{"id":317,"date":"2017-02-07T02:33:24","date_gmt":"2017-02-07T02:33:24","guid":{"rendered":"http:\/\/charliemungersays.com\/?p=317"},"modified":"2017-10-25T00:31:14","modified_gmt":"2017-10-25T00:31:14","slug":"32-djco-annual-meeting-2016-part-v-lesson-19-25","status":"publish","type":"post","link":"https:\/\/charliemungersays.com\/index.php\/2017\/02\/07\/32-djco-annual-meeting-2016-part-v-lesson-19-25\/","title":{"rendered":"32. DJCO Annual Meeting 2016 – Part V: Lesson 19-25"},"content":{"rendered":"

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

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

Lesson 19: Family Is More Important Than Wealth & Prominence<\/strong><\/p>\n

Question: Do you think a person who can\u2019t make money running a New Jersey casino is qualified to be President of the United States?<\/p>\n

Answer: Well, he did make money for quite a while.\u00a0 My attitude is that anybody who makes his living running a casino is not morally qualified to be President of the United States.\u00a0 I regard it as a very dirty way to make money.<\/p>\n

Question: What has given you the greatest sense of accomplishment?<\/p>\n

Answer: Well, my family life has been more important to me than wealth or prominence.\u00a0 On the other hand, I hated poverty and obscurity. (laughter) I tried to get out of them and it has given me some satisfaction that I came a long way from where I\u2019ve started.\u00a0 I think most people who\u2019ve come a long way from where they\u2019ve started feel pretty good about it.\u00a0 I think most the people who\u2019ve finally sat atop of Everest, even though they\u2019ll only stay there for 15 seconds\u2026\u00a0 And so, I think that\u2019s good.\u00a0 Cicero use to say that \u2018one way to be happy in old age is to remember a lot of achievements in your past.\u2019\u00a0 Now some people say that\u2019s too damn self-centered and you should be thinking about God or something, but I agree with Cicero.\u00a0 It\u2019s ok to live that kind of a life if you\u2019re kind of pleased with it when you\u2019re old and look back.<\/p>\n

Lesson 20: Go For Old Fashion Morality: Good Behavior, Dependability, Discipline, A Little Generosity<\/strong><\/p>\n

Lesson 21: \u201cIf you can keep your head when all about you are losing theirs\u2026\u201d.\u00a0 \u201cBe a Man my son!\u201d Quoting Kipling<\/strong><\/p>\n

Question: If you had any advice to give to a younger version of yourself, what would it be?<\/p>\n

Answer: Well my advice is always so trite.\u00a0 The good behavior, being dependable, and morality.\u00a0 It makes your life easier.\u00a0 It makes it work better.\u00a0 You don\u2019t have to remember your lies which gets complicated if you keep lying all of the time.\u00a0 In fact, it gets so complicated that you\u2019re sure to fall off and you\u2019ll be recognized as a liar.\u00a0 So, I think all the old fashioned morality works.\u00a0 The old fashioned discipline works.\u00a0 The old fashioned good behavior and a little generosity.<\/p>\n

We all know people who have people come to their funeral just to make sure they\u2019re dead.\u00a0 (laughter)\u00a0 You don\u2019t want to be in that crowd.\u00a0 You want to live your life so that some people will actually miss you when you\u2019re gone.<\/p>\n

I think Kiplings\u2019s \u2018if\u2019, is a great poetry.\u00a0 Kiplings doesn\u2019t exist in the modern college anymore.\u00a0 It wasn\u2019t politically correct.\u00a0 So I think Kiplings\u2019s \u201cif\u201d is great poetry and it\u2019s great advice.\u00a0 \u201cIf you can keep your head when all about you are losing theirs\u201d.\u00a0 What\u2019s wrong with that?\u00a0 And the quote, \u201cBe a Man my son!\u201d\u00a0 Why don\u2019t you want to be a man?\u00a0 You want to be some idiot child all your life?\u00a0 Some angry twit?\u00a0 There\u2019s so many of them already.\u00a0 There\u2019s so much to be gained by never being an angry twit.\u00a0 In fact I think anger is just\u2026If you want to be philosophical, this political situation we all face now, of course it\u2019s disgraceful, a lot of these people.\u00a0 I mean, it\u2019s bad that a leading civilization has candidates for a high office many of them like those we were talking about. \u00a0And they\u2019re not all in one party. \u00a0You don\u2019t want to get angry.\u00a0 After all, politicians have been politicians for a long, long, time.\u00a0 And, you want to operate constructively?\u00a0 Vote constructively.<\/p>\n

