99-year-old Munger's latest more than 10,000-word shareholder meeting transcript: talk about Ali, BYD, Bitcoin

Text organization | Li Jian, Liu Zenglu, Wang Fei, Qi Yongchao, Liu Xinying

Edit | Lin Weiping, Chengcheng, Li Zhuang, Wu Haishan

Proofreading | Su Hua

Risk Control Edit | Lv Xianwei

Technical Support | Wang Hongquan

Wonderful view

• 1 Investing in China allows you to buy some better companies at a cheap price.
• 2 BYD is my favorite stock, and I have had a big impact on BYD's shift to electric vehicles.
• 3 I still think Alibaba is one of the best companies, and the position adjustment is because some leverage was used before.
• 4 Artificial intelligence (such as ChatGPT) is very important, even indispensable, but it is difficult to implement many crazy ideas, such as not treating cancer.
• 5 Musk is a very unusual person, except for BYD, no company can do better than Tesla.
• 6 Investors who have held Berkshire for more than 20 years will definitely have good returns.
• 7 Munger shares the secret of longevity: likes to eat peanut butter candy, rarely goes to deliberate exercise.
• 8 Human civilization does not demand much from us: to set realistic expectations of ourselves and others, and delayed gratification makes the chances of success greater.
• 9 Rationality is the best quality, and if you're not crazy, you can already do better than 95% of people.

At 2 a.m. Beijing time on February 16, Charlie Munger, an investment magnate who had a huge impact on Buffett, wore a black suit, a bottle of Coca-Cola and some biscuits, and attended the Daily Journal's annual shareholder meeting.

The 99-year-old prophet, a former chairman of the Daily Journal, stepped down from that position last year but is still on hand this year to answer enthusiastic questions from global investors.

Topics ranging from ChatGPT to US inflation and high interest rates, from ways to improve happiness to investment in well-known companies such as BYD, Alibaba, and Tesla, Munger presents us with a wonderful life lesson.

This year, Munger talked about more China topics, and Red Weekly sent Munger questions about his investments in Alibaba, BYD, etc. before the shareholders' meeting, to which Munger replied, "I think Alibaba is one of the best companies in the world"; "BYD's price is not cheap, but it may have more than 50% performance growth this year," he said, revealing that he had a greater impact on BYD's shift to electric vehicles.

The following is the essence of the shareholders' meeting compiled by Red Weekly (with deletions):

I'm not going to sell the Daily Journal, and this isn't a good time for crazy valuations

Q: A year ago, Steven Myhill-Jones was named interim CEO of the Daily Journal, when will he become permanent CEO?

Charlie Munger: Change happens when we need it. This year, we will announce our decision.

Steven Mehir-Jones: I told Charlie before that I was willing to put energy into running our company. Although I am currently the interim CEO, I would like to be a permanent CEO.

Q: You talked last year that the Daily Journal generated enough cash, so what will you do with that money or what kind of asset allocation will you make next?

Charlie Munger: We made a lot of money, more than $30 million during the foreclosure boom alone. In the court appeal, our publishing industry had an information monopoly position earlier, but now the situation has taken a sharp turn, not as beautiful as before, many newspaper companies have lost their past advantages, assets have shrunk significantly, which is an unbelievable change, but this is the inevitable result of scientific and technological progress.

Therefore, we chose to work with Steven, who has a technical background, and hope that the technology section of the Daily Journal will perform well under his leadership.

There is still a lot of basic and complex work in the US courtroom, which requires a lot of automation and modern technology to complete, so this market is very huge. But the process is slow because there's a lot of bureaucracy involved.

How will the Daily Journal address these automation challenges, such as bureaucracy?

Charlie Munger: We know that some software companies generally last a few years. Steven, how would you deal with these risks?

Steven Mehir-Jones: I think our business model is very good, and although I can't guarantee that our software business will work, I do have some experience. I think our key task is to make our technology more service to our customers, so as to help them complete the work as quickly as possible, so we need to plan well, and the technology must be constantly upgraded to keep up with the changes of the times.

Q: At the 2021 Daily Journal shareholder meeting, the company's stock price was around $350, and now it is $300, which is much lower than before. So, would you buy some Daily Journal stock now?

Charlie Munger: I don't buy or sell. Buying stocks has to consider the actual situation, our valuation is not crazy now, and now is not a good time for crazy valuation.

