{"id":700,"date":"2017-06-26T21:46:52","date_gmt":"2017-06-26T21:46:52","guid":{"rendered":"http:\/\/charliemungersays.com\/?p=700"},"modified":"2017-10-24T22:38:54","modified_gmt":"2017-10-24T22:38:54","slug":"114-wesco-annual-meeting-2010-part-4-wisdom-pick-19-24","status":"publish","type":"post","link":"https:\/\/charliemungersays.com\/index.php\/2017\/06\/26\/114-wesco-annual-meeting-2010-part-4-wisdom-pick-19-24\/","title":{"rendered":"114. Wesco Annual Meeting 2010 \u2013 Part 4 \u2013 Wisdom Pick: 19-24"},"content":{"rendered":"

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

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

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

Wisdom Pick 19. <\/strong>Go where there\u2019s dumb competition.<\/strong><\/p>\n

Q (James Armstrong, Berkshire shareholder, Pittsburgh) Last year you talked about a smart electrical grid. Are the BNSF rights of way useful for that? Could that add anything to Berkshire\u2019s net worth?<\/p>\n

A I\u2019ve never heard anyone talk about it but can\u2019t imagine the rights of way full of towers. \u201cPut me down as skeptical.\u201d<\/p>\n

Q Is BYD too dependent on a single person?<\/p>\n

A There\u2019s a risk, but I\u2019m used to it, working around our 80-year-old gallant leader. [At this point, Charlie asks Wang Chuanfu and BYD\u2019s vice-chair to stand and wave (applause).]<\/p>\n

Q (Alex Laga, a BRK and Wesco shareholder, Milwaukee) An engineering mentality is prone to paralysis by analysis and to a fascination with models for their own sake. How does one avoid that?<\/p>\n

A Look at BYD: 16,000 engineers but determined to be rational. They don\u2019t like unnecessary delays, nor analysis for the sake of analysis. By contrast, India has too much paralysis by analysis.<\/p>\n

Q (Austin, TX) WEB credited you with giving him the concept of \u201cdurable competitive advantage.\u201d What are the best ideas he\u2019s given you?<\/p>\n

A Warren knew about durable competitive advantage. He didn\u2019t need me. The amazing thing is we did so well while being so stupid. \u201cThat\u2019s why you\u2019re all here: you think that there\u2019s hope for you.\u201d Go where there\u2019s dumb competition. Patrick Wolff once told me I was better at what I did than Wolff was at what he did. I said no, I just played weaker competition.<\/p>\n

Wisdom Pick 20. <\/strong>\u201cI need it and I want it and so I should get it\u201d is childish. We need to make changes, or we\u2019ll get more trouble.<\/strong><\/p>\n

Q (Australia) How do you determine bet size when you invest? Do you use the Kelly formula?<\/p>\n

A We don\u2019t use any formulas. If you\u2019re referring to \u201cFortune\u2019s Formula,\u201d it\u2019s very intelligent if you get to make lots of bets that pay off quickly, but we get very few opportunities and our problem is to get enough of them to invest a lot of money. I suspect I may have intuitively used the formula when younger. It\u2019s correct, but of very little use to how BRK operates.<\/p>\n

Q Given the high price, and in stock, for BNSF, can you improve their operating margins to CN levels?<\/p>\n

A That\u2019s an easy one: we don\u2019t have to do \u201cone damn thing\u2014just let Matt Rose do whatever he pleases.\u201d<\/p>\n

Q To what extent did you share ideas with WEB before you began co-investing?<\/p>\n

A I always talked over ideas, but not with many people.<\/p>\n

Q (San Diego) Excesses in the economy blew up in \u201908. You compared it to being on drugs. Are things worked out, or is there a hangover still?<\/p>\n

A Of course it\u2019s not worked out. What you and I see as excesses are regarded by the people doing them the way a diver regards his air hose. \u201cI need it and I want it and so I should get it\u201d is childish. We need to make changes, or we\u2019ll get more trouble.<\/p>\n

Wisdom Pick 21. On Greece: <\/strong>I\u2019m glad it\u2019s not my problem to solve, though I believe that, with my mindset, I would have acted earlier.<\/strong><\/p>\n

