{"id":299,"date":"2017-02-04T01:26:19","date_gmt":"2017-02-04T01:26:19","guid":{"rendered":"http:\/\/charliemungersays.com\/?p=299"},"modified":"2017-10-25T00:33:59","modified_gmt":"2017-10-25T00:33:59","slug":"29-charlie-munger-daily-journal-annual-meeting-2016-so-much-wisdom-from-one-meeting-its-like-eating-chocolates-from-a-house-made-from-chocolates-filled-to-the-brim-with-chocolate","status":"publish","type":"post","link":"https:\/\/charliemungersays.com\/index.php\/2017\/02\/04\/29-charlie-munger-daily-journal-annual-meeting-2016-so-much-wisdom-from-one-meeting-its-like-eating-chocolates-from-a-house-made-from-chocolates-filled-to-the-brim-with-chocolate\/","title":{"rendered":"29. Charlie Munger \u2013 Daily Journal Annual Meeting 2016. Six Lessons: Part II."},"content":{"rendered":"

\"\"<\/a>Excellent Book: Charlie Munger For All Seasons<\/a><\/a><\/strong><\/p>\n

Lesson 1: On Sticky Business: \u00a0Sticky Business is good business and it\u2019s not glue we\u2019re talking about here.<\/strong><\/p>\n

Question: Could you tell us one or two opportunities that you\u2019re excited about for journal technologies?\u00a0 And also, in the next year, what are one or two hurdles or threats?<\/p>\n

Answer: The one that I\u2019m most excited about, in Daily Journal technologies, was getting the contract from the Los Angeles courts.\u00a0 It\u2019s one of the biggest court systems on earth and that was, as far as I was concerned, a crucial milestone. \u00a0And you can stop and think about it.\u00a0 If we succeed in saturating California, with a huge success, it may well spread elsewhere.\u00a0 And we bought this little nothing of a software company\u2026and it turns out that they\u2019re really good at all this service to all of these clients that need to have the service.<\/p>\n

We\u2019ve crossed over into a new business.\u00a0 And the new business is interesting because it\u2019s a big market.\u00a0 It\u2019s a big market.\u00a0 And I think if you ever get entrenched in it, it will be a very sticky business.\u00a0 Which has occurred to us as we suffered all of this agony.\u00a0 At least we were suffering agony in an attempt to get into a position from which we\u2019d be hard to dislodge.<\/p>\n

And the main threat or hurdle is that we want to be the most important player in this new niche, which is a big, big, niche.\u00a0 And of course we\u2019re concerned about that.\u00a0 I don\u2019t regard that battle as won.\u00a0 I regard it as going well, but not won.\u00a0 In fact I\u2019d even say going very well, but not won.<\/p>\n

Lesson 2: On IBM: How many roads must a man walk down, before you call him a man? The Answer My Friend Is Blowing in The Wind.<\/strong><\/p>\n

Question: In investing, you talk about how you want to stay in your circle of competence.\u00a0 A few years ago, Warren Buffett decided to buy IBM.\u00a0 And he\u2019s still very optimistic.\u00a0 But some people say that he went out of his circle of competence.\u00a0 What is your comment about this investment, and what do you think of its future?<\/p>\n

Answer:\u00a0 Well IBM was a lot like us, they had a traditional business that was very large and it was very sticky.\u00a0 And of course, the world changed, and a lot of what flourished in the new world, they were not the leader.\u00a0 Up came Oracle and Microsoft and all kinds of other people who were formerly not so large.\u00a0 And of course they didn\u2019t do well in personal computers even though they well started it.<\/p>\n

IBM is a position that is lot like us where they have an old business from which cash continues to flow, but they want a new product that\u2019s a hit.\u00a0 Now the product that they\u2019ve chosen to back is this\u2026I call it an \u201cautomated checklist\u201d.\u00a0 Well an automated checklist is a very good idea and it may be particularly useful in things like medicine, but is it the kind of super market that may replace a lot of what made IBM great?\u00a0 And I would say the jury is out on that.\u00a0 I don\u2019t really have an opinion.\u00a0 In other words, I\u2019m neither a believer or a disbeliever, I regard it as a mystery.\u00a0 It could happen and it could not happen as far as I\u2019m concerned.\u00a0 I do think that the old business of IBM is very sticky and will die slowly.<\/p>\n

It\u2019s not a cinch.\u00a0 The truth of the matter is that at Berkshire\u2019s size, where we have to make great big bets and hold them for long periods, that\u2019s a tough game and we have to make bets that are not the kind of shooting fish in a barrel kind of bets that we use to make.\u00a0 And that\u2019s one of them.<\/p>\n

So\u2026the answer my friend is blowing in the wind.\u00a0 It may work in a mediocre way, it may work big, I just don\u2019t know.<\/p>\n

Lesson 3: On Changing Children and Grandchildren: \u201cI am the master of my fate, I am the captain of my soul.\u201d\u00a0 Clarence Darrow said, \u201cMaster of my fate?\u00a0 Hell, I don\u2019t even pull an oar!\u201d\u00a0<\/strong><\/p>\n

Question: What advice do you give to your grandchildren?<\/strong><\/p>\n

Answer: Well regarding the grandchildren, I was not able to change my children very much.\u00a0 My situation reminds me what Clarence Darrow said when he read the great poem that ended, \u201cI am the master of my fate, I am the captain of my soul.\u201d\u00a0 Clarence Darrow said, \u201cMaster of my fate?\u00a0 Hell, I don\u2019t even pull an oar!\u201d\u00a0 That\u2019s the way I feel about changing the children.\u00a0 And regarding the grandchildren, thank God they\u2019re somebody else\u2019s problem. (Big laughter)\u00a0 I served my time.<\/p>\n