Anger.\u00a0 There\u2019s so much anger in politics right now.\u00a0 So much automatic hatred.\u00a0 How could any of us really know whether the United States will be better 50 years from now because we vote Republican or vote Democrat in the next election?\u00a0 Who can tell what the exact mix is between compassion and something else?<\/p>\n

All of those things were in the old behavior rules.\u00a0 By the way, the Muslim behavior rules read a lot like the Old Testament.\u00a0 Which of course they copied.\u00a0 They claim they came directly from God, but really they stole them from the Jews.<\/p>\n

Lesson 22: There\u2019s A (sic: generally inverse) Relationship Between Oil Prices and Economic Growth. If you think this is a tough question, Charlie Munger can make it tougher.<\/strong><\/p>\n

Question: What is the relationship between oil prices and economic growth?<\/p>\n

Answer: I think it\u2019s obvious that if oil had been a little cheaper and easier, the growth would have been greater than mankind had.\u00a0 In that sense, if oil gets very expensive and we still need it desperately, it \u00a0will make life harder, and so there is that correlation between oil prices and economic growth.<\/p>\n

On the other hand, some very peculiar things happen.\u00a0 When you take Exxon and Chevron and so forth.\u00a0 What\u2019s happened to make those things good investments over the long term, is the damn price of oil went up faster than their production went down.\u00a0 Now name me another business where you get richer and richer where your production of real units, keep going down, down, down.\u00a0 So, not everybody would have predicted that in advance including most of the economists.\u00a0 It\u2019s a complicated subject\u2026<\/p>\n

And there\u2019s another trick to it.\u00a0 People who really have a lot of free energy, like the people of the middle east?\u00a0 They have very dysfunctional economies.\u00a0 They\u2019re (like) a bunch of rich people spending their capital and not knowing how to do anything that anybody else wants to buy.\u00a0 Maybe in that sense, having a tougher hand has been good for us.<\/p>\n

My answer to your question reminds me of what my old Harvard Law professor who use to say to me, \u201cCharlie, let me know what your problem is and I\u2019ll try and make it harder for you.\u201d\u00a0 I\u2019m afraid that\u2019s what I\u2019ve done for you.<\/p>\n

Question 23: In Choosing What You Want To Do: You Want To Be In A Place Where You Are Stressed (in terms of cognitive ability etc). So, If You Are Not Good At Boxing and You Want To Box With Mike Tyson, You Are Being Stressed At The Wrong Place.<\/strong><\/p>\n

Question: How do you understand a new business or new industry that you are trying to get into where the dynamics are different?\u00a0 How do you get deep insights into the specific domain?<\/p>\n

Answer: The answer is barely.\u00a0 I just barely have enough cognitive ability to do what I do.\u00a0 And that\u2019s because the world promoted me to the place where I\u2019m stressed.\u00a0 And if you\u2019re lucky, that will happen to you.\u00a0 That\u2019s where you want to end up is stressed. \u00a0You want to have your full powers called for. \u00a0And believe you me, I\u2019ve had that happen to me all my life.\u00a0 I\u2019ve just barely been able to think through the right answer time after time after time.\u00a0 And sometimes I\u2019ve failed.<\/p>\n

Lesson 24: Avoid Bad Morals, Bad Policies<\/strong><\/p>\n

Question: Last year, you had some very pointed comments concerning Valeant, and I want to know, do you have\u2026<\/p>\n

Answer: It\u2019s caused me nothing but trouble. (laughter)<\/p>\n

Question: Do you have any update regarding Valeant?\u00a0 Do you have any areas where you have similar concerns?<\/p>\n

Answer: It probably wasn\u2019t wise for me to inject myself, I have no dog in that hunt.\u00a0 I have no interest in the pharmaceutical business.\u00a0 I have no interest in Valeant.\u00a0 It\u2019s just that you people have come so far\u2026(laughter)\u2026to tell you amusing stories about life and make comments about current affairs.\u00a0 And Valeant was such an extreme example of misbehavior.<\/p>\n

It ended up with one of the Valeant shareholders saying that Warren Buffett was a sinner because he owned Coca-Cola.\u00a0 I drew retaliation to Warren.\u00a0 By the way, that\u2019s a good place, if you\u2019re anybody that\u2019s mad at me today, why (not get) mad at Warren?\u00a0 He can handle it, he\u2019s a very philosophical man.<\/p>\n

