10,000 words! The 99-year-old Munger made his podcast debut, talking about one-hour investment insights and calling BYD a miracle

Charlie Munger, Warren Buffett's golden partner and legendary Wall Street investment guru, will celebrate his 100th birthday next year. Recently, he made a rare appearance on the recording of the popular business podcast Acquired, where he talked about his investment views, experiences and lessons learned.

In the program, Munger talked about his investment history and unique insights in Costco, Coca-Cola, Apple, BYD, Tesla, General Motors and many other well-known companies, his insights into the economy and investment in China and Japan, and his views on the future.

It's worth mentioning that Acquired is Munger's first guest on a podcast show in his lifetime. Acquired, which is dedicated to exposing the untold stories behind tech giants, has consistently topped the top podcasts in the U.S. this year.

Here are Munger's core points:

• 1

  Retail investors are just chasing prices up and down. If I were a manager, I would tax short-term profits and drive these speculators out of the market.

• 2

  It's almost impossible to succeed again and again in VC investing. All investment projects are hot, and investors have to make decisions quickly. This means that most people are just gambling.

• 3

  China's economic outlook for the next 20 years is better than that of any other large economy. China's top companies are stronger and better, and they are valuations much cheaper. Therefore, I am naturally willing to include some Chinese risk assets in Munger's portfolio.

• 4

  When you hold a stock for 5 years, you may slowly become part of it, or you may understand it more deeply. However, when you realize that you have an advantage, you should bet heavily. You should definitely bet heavily on the best investment!

• 5

  If we [Berkshire] had used a little more leverage throughout, we would have three times as much leverage now and it wouldn't be as risky, but we don't want leverage to undermine the safe-haven position.

• 6

  Investment is an obvious opportunity. In Japan, the interest rate has only been 0.5% per year for the past 10 years, and these Japanese companies are really well-established, they have all the cheap copper mines and rubber bases, so you can borrow all the money 10 years in advance, buy stocks, and pay 5% dividends.

• 7

  Now there will be some (investment) opportunities that will be discovered, but this is getting harder and harder. I don't think there are very many opportunities to buy companies like [Joy Candy, Hermes], so I don't look for them at all. I only believe in and look for those investment opportunities that I think are likely to find.

• 8

  I like companies that really own brands like Apple. Great brands, to buy at the right price, the trick is to take a rare opportunity to bet on a really cheap one.

• 9

  If the stock of some company is really cheap, even if it's a bad company, I'll consider holding it for a while.

• 10

  Wang Chuanfu is an avid man who is obsessed with making products with his own hands, so he is closer to the front line. In other words, Wang Chuanfu is better at manufacturing than Musk.

• 11

  Walmart is too attached to pre-existing ideas, which bothers everyone. They just can't accept new things because the space is already occupied by old ideas.

• 12

  I don't give random advice to any young person, I think carefully about the timing and the audience, and I don't want to be a spiritual teacher. The world is full of deception and madness, and it is getting harder for young people.

• 13

  You need to be in harmony with each member of the family, you have to help them through difficult times, and they will help you. I don't think it's as hard as it seems. I think half of the marriages in the U.S. are going very well.

The following is the full compilation of this podcast:

Welcome to Acquired, a podcast focused on great tech companies and the stories behind them. I'm Ben Gilbert. I'm David Rosenthal.

Host: This was a very unique episode for David and me, where the show's good friend Andrew Marx arranged for us to have dinner with Charlie Munger and a couple of other people, right at Charlie's house in Los Angeles. You can hear Andrew asking Charlie questions in the background a few times. We're pretty sure this is the only podcast Charlie has done so far.

Charlie, along with his partner Warren Buffett, is one of the most prolific investors of all time. Charlie is 99 years old this year, and he will turn 100 on January 1 next year. Of course, our conversation was interesting because he was Charlie Munger, but also because of the fact that the people who lived through 99 years of history had interesting views.

Of course, we talked to Charlie about Costco, his experience investing in retailers over the past 50 years. We also heard his views on other issues, such as what it takes to build good partnerships, problems in global securities markets, the concept of investment versus gambling and investment opportunities in today's world.

Retail investors are actually gambling

Moderator: Charlie, I watched the NFL (National Football League) game last weekend, and now it seems like every ad is related to sports betting. Is this good for the United States?

Munger: No, of course not. Are horse racing as well as casinos good for the United States? Of course not. They're just very popular. That's it.

Moderator: Warren has already bet on it.

MUNGER: Okay, but Warren never gambled, he was more cautious, remember, Warren is not an ordinary person, and he doesn't take risks with a 10% chance of winning. Right. It's that simple.

Moderator: The next topic is retail trading in the stock market, which for many Americans is akin to gambling.

MUNGER: Well, that's why it's organized. Retail investors don't know anything about the company or what's going on, they just chase the price up and down. If I were a manager, I would tax short-term profits and drive these speculators out of the market. This is good for every market participant.

Moderator: What are your thoughts on the algorithms of quantitative investment firms like Renaissance Technologies?

Munger: Renaissance's first algorithm was pretty straightforward. This algorithm will sift through historical data, what can they decide?

They found that if (the stock) closes up for two consecutive days, it is more common for the next two consecutive days to close down than for one day to fall (up) and rise (down) for the other.

They realized that this stemmed from the "reward mentality", and that deep down in the human heart is a natural trend follower, especially when making short-term bets. Quant companies use computer programming to automatically buy on the first day of the rally and then automatically sell and cash out before the close of trading on the second day. Repeating the above actions every day, every day, the central clearing agency will say that if you settle today, you will have $8.5 million, and the next day it may become $9.43 million.

