{"id":442,"date":"2017-03-11T10:55:25","date_gmt":"2017-03-11T10:55:25","guid":{"rendered":"http:\/\/charliemungersays.com\/?p=442"},"modified":"2017-10-24T23:23:57","modified_gmt":"2017-10-24T23:23:57","slug":"56-charlie-mungers-wisdom-nuggets-djco-annual-meeting-2014-part-4-nugget-19-24","status":"publish","type":"post","link":"https:\/\/charliemungersays.com\/index.php\/2017\/03\/11\/56-charlie-mungers-wisdom-nuggets-djco-annual-meeting-2014-part-4-nugget-19-24\/","title":{"rendered":"56. Charlie Munger’s Wisdom Nuggets: DJCO Annual Meeting 2014: Part 4 Nugget 19-24"},"content":{"rendered":"

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

Ref: https:\/\/www.forbes.com\/sites\/phildemuth\/2014\/09\/19\/charlie-munger-and-the-2014-daily-journal-annual-meeting-a-fans-notes\/#7c92323d7d2c<\/a><\/p>\n

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

Lesson 19: \u201cA window as a must have in the bedroom\u201d is a fetish.<\/strong><\/p>\n

Munger: What planet do you live on?<\/p>\n

Audience Member: I live in Marina Del Ray.<\/p>\n

Munger: Well, that may explain it. (laughter)\u00a0 I regard The Wall Street Journal as a must-read publication.\u00a0 I don’t think it’s lost its basic integrity.\u00a0 I think it’s a pretty admirable and useful publication.\u00a0 The editorials I always thought were a little nuts.\u00a0 You know, going way back.\u00a0 They were so right wing and so pure.\u00a0 But, it seems to me that the editorials are saner now.<\/p>\n

Q: What architectural challenges did you have for the Munger Graduate Residence Hall at the University of Michigan?<\/p>\n

Munger:\u00a0 That was interesting. The idea of getting a whole lot of graduate students from multiple disciplines in one big building, which was exceptionally well-located, close to everything, with exceptional common facilities, and to get a bunch of visiting professors and a bunch of fellows (who were sort of equivalent to the Lowell fellows at Harvard), struck me as a very useful thing to do for Michigan.\u00a0 What was architecturally interesting about it was to get that many people on that irreplaceable site, we had to take the windows out of most of the bedrooms. That was not an automatic sale.<\/p>\n

What I did, since I knew it would work, is I mocked-up a model.\u00a0 If it hadn’t done that, Michigan never would have accepted it [Munger\u2019s $110 million donation for the building].\u00a0 It just sounded awful.\u00a0 No windows in the bedrooms?\u00a0 About 80% of the bedrooms have no windows.\u00a0 That’s how we got so many on the site.\u00a0 It costs a hundred dollars more a month to have a windowed bedroom.\u00a0 I\u2019m capable of learning from a little episode like that.\u00a0 In the architectural profession, that ability is usually lacking.\u00a0 Particularly in a university setting where they’re very tradition-bound. But, Michigan was smart: they saw it was right.\u00a0 It’s going to be a non-event.\u00a0 Somebody has a fetish about a window in the bedroom, we’ve got some for fetishists.<\/p>\n

Lesson 20: If you are a poor kid from a poor family, you might get some free books. If you become a billionaire, you\u2019d get 10 times more. Book Recommendation: Ron Chernow’s book on John D. Rockefeller, Sr.<\/strong><\/p>\n

Q: What books would you recommend?<\/p>\n

Munger: People like you send me so many books, I don’t have time to buy my own.\u00a0 Man came to dinner last night, a famous money manager. Brought me three books. I will like the books, I guarantee you.\u00a0 I have a torrent of books coming to me free.\u00a0 I’m a charity case.\u00a0 I actually like a lot of the books because the people have figured me out pretty well.\u00a0 So, I’m living in a very favored world and people give me free books. It was not my ambition in life to get into this position, but it happened, and I rather enjoy it.<\/p>\n

Of course, I’m very selective, I sometimes skim.\u00a0 Sometimes I read one chapter and I sometimes read the damn thing twice.\u00a0 It’s been my experience in life, if you just keep thinking and reading, you don’t have to work.<\/p>\n

