells better oh I
like the I like the old products of
nepotism I'm not monopoly it were better
for us than these new guys these guys
are so good at marshaling hatreds you
know politics was once called by some
famous of these politician the art of
marshaling hatreds we now have a news
outlets that we all follow and they're
good at marshalling hatreds well some
hatred may have some constructive use
but they're overdoing it hatred is too
intense in scavenging up the minds
pretty cabbage DUP the minds of the
broadcasters and now it's gavin geing of
ugly people who watch first of all thank
you so much Shirley for your time of a
big fan
my name is Rima and I'm a nerd from San
Francisco Mayan herd friend RF and I
have a question for you related to
technology there's this common sentiment
that technology is both accelerating the
pace of change and its impact as
broadening across most industries
usurping traditional moats so given your
long career I'm wondering do you think
the traditional emoti industries are
being undermined at a pace that's
different from what's been happy
in the past yeah I think the moats of
have been breached
time after time after time imagine the
Eastman Chemical Company going broke
imagine all these great department store
being on the edge of extinction imagine
all those monopoly newspapers going down
you know look at the strength of the
American auto industry now compared to
what it was say in 1950 well I think the
moats are disappearing rapidly I mean
the old classical moats I think that's
probably a natural part of modern
economic system how's it all boats
stopped working yes let me know what
your problem is and I'll try and make it
more difficult for you mr. mayor my name
is anneka tan I'm a current
undergraduate student at UCLA um similar
to the question before on what advice
you would give to young individuals with
a passion for Business and Finance what
would you say is the best possible way
for someone to expose themselves and
expand their understanding of working in
the business world which without
actually currently being involved in it
and how can I maximize my potential
value to a corporation in the future by
what I do right now
well that's a good question there's so
many of you now who want to be rich by
going into finance and of course that
multitude is not going to all get rich
and and of course 99 percent will be in
the bottom 99 percent that's just the
way it's going to work I look at the
people in my generation were the Nerds
who were patient and rational eventually
did well who lived within their incomin
and worked at being sensible and when
they saw an opportunity grab it
very fiercely and so forth and I think
that'll work for the new nerds of the
world and the people who get ahead
because they're star salesman or
charismatic personalities I'm not one of
those so I don't know how to do that so
if you're not a nerd I can't help you
and and I think that the odds are that
most people who try to do finance are
not gonna succeed
and and there's a lot of rich @xs units
because easy money will always attract
wretched excess it's just the nature
it's like a bunch of animals feeding on
like carcass in Africa by the way that's
Maj Joe's on purpose and but no snow so
I don't think it's so pretty and I don't
think that modern finance is so
wonderful and in my day a lot of the
finance field were more like engineers
they were so chastened by the Great
Depression and all the wretched failure
that they really tried to make
everything super safe and it was a very
different plotting place and just tried
if you weren't trying to get rich
they're trying to be safe this modern
world is radically different and I'm not
sure if I were starting out a new world
in your world how well I would do it
would be a lot harder than it was to get
ahead in the world the way it was when I
came up how are you my best advance I
think you'll be happier if you reduce
your expectations and if you try and
satisfy them and by the way I think
that's generally a very good idea
it sounds silly but it's so obvious you
know how many of us are fairly content
with pretty moderate success that is
worth knowing because that's what most
of us are gonna get a Charlie my name's
Jordan Kalon I go and I come from Canada
I just like to doing your thoughts on
the airs in engineering business
generally at Boeing and how you've been
thinking about that is that's unfolded
recently well I don't like to jump on
Boeing Boeing is a great company that
had one of the great success rates great
its safety records of the world they
lost their way they made some dumb
mistakes and I think that's almost the
nature of things to when you try and do
something very complicated with hundreds
of thousands of people occasionally
they'll be a slip-up and in most places
you have if you actually look at them
they have some near misses but link had
a near miss a few years ago when the
rudders stuff failed and they had a few
crashes I was almost Safety Committee a
US Air when that happened and nobody
could figure it out for months if
something in the rudder was not working
and it caused three crashes it took them
six months or something to figure it out
they must've would have an army island
police arrived that wasn't a lot know
how to ride this one but but it's really
expensive to make a big safety mistake
of course they should be oh boy did I
mr. Munger my name is Alex thank you for
all the wisdom that you shared with us
since you know since you started I had
to fold with no question the first is
it's been a while since you've had the
psychology of human misjudgment as a
talk and I was wondering if there are
any additions you would have you've seen
more recently and the second part is
you've mentioned how important being
rational is throughout your life can you
walk us through aside from the tips and
tricks that you have
what steps we can take to become more
rational well it's a long process I
don't think anybody just flashes into it
it's not like I'm what do you tells you
yeah well you got to do is run down to
the front of the revival meeting and
shout out and you get a wonderful
Hereafter yeah rationality is something
you get slowly and it has a variable
result but it's better than not having
it and no I I just think that you can
just see how awful it is some people get
into these Furies of resentment and
anger and sure they're right about
everything it's hard to know exactly how
human civilization ought to be organized
in my own life I've often reflected
about how well the system has worked and
what I concluded was that the social
safety net is just come up enormous Lee
as the world has gotten more prosperous
that was her a desirable thing and that
the Republicans who always opposed it
were wrong and I've also the the
Democrats always wanted to push to say
you had too far ahead as they did for a
while with the welfare program that was
also wrong and that by and large what we
have is about right and we wouldn't have
got it from either party alone either
party had been totally in control in a
one-party government we wouldn't have
