Perspicacity 31. Advice regarding raising a son: Don’t preach one thing and then live another life!
Q20: What is his advice regarding raising a son?
Munger: Don’t preach one thing and then live another life!
Perspicacity 32. He hopes BRK continues not paying dividends.
Q21: Has being a cult hero limited or improved his ability to do what he wants?
Munger: It has done both. It is only peculiar people like us that he wants to impress. He is lucky because we are the only people he has ever impressed. To the extent he is known by this crowd, he thinks it is a net plus. But, he doesn’t want a bigger house or more acclaim. In fact, he has outshot himself already on those fronts.
Q22: Could we get a list of the 99 mental models he uses?
Munger: The women who asked the question appraises him higher than he does himself. He can’t do that!
Q23: Question had to do with the prospect of a BRK dividend.
Munger: He said that some of us will live to see a BRK dividend but he doesn’t want to see it. It will mean that the company does not have great investment opportunities available any longer. He doesn’t want to see what he would consider failure.
Q24: When assessing durable competitive advantages, what does he consider the most?
Munger: He and Warren only look at industries and companies that they have a core competency in. Every person has to do the same thing. You have a limited amount of time and talent and you have to allocate it smartly.
Perspicacity 33. The failure rate of great empires in terms of geography is 100%. Just look at Athens and Britain today—everyone has passed the baton in due course. If China becomes the greatest nation in the world, some of our best virtues will be a part of that country as well.
Q25: Do you see parallels between the decline of the US and that of the Roman Empire?
Munger: Of course he sees parallels. The failure rate of great empires in terms of geography is 100%. Just look at Athens and Britain today—everyone has passed the baton in due course. However, there is one sense in which these empires are still with us today. What was great about ancient Greece is with us in the world today—it has just moved. You can be confident that the US will not be the most dominant and admired country in the world forever. We may have a longer run than most– we may even have a long run ahead. But, we will eventually fall from the top.
But, the US has had a huge, constructive influence on Asia. Asia is important for the future of the world and many people there have learned from the US’s experiences. Another person who has been a great instructor to the world is Lee Kuan Yew of Singapore. He helped change China. Where did Lee Kwan Yew learn his values? He was educated in England and was English speaking all of his life. As such, a lot of the culture of this room was absorbed by Singapore. If China becomes the greatest nation in the world, some of our best virtues will be a part of that country as well.
Perspicacity 34. A good way for us to deal with the employment problem is gumption.
Q26: Do you see a depression in the near future due to high unemployment?
Munger: Employment conditions are bad compared to what we desire. Employment is going to be a problem for a considerable period. But, that doesn’t ruin life. He was raised in the Great Depression and it did not ruin his life. A good way for us to deal with the employment problem is gumption. (Gumption is one of his favorite words that no one uses anymore.)
Perspicacity 35. We have benefited from Chinese goods being better and better and cheaper and cheaper. But, as a side consequence we have a lot of competition in terms of manufacturing. Charlie said he is very philosophical about stuff like this. He likes that the Chinese are coming up. He likes what was achieved by Japan’s success. Look where car and TV production went—it went to Korea and Japan and away from the US.
Q27: Is there anything he suggests that can be done to help employment?
Munger: Like Japan had in previous decades, the US has had huge new competition from places like China. This dynamic has reduced employment opportunities. These are very real issues that investors have to take into account. Going forward they have to be wiser than BRK was when it bought Dexter Shoes (and the company soon lost out to cheaper Chinese competitors). Part of the trouble is that the Asians are so talented. They were held down so long because they were stuck in a Malthusian trap— they didn’t have enough to eat and now that problem has been alleviated to a large extent. These people now have been unleashed and they have great ambition and culture. We have benefited from Chinese goods being better and better and cheaper and cheaper. But, as a side consequence we have a lot of competition in terms of manufacturing. Charlie said he is very philosophical about stuff like this. He likes that the Chinese are coming up. He likes what was achieved by Japan’s success. Look where car and TV production went—it went to Korea and Japan and away from the US. He can hardly believe the modern products that are developed. For example, his dentist has had at least 4 total equipment makeovers during the years he has been going there. The equipment is so good he thinks even he could use it. The dental assistant now has the modern equivalent of miner’s lamp that helps her see better. Now she is less likely to stick something into his gums rather than where she wants to.
Perspicacity 36. On Managing Funds: You go through life looking for pain and taking it advance. It makes you a protector of yourself and your employer.
Q28: What does he advise for concentrated investors who run pension money?
Munger: Modern consultants with their style boxes and all of the fees are not going to work worth a damn, on average. But, he believes that someone with the attitude and philosophy of the questioner will do better than average. But better than average may not be good enough for certain employers. He would never let pension funds make 8% return assumptions. With low yielding bonds and stocks, how do you come up with 8%? You come up with it because that is what you want. That is not the Munger system. In his eyes you go through life looking for pain and taking it advance. It makes you a protector of yourself and your employer.
The Inoculated Investor http://inoculatedinvestor.blogspot.com/