I'm 99 years old now, and looking back, a lot of companies had their stock prices rising very fast in the early days, just like Berkshire, when they were bigger, it was normal for them to grow slowly.

The Daily Journal is a miniature version of Berkshire. Selling stocks pays a lot of taxes, and I tend to hold them for the long term

Question: You mentioned Berkshire, the latest position shows that the company has a lot of bank stocks, why is there such a allocation?

Charlie Munger: We bought bank stocks when we made a lot of money in the early days, when dividends were basically tax-free. But now that we're in an abnormal environment, we'd rather keep these stocks for a little longer. Because there are a lot of taxes to sell stocks now, especially in California now, we prefer not to lose too much money.

The Daily Journal is a lot like a miniature version of Berkshire, including everything from investing to it.

Charlie Munger: That's right. As the managers of the Daily Journal, our work is free, there are no directors' fees or other management fees for the company, and it is enough to have the company's stock.

Because the Daily Journal and Berkshire's shareholders are similar, they are both rich right now, but we still hope that some new shareholders will join us.

Steven Mehir-Jones: I would like to add that newcomers like me don't have stocks right now.

Charlie Munger: You're going to have [stock].

Steven Mayhill-Jones: Actually, I'm already happy to be able to work for Mr. Munger. I would take this job very seriously, and dealing with a lot of politicians in such an area is quite training.

Charlie Munger: Some people are reluctant to work with our industry because they are not satisfied with the fee, they prefer one-time transactions, and then rely on this one-time development to continue to make money, and our model is to constantly provide services to customers. So, from this point of view, we don't have many big competitors.

Question: There are many people you deal with, and long-term partners besides Buffett and Rick Guerin (who died in 2020), what do you say about him?

Charlie Munger: He was an amazing man and I miss him so much. We first met in 1961, when we were both poor and young. After that, we had a good relationship and worked together for many years.

ChatGPT is very important, but it's not a panacea either

Question: Recently, Microsoft's application of ChatGPT has caused a lot of discussion. ChatGPT seems to be a good business model, even writing code and so on, what kind of impact do you think it will have on our society?

Charlie Munger: I think AI is very important and indispensable to us, but it can't realize a lot of crazy ideas, such as AI can't cure cancer, which it can't do. There is a lot of nonsense now, such as some people trying to use AI for insurance underwriting, and others trying to use it for some aspects of daily life, including buying office buildings. I think it's not going to be very helpful to us in these ways.

Steven Mehir-Jones: From the technology segment of our company, we also want to try some artificial intelligence technology to solve complex tasks this summer, especially some day-to-day tasks, which I think is interesting.

We have a lot of different types of activities, especially some daily work, I think this technology is still very interesting, you can see if this technology can help us do more daily work in the short term.

Question: Mr. Munger, what advice do you have for using ChatGPT?

Charlie Munger: It's been said a long time ago that he wants to have what he believes, and that's certainly very important. But I would say that one of the factors that influence humans to make bad decisions, which I call rejection of reality, is that if people don't like something, the brain automatically makes some mechanism to resist it.

In the investment world, for example, there are many fund managers who are thinking about how to beat the index, no matter how much it costs. But in reality, only 5% of people may be able to consistently beat this average, but everyone will charge customers a lot of fees, which I think is very unethical. If a fund manager charges a few thousand dollars a year for a person, but gives the client some advice that doesn't have much value, and ends up only a little bit above the average index, it's clear that something is wrong with the industry. Berkshire didn't do that, and neither did the Daily Journal. No one solved this problem very well, because the broker needs this fee to live.

We keep buying back some of our shares, which we use to motivate our employees. In the companies we invest, the founder of BYD did the same, he used his stock to motivate employees, which is a good incentive mechanism, a virtue of traditional capitalists, and I like companies like this.

BYD is one of my favorite stocks

Question: In 2018, you analyzed BYD, and you said that the Daily News is different from BYD, but if you do a good job, the Daily Daily can be like BYD. Now do you think there are any similarities between the Daily News and BYD?

Charlie Munger: It's not going to be quick, and it's not going to be easy. BYD is one of my most successful venture capital investment stories ever.

The founder, Wang Chuanfu, was the son of a farmer who was well educated, entered engineering college, and later became an entrepreneur.

He was a genius, he thought 17 hours a day, he was a workaholic who did things that ordinary people couldn't.

Question: Is BYD your favorite stock?