Lesson 4: In Investment, One Good Story is Can Be Enough To Last A Lifetime<\/strong><\/p>\n

Question: Do you have a favorite investment story?<\/p>\n

Answer: Well, investment stories from my younger days\u2026I\u2019ll tell a story I\u2019ve never told before.\u00a0 Years ago, 1962, my friend Al Marshall came to me and said, \u201cI want your help in bidding for some oil royalties.\u201d \u00a0They were being put up by auction. \u00a0I soon realized that under the peculiar rules of an idiot civilization, the only people who were going to bid for these oil royalties were oil royalty brokers who were scroungy, dishonorable, cheap bunch of bastards.\u00a0 I realized that none of them would ever bid a fair price.\u00a0 So I said, \u201cWe just need to bid high enough to get some of these royalties.\u00a0 You can\u2019t possibly fail in an auction where they excluded everybody but kind of shady, difficult, cheap bastards.\u201d \u00a0So we bid for those oil royalties and we financed the thing with a down payment.\u00a0 We each put up a thousand dollars, and for many, many, years, the Mungers were getting $100,000 a year, 50 years later.\u00a0 More than 50 years later.\u00a0 Out of a thousand dollar investment.\u00a0 The problem with that story is that it only happened once. (Laughter)\u00a0 That\u2019s true with most good investment stories. \u00a0You don\u2019t get very many. \u00a0It isn\u2019t like that kind of opportunity comes along every day.\u00a0 The trick in life is when you get the one, or two, or three that your fair allotment for a life is that you\u2019ve got to do something about it.\u00a0 So that\u2019s my story from my youthful days.<\/p>\n

Lesson 5: Luck, Patience and Bold Action: It was luck that we had caught the bottom tick.\u00a0 It wasn\u2019t luck that we had the money on hand when other people didn\u2019t and were willing to deploy it when other people were running for cover.<\/strong><\/p>\n

Question: How is the current energy environment compared to the early 80\u2019s when you were running Wesco are there any notable similarities or differences this time around?<\/p>\n

Answer: Well of course we owned Wesco for a long time.\u00a0 What\u2019s interesting about both Blue Chimp Stamps, which controlled Wesco, and Wesco is that they eventually were some of the most successful investments in the history of mankind.\u00a0 What\u2019s interest about those outcomes is that it was only 5 or 6 transactions that carried all the freight.\u00a0 Really heavy freight.\u00a0 Now that is really interesting when you stop and think about it.\u00a0 You try and do a zillion little acquisitions\u2026it\u2019s hard.\u00a0 But by just doing a few things over a long period of time and having them work out well, those little nothing companies\u2026\u00a0 They were all doomed.\u00a0 The trading stamp business.\u00a0 The savings and loan association.\u00a0 The savings and loans are pretty long gone.\u00a0 And yet they worked out fairly well.\u00a0 There again, just a few good decisions over a long period of time.<\/p>\n

Some great investment success once said, \u201cYou make your money by the waiting.\u201d\u00a0 Now that doesn\u2019t mean sitting around for the next depression, you can\u2019t do that, but a fair amount of patience is required in some of these good investment records.\u00a0 Patience followed by pretty aggressive conduct when the time comes.\u00a0 Imagine sitting there, were having all of this money rolling in with the foreclosure boom, and then deploying it in like one day.\u00a0 At the bottom tick for some of those stocks.\u00a0 Now that was luck.\u00a0 And it was luck that we had caught the bottom tick.\u00a0 It wasn\u2019t luck that we had the money on hand when other people didn\u2019t and were willing to deploy it when other people were running for cover.<\/p>\n

Lesson 6: What\u2019s A Good Model Then May Not Be A Good Model Now<\/strong><\/p>\n

Question: What other business models did Berkshire Hathaway try\/consider, but ultimately did not pursue?<\/p>\n

Answer: Well we were always optimistic.\u00a0 We wanted to buy the best thing that was conveniently available and that we could understand.\u00a0 In the early days, we thought we had a special advantage as investors in our little securities, so we tended to look carefully at float businesses.\u00a0 Nowadays of course, we\u2019ve got enormous float and it hasn\u2019t been that much use to us.\u00a0 Such is the nature of life.\u00a0 We made so much money on those float businesses that it was obscene in the early days.\u00a0 And it\u2019s not a tragedy that now our float businesses don\u2019t get much advantage about the float.\u00a0 Berkshire\u2019s cash which is large is not getting much of a return.\u00a0 In Europe, the rates are negative.\u00a0 Japan the rates are negative.<\/p>\n

Ref: http:\/\/latticeworkinvesting.com\/2016\/02\/13\/charlie-munger-transcript-of-daily-journal-annual-meeting-2016\/<\/p>\n

https:\/\/www.facebook.com\/groups\/charliemungersays\/<\/span><\/u><\/a><\/p>\n

www.charliemungersays.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Excellent Book: Charlie Munger For All Seasons Lesson 1: On Sticky Business: \u00a0Sticky Business is good business and it\u2019s not<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-299","post","type-post","status-publish","format-standard","hentry","category-charlie-mungers-3-categories-of-investment-in-out-too-tough"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/299","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/comments?post=299"}],"version-history":[{"count":4,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/299\/revisions"}],"predecessor-version":[{"id":907,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/299\/revisions\/907"}],"wp:attachment":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/media?parent=299"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/categories?post=299"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/tags?post=299"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}