It is true that these crazy false values, and these crazy excess, is, it\u2019s bad morals and it\u2019s bad policy. \u00a0It\u2019s bad for the Nation.\u00a0 \u00a0It\u2019s just bad, bad, bad.\u00a0 And there\u2019s a lot of it.\u00a0 And of course there\u2019s a lot of it is in American Finance\u2026 \u00a0\u00a0The truth of the matter is that Elizabeth Warren would not agree with me on many subjects and I wouldn\u2019t agree with her on many subjects, but she is basically right when she says that American finance is out of control and has too much evil and folly.\u00a0 And it isn\u2019t good for the rest of us.\u00a0 Both Elizabeth Warren and Bernie Sanders, not two of my favorite people on earth, are absolutely right on that subject.\u00a0 And the extent that you all see it.\u00a0 You all see what all goes on in finance with the craziness\u2026It\u2019s very bad for all of us that we have this huge overdevelopment of finance.\u00a0 And yet, it\u2019s pretty hard to do anything about it.<\/p>\n

What happened was, you look back to say Edwardian England, or a little before.\u00a0 And maybe 300 people owned half the land in England and they had nothing to do.\u00a0 What did they do?\u00a0 They went into the clubs of London and they sat around the card tables and they played (card games) for high stakes.\u00a0 And that\u2019s what human nature does when people have a lot of leisure and so on.<\/p>\n

Fade in, fade out, and multiply the wealth per capita of the world by 30 or so and now we got all kinds of people who are like the Lords of England who had all that time to sit around and play cards against one another and enjoy thrills and games of gambling.<\/p>\n

We have a vast gambling culture and people have made it respectable.\u00a0 Instead of betting on horses or prize fights, they bet on the price of securities, or the price of derivates relating to securities.\u00a0 Of course you can bet on athletic contests.\u00a0 We have a huge amount of legalized gambling.\u00a0 And of course the public market that operates every day with transactions is an ideal casino.\u00a0 And there\u2019s a whole bunch of people who want to own the casino and make a lot of money without losing money on inventories or credit risks, or any other irritating parts of business.\u00a0 Just to sit there and have every night gold go higher and higher. \u00a0Who doesn\u2019t want to be croupier at a casino?\u00a0 And very respectable people get drawn into it if they see other people getting rich at it.\u00a0 There\u2019s way too much of that in America.\u00a0 And too much of the new wealth has gone to people who either own the casino or they\u2019re good at playing others in the casino.\u00a0 And I don\u2019t think the exhalation of that group has been good for (the public generally).<\/p>\n

And I am to some extent a member of that group\u2026 and I\u2019m always afraid that I\u2019ll be a terrible example for the youth that I think will just want to make a lot of money with soft white hands and not do much for anybody else, I just wanted to be shrewd in buying little pieces of paper.\u00a0 Even if you do that honestly, I don\u2019t consider it very much of a life.\u00a0 Just being shrewd about buying little pieces of paper, shrewder than other people, is not an adequate life.\u00a0 It\u2019s not a good example to other people.\u00a0 And it\u2019s the reason that people like Warren and me (are charitable and are) running businesses.\u00a0 We\u2019re not just buying little pieces of paper.<\/p>\n

So I think that we have something going in our nation that is really very serious and very bad.\u00a0 And I hate to agree with Elizabeth Warren on this subject, but she\u2019s right.\u00a0 I don\u2019t see a way of stopping it except with some big legislation changes.<\/p>\n

And you\u2019ll say, \u201cWhat difference does it make?\u201d\u00a0 Well, what happens is, as the cyclicality of the gambling with securities and other assets goes on, what happens is, the big busts hurt us more than the big booms help us.\u00a0 And we say that when the great depression ended and the rise of Adolf Hitler.\u00a0 A lot of people think that Hitler rose because of the great Weimar inflation.\u00a0 But you know Germany recovered pretty well from Weimar inflation.\u00a0 What they did is they destroyed the currency.\u00a0 They just issued a new currency.\u00a0 It\u2019s really interesting.\u00a0 They said, (\u2018oh people who got rid of their old mortgages we\u2019ll replace them with new mortgages and they\u2019ll owe us the new currency back.\u2019)\u00a0 But what really enabled Hitler to rise was the Great Depression.\u00a0 You put it on top of the Weimar inflation the Great Depression and the people were just so demoralized that they were subject to being snookered by a guttersnipe like Adolf Hitler.\u00a0 So I think this stuff is deadly serious in that these crazy booms should be (nipped in the bud)\u2026\u00a0 People like Alan Greenspan, he\u2019s an amiable man but he was an idiot! (laughter)<\/p>\n