Charlie Munger: I would say yes. No company has a better return on investment than BYD, and our investment in BYD is now worth about $8 billion or $9 billion. This is a pretty good rate of return.

We can't always encounter such things, maybe once in a lifetime, this kind of thing is really difficult to encounter.

I had a big impact on BYD's shift to electric vehicles

Question: Comparing BYD with Tesla, do you like BYD more often?

Charlie Munger: That's a good answer. Tesla took the initiative to cut prices in the Chinese market last year and also sees BYD as its main competitor. However, in China's electric vehicle market, BYD's market share is more than Tesla's.

From the perspective of the entire electric vehicle market, China's production and sales are very large, and a few years ago, it was difficult to see BYD's name among the top manufacturers.

Q: Berkshire recently sold some BYD shares, what do you think is the reason?

Charlie Munger: BYD's price-to-earnings ratio is already 50 times, and the price is not cheap. Of course, in terms of performance, it may have more than 50% growth this year.

We are not selling BYD now, we have sold some BYD shares before, mainly because BYD's share price is already high, and now BYD's market value has exceeded the market value of Mercedes-Benz.

This does not mean that I am not optimistic about it, BYD is a very great company. At the beginning, it was Li (Munger partner and founder of Himalaya Capital in the United States) recommended BYD to us, at that time, BYD's factory was very simple, and it was just a company that made supporting batteries for mobile phone manufacturers, and later we also gave it some advice, such as suggesting that BYD enter the automotive industry, and I did have a relatively large impact on BYD's development direction at that time.

I still think Alibaba is one of the best companies to adjust positions because some leverage was used earlier

Q: What do you think of Alibaba? Alibaba's stock has seen some adjustments last year, and you have sold some of the shares, what are the reasons for selling? It seems to be contrary to the usual philosophical thinking.

Charlie Munger: I think Alibaba is one of the best companies in the world, it occupies a very important position in China's Internet retail, it has a strong market competitiveness.

Some stocks we hold for a long time, others as you said, and the latter is rare. To be clear, we used some leverage in the first place.

Sometimes I also ask myself the question, that is, what percentage is the most appropriate percentage to compare the investment amount to the net asset value? Maybe 100%, maybe 150%, but it's not a simple question, and if there's a good chance, 100% is actually a reasonable percentage.

Question: Some people think that the following three things are "evil": women, alcohol, and leverage. One of them is leverage, what do you think about that?

Charlie Munger: In contrast, leverage is not so evil, I have used it, and Buffett will use it. In banking, we use some leverage on products called "Jewish treasury bills," and they work.

Berkshire's buying and holding Activision Blizzard is also a transaction similar to "Jewish treasury bills", although arbitrage also plays a role.

Investing in China allows you to buy some better companies cheaply

Question: Is it still a good choice for foreign investment in China?

Charlie Munger: It's no problem for investors to invest in China. Investing in China allows you to buy some better companies cheaply than investing in the United States, and it's worth it even if there are some uncertainties.

Question: Tell us about your views on the semiconductor industry.

Charlie Munger: The semiconductor industry is a very special industry because it requires you to put all the money into it, especially in the face of technology update iterations, the amount of money that needs to be invested is greater, and I don't want Berkshire and the Daily Journal to put money into one industry.

Semiconductors can be said to be a winner-take-all industry, but also an imperfect industry. Maybe it's a good area to invest, but as an older person, I don't want to learn anything new.

Investing in cryptocurrencies is very crazy and funny

Q: You said that to get better, you have to learn to debate from the opposite side of me. What are your thoughts on cryptocurrencies? Is there anything to debate?

Charlie Munger: There are no good arguments to refute my view of cryptocurrencies. Cryptocurrency is a stupid species, like a gamble, sometimes I would call it a cryptocurrency scam.

Investing in cryptocurrencies is crazy and funny, and someone actually buys cryptocurrency? For human beings, nothing else in the world is more important than money, especially national currency, which has led people to modern social civilization.

But it is very wrong, stupid and even very dangerous for someone to invent something to replace the national currency.

The U.S. government is at fault for allowing cryptocurrencies to exist, which could end up being a disaster. The Chinese government is right to ban cryptocurrencies, and this is worth learning from the US government, and we should not make mistakes again and again.

Question: What about Bitcoin? Will you sell short?

Charlie Munger: I won't. I've only had three short selling in my life, all 30 years ago, one in currency and two in stocks.

