{"id":312,"date":"2017-02-06T02:34:44","date_gmt":"2017-02-06T02:34:44","guid":{"rendered":"http:\/\/charliemungersays.com\/?p=312"},"modified":"2017-10-25T00:32:21","modified_gmt":"2017-10-25T00:32:21","slug":"31-djco-annual-meeting-2016-part-iv-lesson-13-18","status":"publish","type":"post","link":"https:\/\/charliemungersays.com\/index.php\/2017\/02\/06\/31-djco-annual-meeting-2016-part-iv-lesson-13-18\/","title":{"rendered":"31. DJCO Annual Meeting 2016 – Part IV: Lesson 13-18"},"content":{"rendered":"

\"\"<\/a><\/span><\/strong><\/p>\n

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

Lesson 13: A Cynical Banker Is A Good Banker<\/span><\/strong><\/p>\n

Question: Question regarding\u00a0 Daily Journal and its purchase of Wells Fargo stock.\u00a0 Wells Fargo was a levered institution and you bought it at a time when banks were failing.\u00a0 How did you arrive at that decision?<\/span><\/p>\n

Answer: Well that\u2019s a good question.\u00a0 I\u2019ll take you back to one time before.\u00a0 \u00a0When Berkshire bought Wells Fargo, the world was coming unglued in banking panic, and again real estate lending had been the source of it.\u00a0 And Wells Fargo had been huge in real estate lending\u2026\u00a0 But the answer was, we knew that the lending officers at Wells Fargo were not normal bank lending officers.\u00a0 They had come up, a lot of them, from the garment district, and they had this cynical view of human life.\u00a0 They were appropriate careful.\u00a0 And when they needed to intervene strongly they did so because they learned that was the right way to run a garment lending business. \u00a0\u00a0And they were just better.\u00a0 And so we knew they weren\u2019t going to lose as much money as everybody thought they were with that big real estate portfolio.\u00a0 Because they had chosen it better and they had managed it better, etc. etc.\u00a0 So we had an information advantage just based on general thinking and collecting data\u2026We were aware that they had that special capacity.\u00a0 Well that gave us a big advantage so we bought heavily.\u00a0 That was one.<\/span><\/p>\n

Now number two; the Daily Journal Company. \u00a0When the world was coming unglued when the Daily Journal bought Wells Fargo stock.\u00a0 But we again, we knew that the bankers at Wells Fargo were more rational than ordinary bankers.\u00a0 It was a different kind of superiority and rationality.\u00a0 It wasn\u2019t this big real estate portfolio on a shrewd way of handling developers.\u00a0 \u00a0But it was still a shrewder way of being in banking.<\/span><\/p>\n

I don\u2019t think anybody could ever buy a bank who doesn\u2019t having a feeling for how really shrewd the management is.\u00a0 Banking is a field where it\u2019s easy to delude yourself into reporting big numbers that aren\u2019t really being earned.\u00a0 It\u2019s a very dangerous place for an investor.\u00a0 Without deep insight into banking, you should (avoid it).<\/span><\/p>\n

Lesson 14: Have Powerful Mental Models and Multi-Disciplinary Approach But Don\u2019t Be A Chiropodist Who\u2019s Trying To Be A Poet<\/span><\/strong><\/p>\n

Question: Two powerful mental models are the concept of specialization, and the multi-disciplinary approach.\u00a0 Do you have any advice on synthesizing them?<\/span><\/p>\n

Answer: Saying you\u2019re in favor of synthesis is like saying you\u2019re in favor of reality.\u00a0 Synthesis is reality because we live in a world with multiple factors and models.\u00a0 And of course you\u2019ve got to have synthesis to understand a situation when two factors are intertwined.\u00a0 So of course you want to be good at synthesis.\u00a0 And it\u2019s easy to say that you want to be good at synthesis, but it\u2019s not what the reward system of the world pays for.\u00a0 They want extreme specialization.\u00a0 And by the way, for most people, extreme specialization is the way to succeed.\u00a0 Most people are way better off being a chiropodist than trying to understand a little bit of all the disciplines.\u00a0 I don\u2019t want a chiropodist who\u2019s trying to be a poet.\u00a0 I want somebody who really knows a lot about feet.\u00a0 And the rest of the world is that way.\u00a0 And so this model of being good at synthesis across a lot of disciplines it\u2019s very helpful to some people.\u00a0 But it\u2019s not the correct career advice for most people.\u00a0 For most people the correct career advice is figure out some clever specialty and get very, very good at it.\u00a0 The trouble of it is, is if that\u2019s all you do, you make terrible mistakes everywhere else.<\/span><\/p>\n