Bonus Wisdom Pick 21A. 20\/80 Rule Or Is It 80\/20 Rule?<\/strong><\/p>\n

Q (Germany) What do you think about central banks printing money and the ECB accepting Greek \u201cgarbage\u201d as collateral?<\/p>\n

A Everybody knew Greece was problematic when they joined the EU. It\u2019s amazing we didn\u2019t get a Greece-type problem sooner. It\u2019s very hard to fix: you don\u2019t want to set a bad example, nor let them go under. Ireland got a big benefit from joining the EU, but Greece threatens the whole system. [Charlie paraphrases a Woody Allen line: \u201cToday we are at a crossroad. One road leads to hopelessness and despair; the other to total extinction. Let us pray we choose wisely.\u201d] I\u2019m glad it\u2019s not my problem to solve, though I believe that, with my mindset, I would have acted earlier.<\/p>\n

Q You suggest studying people one admires and the eminent dead. You\u2019ve mentioned Lee Kuan Yew, Ben Franklin, Paul Volcker. Who else?<\/p>\n

A There are lots within Berkshire. An example: managers are reporting, and one says he uses the 80\/20 rule, focusing on the 20% of the business that makes 80% of the profit. The next says he does the opposite, focusing on the 20%-profit businesses that you can buy cheap and improve. They\u2019re both correct. You need multiple models.<\/p>\n

Wisdom Pick 22. On Berkshire Hathaway: A <\/strong>BRK will be very successful long after we\u2019ve gone. It has wonderful businesses and a durable culture.<\/strong><\/p>\n

Q (College student) I want to invest in Berkshire but I\u2019m worried about succession and the future.<\/p>\n

A BRK will be very successful long after we\u2019ve gone. It has wonderful businesses and a durable culture.<\/p>\n

Wisdom Pick 23. (With small amount of capital) <\/strong>I\u2019d go where there are market inefficiencies and your work could lead to knowing important things that other people didn\u2019t.<\/strong><\/p>\n

Q If you were starting out with a small amount of capital, where would you focus?<\/p>\n

A I wouldn\u2019t go where the big boys have to be, trying to decide whether Merck\u2019s pipeline is better than Pfizer\u2019s. I\u2019d go where there are market inefficiencies and your work could lead to knowing important things that other people didn\u2019t.<\/p>\n

Q (Fund manager, New Delhi) I admire your \u201clattice work\u201d model but in applying it find that adding to one\u2019s toolkit takes a long time because you have to fit new things into a complicated framework. Is this inevitable or is there a way to speed up integration?<\/p>\n

A I was born with a mind that works that way and am also curious, so learning isn\u2019t work but play. If your nature\u2019s different, you\u2019ll \u201chave to figure out your own damn answer.\u201d<\/p>\n

Wisdom Pick 24. England showed us that we could intervene directly in major banks, which was much better than TARP. It\u2019s a credit to Paulson that he switched plans when he saw a better one.<\/strong><\/p>\n

Q (Student, Toronto) Why is it the government, rather than someone like Berkshire, bailing out the banks this time?<\/p>\n

A It\u2019s way worse this time. Nobody in his right mind wanted to see how far it would have gone if the government hadn\u2019t acted. It\u2019s a credit to democracy. England showed us that we could intervene directly in major banks, which was much better than TARP. It\u2019s a credit to Paulson that he switched plans when he saw a better one.<\/p>\n

Source: http:\/\/www.valueplays.net\/wp-content\/uploads\/The-Best-of-Charlie-Munger-1994-2011.pdf<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Excellent Book: Charlie Munger For All Seasons New Book Release – Please check this out: https:\/\/charliemungersays.com\/index.php\/books\/ Wisdom Pick 19. Go<\/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":[3,4],"tags":[],"class_list":["post-700","post","type-post","status-publish","format-standard","hentry","category-investment","category-wisdom"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/700","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=700"}],"version-history":[{"count":4,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/700\/revisions"}],"predecessor-version":[{"id":828,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/700\/revisions\/828"}],"wp:attachment":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/media?parent=700"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/categories?post=700"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/tags?post=700"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}