One short selling of stocks cost me a lot, and a short sale of currencies helped me make a lot of money, about $800 million, and although I ended up making a lot of money, short selling is never a good thing.

Opener is a very perfect company, and I wouldn't sell its stock

Question: Do you like Costco's business model, will its moat be around for a long time?

Charlie Munger: Market Openers have very strong cost control capabilities, and we don't think any company can stop the momentum of Market Openers. Market openers now have a price-to-earnings ratio of about 40 times, which is not cheap.

Market Maker is a very perfect company with a very good future, a good culture, and great employees. I love everything about market openers, I'm an admirer of it, I'm addicted to it, and I never sell its stocks.

Add tax on share buybacks

It is taking advantage of the enterprise

Q: What do you think of President Biden's proposal to raise the corporate share buyback tax from 1% to 4%?

Charlie Munger: Strongly disagreed. Taxing share buybacks is like stealing the company's hard-earned money and taking advantage of the company.

I advocate doing ethical things, and that both governments and businesses should earn money in a decent way. In some ways, I agree with President Biden's approach, but I am against the increase in taxes on share buybacks.

Question: Berkshire has done a lot of big buybacks. What do you think about this?

Charlie Munger: Berkshire has done a lot of buybacks over the last three years, some of which may be for tax reasons. This [buyback] is good for our shareholders.

Investors who have held Berkshire stock for more than 20 years are sure to have a good return

Question: There have been articles recently that people who own Berkshire stock are under pressure, but as far as I know, Berkshire is a big coalition of companies, one company has a problem, another company or department can help it, can you give our shareholders some confidence not to let our stock have a big problem.

Charlie. Munger: I don't think Berkshire's stock will have a big problem for a long time, and in the current price background, you (the investor) can sell the stock at a high price.

But as far as I'm concerned, all things considered, I think Berkshire's stock is still very reasonably priced at the moment, and Berkshire's shareholders are relatively safe in the long run, so don't worry too much about what difficulties it will have. Investors who have held Berkshire stock for more than 20 years are sure to have a good return.

Question: Is there potential pressure on Berkshire's share price?

Charlie. MUNGER: I think it's going to be going to be a bit of volatility in a certain range, and the U.S. government is a bit unfriendly to companies right now. It's only natural that the future of the investment industry will be more and more difficult as taxes go up, but I'm not very worried about these issues because I'm getting older.

Munger shares the secret of longevity:

I like to eat peanut butter candy and rarely exercise deliberately

Question: You are 99 years old and still healthy, can you share the secret of longevity?

Charlie. Munger: I have a peanut butter candy that I really like, and I don't want to advertise my product, but it's really good.

Q: People are also interested in learning about your daily habits, such as do you exercise?

Charlie. Munger: I don't exercise very much, when I was younger, when I was in the army, I did some exercise, but I rarely did it consciously, maybe occasionally playing tennis.

Question: Have you ever thought about changing this habit?

Charlie. Munger: No, I think everyone's life journey is different, and everyone's habits are different.

Question: What do you do every day when you wake up? What would you most like to do on your 100th birthday?

Charlie. Munger: I have to go to bed in a wheelchair every day, but I don't like the feeling. Roosevelt spent the last 12 years in a wheelchair, and I didn't really want to be like him.

Q: You gave a lecture in 1995 on the psychology of human misjudgment, and you said that as we age, some human regression is inevitable. You were 71 years old and now you're 99 years old, do you still hold on to your previous views?

Charlie. Munger: Some people are more savvy the younger they get, like Schroeder. I've also declined a lot now, but I can still cope with most things, which I think is a good result for my age.

Interest rate growth is inevitable Investors need to learn to adapt to high interest rates

Question: Let's talk about investing again. Do you think the current high interest rates will have any impact on investing?

Charlie. Munger: Needless to say, interest rates are already high now, and it's bad for stock prices. But interest rate growth is also inevitable, we should not be in a zero-interest rate environment for a long time, investors should also learn to adapt to high interest rates. Nothing goes with the wind all the time.

The current inflation rate is also high, and there will be more inflation problems in the future, and the Daily Journal is also considering buying some government bonds.

Question: Our inflation is always emerging, and the previous more serious was the Paul Walker era in the 70s of the last century, now do we also need to learn from Paul Walker's practice?

Charlie. Munger: I'm still optimistic about the long-term outlook, but in the short term there will be some volatility and difficulties, and of course I don't know exactly what problems will arise.