So synthesis should be your second attack on the world.\u00a0 And it\u2019s really defensive.\u00a0 Without synthesis, you\u2019ll be blindsided in all the other parts of your life that aren\u2019t \u201cchiropity\u201d.<\/span><\/p>\n

Lesson 15: Be Rational, Start Young At It<\/span><\/strong><\/p>\n

Lesson 16: No Self-Pity, Even If You Have Cancer<\/span><\/strong><\/p>\n

Question: What advice could you give for a person to improve their own rationality.<\/span><\/p>\n

Answer: Well start working at it young and keep doing it until you\u2019re as old as I am.\u00a0 That\u2019s a very good idea, and it\u2019s a lot of fun.\u00a0 Particularly if you\u2019re good at it.\u00a0 I can hardly think of anything that\u2019s more fun.<\/span><\/p>\n

You don\u2019t have to be the Emperor of Japan to get fun out of rationality.\u00a0 If you can avoid a lot of hopeless messes and you can help other people (avoid) a lot of their messes, you can be a very constructive citizen.\u00a0 If you\u2019re always rational.<\/span><\/p>\n

Being rational means that you avoid certain things, it\u2019s like \u201cI don\u2019t want to go where I\u2019m going to die.\u201d\u00a0 I don\u2019t want to go where the standard result is awful.\u00a0 Where is the standard result awful?\u00a0 Try anger.\u00a0 Try resentment.\u00a0 Try jealousy.\u00a0 Envy.\u00a0 All of these things are just one way tickets to hell.\u00a0 And yet some people just wallow in them.\u00a0 And of course, it\u2019s a total disaster for them and everybody around them.<\/span><\/p>\n

Another one that is just awful is self-pity.\u00a0 If you\u2019re dying of cancer, don\u2019t feel sorry for yourself.\u00a0 Just chin up, and suck it up.\u00a0 Self-pity is not going to improve anything, including (cancer).\u00a0 Self pity is just\u2026forget about it.\u00a0 Get it out of your repertoire.<\/span><\/p>\n

Lesson 17: Marriage Is The Best Practical Alternative and Don\u2019t Lose Family Values<\/span><\/strong><\/p>\n

Question: Some people have not found the ROI on marriage to be worth it.\u00a0 What\u2019s your valuation on the investment of marriage.<\/span><\/p>\n

Answer: Well, I think different folks can live in different ways, but I think all the evidence is that marriage is the best practical alternative for most people.\u00a0 And the statistics show it.\u00a0 They live longer.\u00a0 When you measure happiness, physiologically and so forth.\u00a0 Considering how difficult the world is, it\u2019s your best chance for most people.\u00a0 And of course it should be valued.<\/span><\/p>\n

That\u2019s one of the things I like about the Asian cultures.\u00a0 The Confusion idea that the family is really important.\u00a0 It\u2019s a very sound idea.\u00a0 If we ever lost the family values, we\u2019d have one hell of a lousy civilization.<\/span><\/p>\n

Question: Happy belated 29th birthday.<\/span><\/p>\n

Answer: Yes.\u00a0 Very belated.<\/span><\/p>\n

Lesson 18: But we don\u2019t mind owning real estate, it\u2019s part of the business.\u00a0 And it simplifies life. [Sic – Depending On The Situation]<\/span><\/strong><\/p>\n

Question: Why purchase real estate in Utah, rather than deploying it in the technology business?<\/span><\/p>\n

Answer: We think we\u2019re going to be in Logan, Utah for a long time.\u00a0 We have a very happy bunch of employees there.\u00a0 They like their work, they like their community, they like everything about it.\u00a0 And it\u2019s part of a business operation.\u00a0 We\u2019ve got customers who come there and it\u2019s a very presentable building.\u00a0 I\u2019ve never seen it, but it\u2019s got a river that flows by.\u00a0 Of course we\u2019re glad to own it.\u00a0 We own this real estate.\u00a0 We bought it cheaply, we built it cheaply, it\u2019s a nice piece of property.\u00a0 The neighborhood around it has steadily upgraded and gentrified it as we expected.\u00a0 Nothing wrong with owning a little real estate.\u00a0 Our way of getting ahead was not to be real estate operators.\u00a0 But we don\u2019t mind owning real estate, it\u2019s part of the business.\u00a0 And it simplifies life.<\/span><\/p>\n

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

Excellent Book: Charlie Munger For All Seasons Lesson 13: A Cynical Banker Is A Good Banker Question: Question regarding\u00a0 Daily<\/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-312","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\/312","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=312"}],"version-history":[{"count":3,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/312\/revisions"}],"predecessor-version":[{"id":905,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/312\/revisions\/905"}],"wp:attachment":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/media?parent=312"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/categories?post=312"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/tags?post=312"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}