{"id":695,"date":"2017-06-25T22:10:11","date_gmt":"2017-06-25T22:10:11","guid":{"rendered":"http:\/\/charliemungersays.com\/?p=695"},"modified":"2017-10-24T22:40:04","modified_gmt":"2017-10-24T22:40:04","slug":"113-wesco-annual-meeting-2010-part-3-wisdom-pick-13-18","status":"publish","type":"post","link":"https:\/\/charliemungersays.com\/index.php\/2017\/06\/25\/113-wesco-annual-meeting-2010-part-3-wisdom-pick-13-18\/","title":{"rendered":"113. Wesco Annual Meeting 2010 \u2013 Part 3 \u2013 Wisdom Pick: 13-18"},"content":{"rendered":"

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

New Book Launch \u2013 Please check this out: https:\/\/charliemungersays.com\/index.php\/books\/<\/a><\/strong><\/p>\n

Wisdom Pick 13. <\/strong>The Berkshire model is extreme decentralization combined with extreme centralization of excess cash.<\/strong><\/p>\n

Back to Wesco. What about the future? succession planning? You shouldn\u2019t think there is a future for an independent Wesco. You guys bid the stock up to \u201cwhere it would violate all of Warren Buffett\u2019s principles as a capitalist\u201d to buy you out with stock, and we don\u2019t like to force people out with cash, but it will happen eventually. Either the price will be right, or at some point it will be just a blip to Berkshire. \u201cI don\u2019t know why you like this sort of thing. I was never this popular in my youth.\u201d<\/p>\n

The Berkshire model is extreme decentralization combined with extreme centralization of excess cash. Both features are extremely peculiar but the benefits exceed the harm from each. \u00a0Centralization of investment means they think about opportunity cost and look at opportunities broadly. For example, Charlie was once asked to look at company in China, liked it, but said no because he knew of something else he liked even better.<\/p>\n

Wisdom Pick 14. T<\/strong>he standard result for a dominant company when disruptive new technology comes along is to fail. (Quoting Bill Gates)<\/strong><\/p>\n

Why high-tech stuff like Iscar and BYD after all these years? When Charlie was young he poured money into a scientific-instrument company with a great oscillograph. Then some venture capitalist hired the top guy away, and the invention of magnetic tape came along and suddenly made the oscillograph obsolete. Damn near went broke and soured on high tech. So why now? Multiple models, and in this case the northern pike model. If you throw a few northern pike into a lake full of trout, soon you have big pike and few trout. Charlie recognized Walmart as a northern pike. Costco is too, plus they have Gil Glazer morality; he wouldn\u2019t want to compete with Costco. Bill Gates said more than once that the standard result for a dominant company when disruptive new technology comes along is to fail. So why invest in tech now? Because some models got so powerful that we thought we could make predictions.<\/p>\n

Wisdom Pick 15. The Proof Of The Pudding Is In The Eating (<\/strong>Charlie Munger recently drove a BYD car with a 200-mile battery around the parking lot at Dodger Stadium and was very impressed; it compared favorably to his Mercedes 550.)<\/strong><\/p>\n

If Charlie said he could lift 800 pounds you\u2019d laugh, but if you saw him do it a few times you\u2019d change your mind. The same thing happened with BYD. True, we bought in early at a much better price than currently through the wisdom of Li Lu. How can you know we got it right? You can\u2019t, but we\u2019re not going to do it often\u2014there aren\u2019t that many BYD\u2019s. Charlie doesn\u2019t consider it venture capital; more like betting on a sure thing. Big lithium batteries for utilities to time-shift, electric cars, better cars for the masses in China\u2014these are all Holy Grails. Why do these folks in China have the lead in pursuing them? A very unusual individual in a very unusual place.<\/p>\n

Charlie recently drove a BYD car with a 200-mile battery around the parking lot at Dodger Stadium and was very impressed; it compared favorably to his Mercedes 550. Why is Mercedes forming a joint venture with BYD? It can only be because they\u2019ve tested the battery. Still, Charlie\u2019s not recommending any of you get into tech. The old ways were safer. But there\u2019s an exception to every rule, and \u201cI think I\u2019m right about BYD.\u201d And you\u2019re entitled to an explanation.<\/p>\n