We can't avoid all difficulties perfectly, but we need to prepare for the unknown

Q: Should we continue to raise our debt limits? There are many factors competing at the moment, how should we deal with it?

Charlie. Munger: When you look at the history of democracy in the world, there are many failures. In my lifetime, I think the worst thing will happen to me is the coming to power of the German dictator Hitler. Hitler's rise to power was a product of the Great Recession, and the aftermath of World War II also affected the American people.

In the future, we cannot perfectly avoid all difficulties, but we must prepare for unknown difficulties in advance. The government does some things, some of which are right, some of which are not necessarily right, of course, I still think that many of the things that the U.S. government does are very good, and in many ways I am still proud of our government.

For example, the attitude towards "World War II", after our victory, did not punish Germany and Japan, but provided them with a lot of help, such as funding to help them rebuild, which is a relatively good aspect of our country, which is a good thing for the whole of mankind.

But in the future, we cannot rule out bad things, after all, everyone will make mistakes.

Q: A German equity analyst said that many stock compensation is a common incentive compensation for companies, and some companies use 20% of their revenue as stock compensation.

Charlie. Munger: American companies have very good incentives, but some companies are really aggressive, which is also a manifestation of human nature.

I agree with companies using this stock-based incentive or compensation mechanism to motivate everyone to work, but it also makes the income seem too high, but that's human nature.

I would say that the remuneration mechanism of the market opening company is very perfect, and he uses a more appropriate percentage of shares as a remuneration mechanism. High-tech companies, on the other hand, issue shares, sometimes creating an illusion. The compensation mechanism of some companies in the United States is obviously not very reasonable, but in fact, in the early years, our atmosphere was relatively good, and this unreasonable situation occurred mostly in the last 50 years. Now everyone wants higher compensation, especially at the executive level, which is a bad practice and very abhorrent. If it continues, civilization will perish. But I really don't have a better suggestion to correct this practice, which is a very difficult problem.

Musk is a very unusual person, and no company other than BYD can do better than Tesla

Q: What impact do you think Musk's ownership of Twitter will have on the entire American society?

Charlie. Munger: I don't use Twitter, so I don't have a good judgment on this topic. Musk is talented and special, but I don't buy or sell the shares he owns in the company, I just think he's a very unusual person.

Musk has done some of Tesla well, and I don't think any company can do it better than BYD. But a genius like Musk still can't do BYD in some aspects, and it is not easy for him to compete with BYD.

Question: There is a question about the fact that the world's population has quadrupled since you were born, do you think population growth is a threat to humanity?

Charlie. Munger: Population problems sometimes cause big disasters, but as the world prospers, we can see, for example, that in China, the fertility rate is declining year by year, and Japan has a population shortage.

At present, the world's population, especially the population of developed countries, has reached its limit, Musk seems to have said the same thing, in fact, population shrinkage is a threat to human beings, which is why I say that sometimes Musk is a smart person.

Will not invest in companies like Disney Technology development poses great challenges to the company's business

Question: What do you think of Disney? Is it a good investment?

Charlie. Munger: We haven't bought shares in Disney, but Disney is an interesting company, and all of its business is more difficult than before, and now the development of technology has completely changed the world. I think ESPN in sports is somewhat similar to Disney, and now the business is becoming more and more difficult, and the movie industry is the same, it is not easy. I don't invest much in these kinds of companies.

Q: In 2022, a Missouri woman won a special car claim case and received a high compensation from GEICO Auto Insurance Company, do you think the Missouri court ruled correctly?

Charlie. Munger: Not every court decision is correct, and sometimes the court decision is really infuriating, which is why we have an appellate court, and the appellate court has a different opinion on some crazy judgments.

Q: Do you think this verdict is crazy?

Charlie. MUNGER: Yes.

Question: There is a lot of interest in Berkshire's partnership with 3G Capital and Kraft Foods and 3G Capital, what do you think of this partnership?

Charlie. MUNGER: Some deals are good, some deals are bad, Berkshire is the same, but the business is still very good, but their working methods haven't worked recently, that's life, it's not that simple.

Question: This question is also focused on Berkshire. Is Berkshire's increase in ExxonMobil oil long-term?

Charlie Munger: That's a good question. I think it's good to have a high position in the Permian Basin (also known as the West Texas Basin, which has abundant shale oil and gas resources) through the holdings of Occidental and ExxonMobil, and I like this high position investment. A lot of times people prefer to speculate in the short term rather than invest in the long term, but I would say it's very good to have that kind of investment in the basin.