Q:\u00a0 You mentioned recently that you enjoyed Ron Chernow’s book on John D. Rockefeller, Sr.<\/p>\n

Lesson 21: John D. Rockefeller\u00a0 is an excellent cr\u00e8me-de la cr\u00e8me philanthropist eg. Just for small amounts of money, doing huge amounts of good.<\/strong><\/p>\n

Munger:\u00a0 Oh, hugely.\u00a0 If any of you haven’t read that book, you should read it.\u00a0 That’s a wonderful biography.\u00a0 [Titan, by Ron Chernow] It shows how high grade that man was as a business partner.\u00a0 He may have tough on competitors, but as a partner, he was one of the most admirable people who have ever lived. And as a philanthropist — you can actually chart what his philanthropy has accomplished — some of the most remarkable things in the whole history of philanthropy.<\/p>\n

Let me give one example.\u00a0 In China, they had deaths by the millions every year.\u00a0 Woman tried to have a second child and their bones just wouldn’t enable the child to be delivered.\u00a0 So the terrible, horrible deaths all these young women died, millions of them.\u00a0 Rockefeller sent doctors over there and they figured out that in 4,000 years of intense farming, they bleached something out of the soil that these women’s bones needed.\u00a0 It was pretty cheap to put back.\u00a0 Lo and behold, he did all kinds of things like that.<\/p>\n

Just for small amounts of money, doing huge amounts of good.\u00a0 Look at the people who were financed by the Rockefeller Foundation.\u00a0 Very admirable people, the physicists in the 1930’s and so on.\u00a0 He totally revolutionized medical education in the United States with 50 million dollars.\u00a0 He really revolutionized medical education in the world.\u00a0 If you haven’t read that book you ought to read it.<\/p>\n

It doesn’t deal adequately with his philanthropy.\u00a0 But it deals adequately with the way he handled his partners.\u00a0 He would do things like say, \u201cI know this bothers you and it\u2019s risky, but I think we have to do it.\u00a0 I’ll put up all the money and if it fails, I’ll take the loss.\u00a0 If it works, you can buy me out at my cost, so you\u2019ll get the benefit.\u201d\u00a0 When he did that, the other partners, who were also rich old men, would say, \u201cHell, John, if you feel that strongly about it, I’ll put up my share.”<\/p>\n

Which is the right way.\u00a0 We had a person do that at Berkshire.\u00a0 The nice Mormon gentleman who sold us the furniture company in Utah [R.C. Willey Home Furnishings].\u00a0 He wanted to go into Las Vegas and not open on Sunday.\u00a0 Which is not an intuitive decision.\u00a0 He said, “I’m asking\u00a0 you to do something very peculiar for my religion. I’ll put up all the money, I’ll take all the risk.\u00a0 If it works, you buy it out at my cost, and if it fails, I’ll take the loss.”<\/p>\n

We weren’t like Rockefeller.\u00a0 We took the deal.\u00a0 (laughter)\u00a0 That behavior is so rare, so noble, you shouldn’t squelch it.<\/p>\n

Q:\u00a0 Would Daily Journal consider selling itself to a competitor if the offer was right, or is it going to remain an independent company?<\/p>\n

Lesson 22: Run Your Company In A Way That Any Intelligent Person Would Want To Buy It.<\/strong><\/p>\n

Munger:\u00a0 Generally speaking, we like selling to people we like and admire.\u00a0 Not everybody would fit that category.\u00a0 We’re trying to run it so that any intelligent person would want to buy it. My attitude in running the Daily Journal, with its technology thing, is that Google would be out of its mind not to buy it.\u00a0 It’s going to take years for them to figure that out, though.<\/p>\n

 <\/p>\n

Lesson 23: No Method That Guarantee You Will Not Miss Any Chances.<\/strong><\/p>\n

Q:\u00a0 Last year you talked about Belridge Oil and how you made a mistake not buying more when you had the chance.\u00a0 Can you talk about your investment process?<\/p>\n

Munger: In those days, Belridge was a pink-sheet company.\u00a0 It was very valuable.\u00a0 It had a huge oil field, it wasn’t even leased, they owned everything, they owned the land, they owned the oil field, everything.\u00a0 It had liquidating value way higher than the per share price — maybe three times.\u00a0 It was just an incredible oil field that was going to last a long time, and it had very interesting secondary and tertiary recovery possibilities and they owned the whole field to do whatever they wanted with it.\u00a0 That’s rare, too.<\/p>\n