Wisdom Pick 16. <\/strong>I like Lee Kuan Yew\u2019s solution of raising regulators\u2019 pay.<\/strong><\/p>\n

Questions and answers to follow in Part II. Wesco 2010 Meeting Notes, Part II.\u00a0 Questions and Answers<\/p>\n

[I\u2019ve tried to identify the questioners with as much as I caught of their self-identifications.]<\/p>\n

Q (New York BRK shareholder) How big a problem are distorted incentives of regulators<\/p>\n

    \n
  1. the regulated (pay differentials and regulators hoping for later jobs in industry)? In<\/li>\n<\/ol>\n

    Singapore. . .<\/p>\n

    A Yes, it\u2019s a problem, and yes, I like Lee Kuan Yew\u2019s solution of raising regulators\u2019 pay (he also has draconian anti-corruption policies). But in the US, I think the problem with regulators is more \u201ccognitive insufficiency\u201d than corruption.<\/p>\n

    Wisdom Pick 17. Don\u2019t Fail To Change What Needs Changing. T<\/strong>his very failure that\u2019s bothering you so much looks like the first rays of sunshine to me.<\/strong><\/p>\n

    Q (Whitney Tilson) Cayne and Schwartz are up testifying to Congress that there\u2019s nothing they could have done to prevent the meltdown. Are the hearings a circus?<\/p>\n

    A There\u2019s not much point in the hearings. It\u2019s human nature to blame others. But Congress is \u201cmad,\u201d and rubbing their noses in the mess they made isn\u2019t useless.<\/p>\n

    Q (David Winters) When will insurance pricing be better, and Berkshire able to grow float?<\/p>\n

    A Odds are float will not grow much, and may even decline. It\u2019s very hard to increase it. \u201cIs that negative enough for you?\u201d<\/p>\n

    Q (Some media guy) Questioner was in China and really blown away; he doesn\u2019t think the US is recovering and getting back to basics. Why aren\u2019t we getting back to basics, manufacturing and infrastructure?<\/p>\n

    A Of course we\u2019re seeing more troubles than we\u2019re used to, and we\u2019ve failed to change some things that need changing, such as education. But I\u2019m not as pessimistic as you are; I\u2019m optimistic about California despite it\u2019s troubles\u2014it has its climate, it faces Asia, it has an influx of new talent, especially from Asia. And a big mess brings on corrections; \u201cthis very failure that\u2019s bothering you so much looks like the first rays of sunshine\u201d to me.<\/p>\n

    Wisdom Pick 18. <\/strong>It\u2019s good to understand models for failure.<\/strong><\/p>\n

    Wisdom Pick (Bonus). <\/strong>An ounce of prevention is often worth a ton of cure.<\/strong><\/p>\n

    Q Any tips on how to develop temperament and character in young people of the BRK type, rather than the MBA type?<\/p>\n

    A It\u2019s good to understand models for failure. For example, East Germany. The best 5 million left and the worst 17 million stayed. Then they lived under Communism 60 years. That\u2019ll ruin even Germans. The same thing is going on in central cities. It\u2019s not an easy problem to fix. Prevention is preferable, though it\u2019s not easy to preemptively stamp things out in a democracy. You can\u2019t blame the Greek politicians for trying to make it easier for Greeks, but when it comes unglued. . . . In business, if you see high-quality people leaving A for B and C, and no high-quality people going into A, that\u2019s a similar model for failure.<\/p>\n

    I recommend a tough-minded, rational approach, plus good will. An ounce of prevention is often worth a ton of cure.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Excellent Book: Charlie Munger For All Seasons New Book Launch \u2013 Please check this out: https:\/\/charliemungersays.com\/index.php\/books\/ Wisdom Pick 13. 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":[1,3,4],"tags":[],"class_list":["post-695","post","type-post","status-publish","format-standard","hentry","category-charlie-mungers-3-categories-of-investment-in-out-too-tough","category-investment","category-wisdom"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/695","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=695"}],"version-history":[{"count":4,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/695\/revisions"}],"predecessor-version":[{"id":829,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/695\/revisions\/829"}],"wp:attachment":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/media?parent=695"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/categories?post=695"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/tags?post=695"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}