I can only teach people almost everyone knows, kind of like pulling a person off a cliff

QUESTION: Mr. Munger, do you think there is systemic racism in the United States right now?

Charlie Munger: Absolutely, I think there is. In human history, there have been many cases of discrimination against certain ethnic groups, but I think in my lifetime, this has improved a lot, racism has declined.

Q: Do you think climate change will have an impact on the insurance industry in the next 25 years? Will you raise Berkshire's premiums?

Charlie Munger: I'm not sure I'm good at answering that question. Although climate change is serious business, I think it will actually have a much smaller impact than people think. So I think it may not affect us to adjust the premium, and I will wait and see.

Question: This question comes from a teacher who teaches personal finance and corporate finance at Indiana University. What do you think students should be taught so that they have the basics and common sense to effectively deal with their personal or corporate financial problems later in life?

Charlie Munger: Good judgment is crucial. If a person lacks judgment, they may make some less rational decisions and have some bad effects. So my advice is to keep learning and keep improving yourself.

I used to say that I can only teach others what almost everyone knows, a bit like pulling a person off the edge of a cliff, maybe I will teach knowledge to those who are willing to learn and able to learn. But I'm not good at teaching people who haven't started yet.

By the way, most education operates in a constant selection of talents, and some people cannot keep up with progress and are eventually eliminated. I also spoke yesterday with a good law professor who is a professor at a prestigious law school who always has the ability to lead good students to improve more, but they can't make stupid people smart.

As the saying goes, silliness endures.

Human civilization does not demand much from us: to set realistic expectations of ourselves and others

Question: For many entrepreneurs or celebrities, people must dream big. But you say that "the secret to a happy life is to lower expectations", can you expand on this sentence?

Charlie Munger: Indeed, of course you have to work as hard as you can to get more and more, which is the mystery of life. But there will always be people who get into emotional trouble because of this. After all, behind every success there may be a thousand failures. If you make some unrealistic promises and fail again and again, then others will hate you for it.

When we little beings meet each other, human civilization does not demand much from us: to set realistic expectations of ourselves and others.

Q: An investor from China would like to ask you, after the relaxation of epidemic prevention and control measures, what health and safety advice for the elderly are available?

Charlie Munger: I also had Covid-19 before, but my symptoms were mild and despite testing positive, I just had about 10 minutes of runny nose. However, compared to the pandemic, I think it is more important for the elderly to avoid falling as much as possible. Some of my older friends died of falls. A good friend of mine usually uses crutches, I have used a walker for about 6 and a half years, it works well, I have never fallen during this time, and now I have bought a wheelchair. My advice to seniors is to be cautious and not fall.

Pay for great businesses Great is good

You've given Buffett a great piece of advice to buy good companies at a good price, which has changed some of Buffett's investment philosophies, rather than picking up cigarette butts everywhere like the original.

Charlie Munger: There was a time when there was fruit everywhere and you could easily buy good things in the orchard cheaply, but that went away and then there was a decline in performance.

More than half of all the money Ben Graham made in his life came from 1 stock. That stock is GEICO (Government Employees Insurance Company). So you see, what he taught me was how he became rich. In my opinion, this is what should be paid for great business.

Greatness is good.

Invest in good companies and think about good management

Question: When you value a potential investment in a company, do you value the company itself or the management? Or what would you consider first?

Charlie Munger: I think the company comes first, and then the management. If we only invested in good management, but the company was not very good, we would not have achieved the good results we have now.

Question: What if a good company has bad management?

Charlie Munger: Like Coca-Cola, it was run by a bad manager for a long time, but it was still very profitable, which is why I invested in good companies. Coca-Cola's most glorious period was 25 years ago.

Question: What is your experience in evaluating the character and competence of company management?

Charlie. Munger: Everyone makes mistakes, in my life, what makes me most emotional is the rise and decline of IBM, IBM used to be the American company I admired the most, but in the past 10~15 years, with the rise of competitors Apple, Google, IBM's decline is inevitable, Kodak is the same, after the advent of digital photography, Kodak also has a decline.

Bill Gates once said that when truly disruptive technologies emerge, it is easy for new technologies to replace the old ones entirely. It's hard for a long-successful business to change its business model and way of thinking. But our Daily Journal company is still dealing with the new world, especially the changing newspaper industry, and we are doing automation software for the courtroom, which is a completely different industry.