You do not make the head of the Federal Reserve, the governor of all banking, somebody whose hero is Ayn Rand!\u00a0 Who believed in no government at all!\u00a0 It\u2019s a very unlikely place to look for correct decision making.\u00a0 And it\u2019s probably not the kind of decision making that we observe.\u00a0 I think he\u2019s an honest and amiable man, but of course he didn\u2019t see reality the way that it was.\u00a0 A lot of people think that if an ax murder happens in the free market that it has to be all right because free markets are all right.\u00a0 A lot of those people are in my party by the way.<\/p>\n

Question: Is the Automobile Industry meaningfully different today than it was (10) years ago? Does GM make sense in the Berkshire portfolio?<\/p>\n

Answer: The second one is easy.\u00a0 General Motors is in our Berkshire portfolio because one of our young men likes it.\u00a0 And Warren lets the young men do as they please.\u00a0 Warren, when he was a young man, didn\u2019t want any old man telling him what to do.\u00a0 So he delivers that kind of freedom to his young men.<\/p>\n

I haven\u2019t got the faintest idea of why that young man likes GM.\u00a0 It is true that it\u2019s statistically cheap and it may be affected by the federal government in the end.\u00a0 So it may be a very good investment.\u00a0 But the auto industry is about as brutally competitive an industry now as I have ever seen it.\u00a0 Everybody knows how to make good cars.\u00a0 Everybody.\u00a0 And they rely on the same suppliers.\u00a0 And the cars last a long time with very little service.\u00a0 And everybody leases them at cheap rents, and has all kind of incentives.\u00a0 It has all of the earmarks of a very commoditized, difficult, super competitive market.\u00a0 So I don\u2019t think the auto industry is going to be a terribly easy place. \u00a0And it may actually shrink one of these days.\u00a0 In other words, the culture of everybody having three or four cars could actually shrink.\u00a0 And so, I think that the auto industry is not a cinch.\u00a0 If I were investing in the auto industry, I\u2019d want some place that I thought was way the hell better competitor than the others, and that\u2019s hard to find.<\/p>\n

Lesson 25: If You Did Not Predict The Recent Low Oil Prices, You Are In Good Company: Neither Did Our Teacher Charlie Munger. In Commodities, You Can Get Extreme High Prices and Extreme Low Prices<\/strong><\/p>\n

Question: For most of the oil market\u2019s history there\u2019s been some entity enforcing production controls.\u00a0 But today Saudi Arabia (operates) more as a base load producer than controlling OPEC\u2019s production.\u00a0 Would you suspect that this will result in protracted negative impact on the economics of all those related to oil production?\u00a0 Or is the way to bet that some entity will eventually re-emerge for production control.<\/p>\n

Answer:\u00a0 I would not have predicted that oil would be at its present price. \u00a0In fact, if you forced me to bet, I would have bet that what has happened wouldn\u2019t have happened.\u00a0 But it did.\u00a0 I think that it\u2019s generally true that with these commodities you can get periods of extreme high prices, like we had in iron ore, and extreme low prices, like we now have with iron ore.\u00a0 So I think that commodities do strange things both up and down in terms of prices.\u00a0 And of course they have macroeconomic consequences.\u00a0 And huge consequences if you\u2019re in Australia having these commodities going way down is terrible.\u00a0 If you\u2019re in the tar sands area of Canada having oil prices go down to where they are now\u2026I don\u2019t even know how economic it is to produce tar sands oil at $30 per barrel.\u00a0 My guess is that it\u2019s not very attractive.\u00a0 And it may not work at all.\u00a0 You\u2019re in a weird period.<\/p>\n

But I think it\u2019s the nature of the human condition that with free markets in stuff like iron ore and oil, you\u2019re going to have weird periods high prices and weird periods of low prices.\u00a0 I\u2019ve never been able to predict accurately, or make money predicting accurately those swings.\u00a0 We\u2019ve tended to get into good businesses and then take the bumps as they fall.<\/p>\n

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

Excellent Book: Charlie Munger For All Seasons Lesson 19: Family Is More Important Than Wealth & Prominence Question: Do you<\/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-317","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\/317","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=317"}],"version-history":[{"count":3,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/317\/revisions"}],"predecessor-version":[{"id":904,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/317\/revisions\/904"}],"wp:attachment":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/media?parent=317"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/categories?post=317"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/tags?post=317"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}