Why in the hell did I turn down the second block of shares I was offered?\u00a0 Chalk it up to my head up a place where it shouldn\u2019t be.\u00a0 So, that’s why I made that decision.\u00a0 It was crazy.\u00a0 So if any of you made any dumb decisions, you should feel very comfortable.\u00a0 You can survive a few.\u00a0 It was a mistake of omission, not comission, but it probably cost me $300 – $400 million.\u00a0 I just tell you that story to make you feel good about whatever investment mischances you’ve had in your own life.\u00a0 I never found a way of avoiding them all.<\/p>\n

Q:\u00a0 Given your accumulated wisdom, what do you know today that you wish you knew when you were first started investing in stocks?<\/p>\n

Munger:\u00a0 Like Warren [Buffett], when I was young I scrambled around doing anything that would work, and I could get a tiny little obscure company that was too cheap because they were on the pink-sheets, and all kinds of things.\u00a0 As I got more money, I decided I didn’t like all that scratching around.\u00a0 I was thinking about things I didn’t want to think about.\u00a0 I wanted to admire the people who were running the business.\u00a0 I wanted to admire the business, think it well-placed, and going to do well.\u00a0\u00a0 So, I drifted into this, good people, good company field in my old age, and I found it much more comfortable, and my returns haven’t gone down that much.\u00a0 It’s remarkable.<\/p>\n

Q:\u00a0 What would you tell a young man today about what he should be reading on a daily basis?<\/p>\n

Munger:\u00a0 You’ve got to have a main publication that’s using some editorial discretion because you can’t read 500 pages.\u00a0 The Wall Street Journal, with its editing, is a very convenient thing for me, and I’ll bet all of you read it, too.\u00a0 Who doesn’t read the Wall Street Journal? Raise hands if you don’t read it.<\/p>\n

(One hand in the room goes up)<\/p>\n

 <\/p>\n

Munger: Why don’t you read it?<\/p>\n

Audience member: It’s a publication I haven’t picked up yet.<\/p>\n

Q:\u00a0 I\u2019m Jason Zweig from The Wall Street Journal.\u00a0 Thanks for the free ad.\u00a0 If you want I can ask Rupert [Murdoch] if he’d like to reciprocate for the Daily Journal.\u00a0 Late in his life, Ben Graham said that in his opinion there was no reason to imagine that an individual investor who thought appropriately couldn’t outperform institutions.\u00a0 Do you think the relative playing field has shifted?\u00a0 Do individuals have a greater or a lesser advantage today?<\/p>\n

Lesson 24: Search Out A (Few) Place(s) Where You Have Real Advantage & You\u2019ll Do Well<\/strong><\/p>\n

Munger:\u00a0 In markets as big as this, some shrewd guy who\u2019s willing to search out a few places where he has a real advantage will always do well.\u00a0 There are always going to be ways in markets this big for some smart people to figure out something where they’ll make money at an unusual rate, just because they’re smarter and more diligent.\u00a0 That will never go away.<\/p>\n

I don’t think there will ever be a universal easy solution where people can do that.\u00a0 The American market is tough now to outperform if you’re buying big stocks in big quantities.\u00a0 I think it’s a pretty damned efficient market, and I don’t say it can’t be done, but I just think it’s plenty difficult.\u00a0 The evidence is overwhelming that even though there are zillions of people who have tried, the ordinary result is that they don’t succeed.<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Excellent Book: Charlie Munger For All Seasons Ref: https:\/\/www.forbes.com\/sites\/phildemuth\/2014\/09\/19\/charlie-munger-and-the-2014-daily-journal-annual-meeting-a-fans-notes\/#7c92323d7d2c https:\/\/www.facebook.com\/groups\/charliemungersays\/ Lesson 19: \u201cA window as a must have in the<\/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-442","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\/442","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=442"}],"version-history":[{"count":5,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/442\/revisions"}],"predecessor-version":[{"id":879,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/442\/revisions\/879"}],"wp:attachment":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/media?parent=442"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/categories?post=442"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/tags?post=442"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}