Question: You once said, "You don't need to invest a lot to be rich." So, would you hold a stock for a long time? Who would you choose for this now?

Charlie Munger: A good position is very important, and if we meet a good company, we will definitely hold it for a long time.

Now, many good companies are not cheap, some good companies in the United States generally have a price-to-earnings ratio of 25 times or even 30 times, which is actually a certain risk, if you take a wrong step, you will lose a lot. Although there are some good companies whose prices are okay, they are not many. In this case, 95% of the U.S. fund managers I don't want to let them give me a job because I find it too hard. It is very rare for the current 401K plan in the United States to achieve positive returns of far less than 5%.

Question: Everyone makes mistakes, and you make mistakes occasionally, which creates a warning effect in actual action, which leads to some good ideas running aground, what good ideas have you destroyed since last year?

Charlie Munger: All I destroyed were bad ideas. For example, when the Internet was rising, I was shocked by the online retail model, so I would pay attention to related companies. But for Alibaba, it may be that I overestimated its rate of return.

I have to admit my own mistakes, and that helps me as well.

There's a lot of waste in the U.S. health care system, and I don't want to answer the question of who's going to govern

Q: At the last shareholder meeting, you talked about the healthcare system. What do you think about medical subsidies in the US, the unitary payment system in the UK, etc.?

Charlie Munger: A lot of companies, including JPMorgan Chase Bank, Amazon, etc., are correcting some of the problems in the US health care system, and Warren is also figuring out how to do it, because we really have too much waste in the health care system at the moment.

Q: If you had to pick one to govern in 2024, who would it be?

Charlie Munger: I don't want to answer that.

Question: You said you admired Benjamin Franklin very much, why?

Charlie Munger: He's a genius. Long ago, America was weak, many people lived in poverty, and his father's main job was to dispose of dead animal carcasses. But after his primary education, he became one of the country's best founders through self-learning. He has a high IQ and is constantly innovating, including inventing glasses for myopia, which he invented [the glasses] I wear now. He also did a lot for the country, including the formulation of many national rules, which created the United States today. So, I think we're lucky to have a leader like him.

The "new edition" of "Poor Charlie's Book" is already working on delayed gratification to make the odds of success greater

Question: Will you publish a new copy of Poor Charlie's Book?

Charlie Munger: It's being done now, it's a Chinese, online version. This is not only because there are more Chinese, but also because a successful elderly person can win more respect in a Confucian society.

Question: At your age, you have accumulated great wealth, will you still delay gratification? What advice would you give to young people?

Charlie Munger: I'm really older now, but I'm still using delayed gratification, which has no age limit and applies to anyone.

We are all looking for opportunities and different ways to enjoy life. Some of this (delayed gratification) is innate, and some can be learned through the day after tomorrow.

Question: Are you born or acquired?

Charlie Munger: I learned to delay gratification very early. Children love marshmallows, and if they are willing to wait a little longer, they can eat more marshmallows, and those who are willing to spend a little more time and eat more marshmallows have a better chance of success in the future. I was lucky that I was born with this technique and no one taught me.

Be loyal to shareholders, even if they have died

Question: Warren Buffett is a "learning machine", besides this quality, what other qualities do you think make Warren one of the greatest investors in the world?

Charlie Munger: Warren is not only a very good thinker, but he is also a very good learner.

Warren and I were fortunate that very early on, we had a lot of shareholders who trusted us. We have built a good reputation among them. We are loyal to them, even though many of them have passed away.

Q: What do you say about Greg Abel? Is he a "learning machine"?

Charlie Munger: Greg is a great business leader, both as a thinker and a doer. And he's very good at leading other people to get the job done, and he's a pretty amazing guy. We are lucky to have Greg working for Berkshire. He's also a "learning machine" who, like Warren, is always learning new things.

One of the interesting things about Greg is that he is better at things than Warren. Warren knows this, and he constantly guides Greg to do better.

Berkshire is running well, and we're lucky to have a 92-year-old who works and is in good physical condition. Of course, we're also lucky to have a CEO like Greg.

Greg is trying to manage the business of all utilities like a regulator, which is a smart way of thinking.

Question: You mean, that's a good belief?

Charlie Munger: yes, why not? If you want people to treat you this way, you need to do the same. It's the golden rule, and I don't think anyone who does it will fail.