had the result that we have which is
close to right and and I think power
does corrupt I think too much power part
of the genius of the American system is
there's no one person gets too much
power they just
if either party had all the power I
don't think this I don't think American
civilization woulda worked as well as it
as it has with this ebb and flow and I
don't know what the exact right safety
net is I don't think it matters that
much I think the United States would be
about as happy if it had five percent
more or five percent less safety net
gnarly
thank you for the answer that and kind
of echo with the line one of my favorite
line from your book it's better to be
roughly right then precisely wrong with
that being said on some teams could you
elaborate a little bit on the project
Haven how are you exactly
or specifically doing to improve health
care lower the cost improve quality and
access well that's a very interesting
object if you take American healthcare
in many ways it's the best in the whole
world we have more brains in our medical
schools and our pharmaceutical companies
and the rest of the world has per capita
like we may have as much brains as all
the rest of the world together on the
other hand if you actually went into
American medicine hospitals doctors
offices or you would find a huge amount
of totally counterproductive unnecessary
activity that costs a lot those no good
or actually does harm and you'd find
that some people are not doing that that
well they don't have the incentives to
make money by doing it you don't get a
lot of comfort productive medical care
Kaiser here in California does not do a
lot of unnecessary stupid medical care
for a long death to make more money and
do all the evil things that other people
do other people as the hospitals and
doctors get under pressure introduce a
lot of
waste and folly and some of the
pharmaceutical companies behavior is
totally outrageous have some basic
diabetes drug ins trying to charge
someone ten thousand a month or
something it's ridiculous and I even go
further I think it's evil and I think
the system should be changed and I think
it will be changed I think there's too
much wretched excess in the medical
system and the really sad part of it is
that people are doing it have no
conscious malevolence there are a lot of
people who decided to do murders and
maimings to make money they think it's
good for the patients what they're doing
and of course you got an unnecessary
back operation on somebody it's a major
evil but the guy that's doing it really
thinks is good for the patient other
words Eastern is Brandon in the cabbage
and and that's not a good thing I think
you have to change the incentives I
think there are places in America that
are very admirable that don't do a lot
of unnecessary stuff in other places
that do and I think I think we're gonna
have to change the system I think it's
it's if you take the government the
medical system of Sam war it costs
twenty percent of what ours cost it has
better statistics that's not opaque it's
open we have a whole industry that tries
to make the payment things opaque so
they can take advantage of people and
they think it's free enterprise I think
it's stealing
hi mr. Munger yeah Jeffrey Malloy from
clean Virginia on your far right I've
been working in the financial services
industry for the past five years and one
of the things that has surprised me is
how many of my peers in the industry
have set out the market over the last
five years holding cash in anticipation
of a market downturn and you know I
would think given that
we're in our late 20s and we've
accumulated savings and have what's
hopefully a multi-decade runway ahead of
us the right thing to do would be to
start investing now and my question is
first you agree with this assessment and
if so how would you convince your
friends to start investing thank you
well it's obvious that deferred gratify
errs do better over the long pole then
these impulsive children that have to
spend on money on Rolex watches some
other falling and not that I'm picking
Rolex is any worse than that a Phillipe
or something but but I think everybody
should lose adults should save and not
be stupid suppose spending money and
defer gratification they get more later
and all those good things that we were
taught you know well by Benjamin
Franklin's thrift and so forth and the
odd thing about it is that people are
kind of worn deferred gratifies or not
they've done recent psychological work
on that subject then also look if you're
an impulsive person that has to be
gratified immediately you're probably
not going to have a very good life and
we can't fix you
and but if you have a slight tendency to
defer gratification and you can feed
that tendency you're on the way to way
to prosperity and happiness
it's a that demand for immediate
gratification is that's the way to ruin
may also give you a syphilis this is the
last question evidently I have I'm
getting they have a saying in father
Bill give him the hook my rendering is
just giving me the hook I know I'm an
accidental guru we didn't sell out to I
didn't sell out to have an audience of
people coming in and asking me questions
about every damn subject in the world it
just it just gotta happen by accident
when I went along with it cuz I think it
did more good than harm and I kind of
enjoy it as long as I'm not to do it too
often but I feel I would be I feel sorry
for people they have edge elating
multitudes and I I also wouldn't like a
normal mobile dude I love these nerds
one last question
all right go ahead hi mr. Munger my name
is Lazar her Z a graduating senior at ha
School of Business Berkley I wanted to
go back to Singapore and ask you a
question involving Lee Kuan Yew
particularly his housing policies I'm
curious how you think California should
address the insane cost of construction
new development right now and how you
would try to create housing in
California that would be affordable
across all socio-economic areas to avoid
kind of soak the social evils that Lee
Kuan Yew has managed to avoid back in
Singapore thank you well that's like
asking some ordinary cool
who's drunk ever he can't come up with
something like Albert Einstein you know
it's just too much Lee Kuan Yew was the
best nation builder that probably ever
existed and what he accomplished didn't
say I'm working certain what he started
with it was a miracle
and of course I don't know how to create
that everywhere I'm not sure Lee Kuan
Yew could have done it if he didn't have
a bunch of expelled Chinese there I'm
not sure that any other ethnic group
would have done I think he had a very it
looked like a terrible hand and by the
way there's a an interesting story there
he needed a army when he first took over
and nobody would help him and only one
nation in the whole world would help you
know that was Israel and he said how can
I accept I'm surrounded by Muslims who
hate me how can I accept military advice
from Israel and he finally figured it
out he accepted the help and he told
everybody they were Mexicans
well that little joke will end leave me
meeting