A good civilized property is privately owned and freely traded

Q: Do you think I will receive Social Security at 67, or will I wait until I am 70 to receive more each month?

Charlie Munger: I can't make a choice for you, it depends.

If you know you're going to die soon, go and get your insured money. If you think you'll live a long time, you'll come up with different choices.

Most healthy people generally put off receiving Social Security benefits so that they can get more money later.

Question: What should a good government do for economic growth in boom and bust cycles?

Charlie Munger: Almost everything is a must-do. It is necessary to increase per capita GDP as much as possible, and make private property in private hands, and then through free exchange, civilization will develop and the economy prosper.

In good civilization, most property is privately owned and freely traded. For example, if you like violin lessons and I need your money, we can make a deal that is good for both of us.

As far as I know, in the history of the world, from the development of primitive societies to modern civilizations, a way has been followed, that is, "property is privately owned and freely exchanged."

By the way, I just said some obvious things, but these truths are not taught in most education.

After understanding that "all companies die," I became a better investor

Q: What impressed you most during your time as vice chairman of Berkshire Hathaway? How did you become a better "learning machine" through these things?

Charlie Munger: The thing that strikes me the most is the demise of corporations, a business world and nature are almost the same, many animals, many species will die, they are following the laws of nature.

Everything changes, this is the law of nature, and many businesses are on the road to extinction. Take Kodak, for example, which was once one of the greatest brands in the world. Every one of us uses film, but it suddenly dies out of the world. In fact, within a certain range, everything will die. I didn't realize it when I was younger.

Another example is Xerox, which looks like it's going to be around forever and has been around for a long time. I think these companies will be there when I'm old, but in fact many of them have died out, and no company is eternal.

Another example is some of the great department stores, which are the most important part of the entire community, providing residents with the goods they need for daily life, which seem to survive forever, but eventually close their doors.

Once I understood that, I became a better investor.

I spoke with Walmart's Doug McMillan, whose wallet has been filled with lists of top retailers for decades, suggesting that he has lived in fear that Walmart will be disrupted.

At one time, IBM was a leader in smart manufacturing, but now it's just one of all smart manufacturing companies. So the company will rise and fall, even if the business manager is very talented and hardworking.

Patience, delayed gratification, and delivering on promises will improve your resources and opportunities

Question: Who do you admire the most?

Charlie Munger: I might say, Jim Senegal of the market opener. He didn't go to Wharton or Harvard.

He was 18 years old working in a store. Now the CEO of the market opener. He's been in business all his life, and he's too good at it.

Question: What qualities in life help you the most?

Charlie Munger: Quite simply, the answer is rationality. If you don't go crazy, you're already doing better than 95% of people.

Also, be patient, know how to delay gratification, and don't do crazy things. Also try to keep your promises to others. Then, you will greatly improve your resources and opportunities. It's that simple.

Question: Why don't many people do this?

Charlie Munger: That's an interesting question, and I don't think kids can do it automatically. If you have 10 kids, some will do better and some will do not do so well.

Question: When you have success and wealth, or as you get older, do you find it harder to be rational?

Charlie Munger: I think it's hard, but if you're young and practice hard, you'll get better, but it's never easy.

If I asked you the question, invest $1 million to buy a stock, which one would you buy? There is no income, and only this stock can be used to meet living expenses and spiritual world expenses.

I think a lot of Americans don't know how to answer this question, they don't even know where to start.

I often tell those around me that no matter what your life is like now, increasing age and wealth will bring you closer to this trend (insistence on rationality).

Waking up this morning, I was still thinking that I had been saving money when buying pants, this habit was ingrained in my mind and I couldn't change it, I had always been such a person.

(The views in the article only represent the individual guests, do not represent the position of "Red Weekly", and the mention of individual stocks is only an example analysis, and does not make trading recommendations.) Screenshot source: CNBC)

Editor's note: Introduction to the Daily Journal

Daily Journal Corporation is a newspaper and software business. Since 1987, the daily journal company has been listed on NASDAQ, publishing news, legal, real estate and commercial newspapers. The company also provides various advertising information services and provides legal-related case management software system services. Buffett's old partner Charlie Munger serves as the chairman of the company, and according to the official website of the US Securities and Exchange Commission: as of the end of December 2022, the daily journal company of which Munger is the chairman holds a total of $174 million in US stocks.