As a result, the easiest trades are on the front-end, which index funds have to make. That's right. Year after year, they increase their leverage in order to earn a return, making it higher and higher. As a result, they are trading more and more, but their profits are getting smaller and smaller, which poses a huge risk to them, which I would never do myself. It's the only way they can easily get their rewards – huge leverage. If you're already rich, this leverage will drive you crazy.

Reasons to invest in Costco

Moderator: I'm curious, how did you first come up with the idea of investing in Costco (formerly Price Club)?

Munger: Rod Hills (one of Munger's partners) knows Sol Price (founder of Price Club) and he knows Sol's business. And he said unto me, Thou shalt go and see him. So I drove straight to his store and chatted with Sol. Of course, Sol was a very smart guy who was a lawyer until he was 39 years old, when he opened a membership discount store that did a business for government employees.

Moderator: Is this in Fedco times?

Munger: He was no longer Fedco, and in 1975 Hugo Mann from Germany bought two-thirds of Fedmart.

Interviewer: Did you invest in Price Club before it merged with Costco?

Munger: Yes, I bought his shares, but I bought them on my own, and I didn't get any help.

Interviewer: So how did you end up meeting Jim Sinega (founder of Costco)?

MUNGER: Well, Sinega wants Warren to be a director at Costco, and he's looking for investors with a strong financial reputation.

Moderator: As an independent director?

MUNGER: yes, he (Warren) didn't want to go, and said you let Charlie do it. I accepted a shorter flight to the INED meeting, and that's how it happened.

Moderator: Did Berkshire ever try to become their shareholder or get customers?

MUNGER: I had suggested that Warren Buffett buy a stake in the French when Carrefour left India, but Buffett rejected that suggestion because he didn't like retail.

Moderator: Is it just that he doesn't like retail or is there any other objection?

Munger: He was scared of retail, and he was right, and gradually, everything that was once powerful in retail was gone, the partners left, there were too many competitors in retail, and retail was too difficult to do, and he was worried.

Moderator: He's had a bad experience with Diversified Retailing, right?

Munger: No, we're making a lot of money from Diversified Retailing, we're not making money from the retail industry.

The whole story is very simple, Warren Buffett and I bought this small department store chain in Baltimore. This is a huge mistake because the competition is so fierce! As soon as we signed it, we realized that we had made a terrible mistake. So we decided to turn the situation around and take the consequences that seemed stupid, rather than let it go bankrupt. In those recessionary years, we bought and bought, and all the money went into these stocks, and of course we quadrupled it.

Moderator: But did that make Blue Chip (In the late '60s and early '70s, Munger, Guering, and Warren Buffett gradually acquired a controlling stake in Blue Chip Stamps. This small company is in the business of helping retailers issue coupons. Consumers collect these coupons and then go to the store to use them for consumption. ）

Munger: We should be doing something that people don't know about, and yes, we bought a small savings and loan company for about $20 million. When we left that company, we got back more than $2 billion in marketable securities from a $20 million 'small investment' that became part of the underlying capital of an insurance company that invested in Nebraska. That's the perfect start for everyone.

Moderator: In our talk about Costco, we started with a joke at a Berkshire conference about 10 years ago, where Warren told a joke about you on a hijacked plane, and the hijacker can fulfill your last request, you say you want to give a speech.

Munger: That reminds me.

Moderator: Warren Buffett's answer is the equivalent of "shoot me". We hope you can tell us about the advantages of Costco?

Munger: It's rare in your life that you'll know you're right and be sure that what you're doing will work. Maybe you only need to do this five or six times in your life, and maybe two or three times in the early days. A lot of people go bankrupt and think that everything is easy, when the reality is very difficult and rare.

Interviewer: What made you realize that Costco is one of the few moments in your life?

Munger: They're cheaper than anywhere else in the U.S., and they're large, efficient stores. Costco has ample and spacious parking spaces, all of which are 10 feet wide, and special benefits are given to those who come to the store in the form of bonus points; Have the supplier wait (pay) until Costco gets the payment from the consumer.

You have a business as big as Costco. With the "ultimate cost performance" strategy and a large parking lot, do you want to miss the Munger case?

The company has been implementing the strategy of "ultimate cost performance", through low-cost and high-quality products and focusing on 3,700 popular SKUs, bringing higher sales volume and higher turnover efficiency of single products, and high sales volume and high turnover in turn promote the reduction of sales costs and operating expenses, forming a positive cycle; On the membership management side, membership fees are the main source of profits, and the scale of membership fee income and the company's net profit is basically equal, so as to promote the company's performance to achieve sustained and high-quality growth.

Moderator: Have you ever seen another one that leveraged low SKUs (Stock Keeping Units) and low costs to succeed?

MUNGER: Gelson's, a small grocery chain in California, has adopted a similar strategy to Costco, but they are not operating as efficiently as Costco, so they can't achieve similar success.

Bet heavily on the best investment

Moderator: When you look back at these few great companies in your lifetime, you should be betting big, what would you suggest to David and me as a young investor?

Munger: When you own a stock for 5 years, you may gradually become part of it, or you may understand it more deeply. However, when you realize that you have an advantage, you should bet heavily. You know you're right, but business schools don't teach that. It's incredible. You should definitely bet heavily on the best investment!

Interviewer: How do you develop this level of belief?

MUNGER: You're constantly working and exploring, and you're recognizing it, understanding it through a lot of reading and thinking.

Interviewer: You and Warren have had a rapport for half a century, has anything changed?

Munger: In the early days of our work, there were a lot of things that couldn't be judged, and nothing could be easily given to Munger's case.

Moderator: So how do you maintain a rapport?

MUNGER: We're all similar, we all want to keep our families safe, do good jobs for investors, and so on. We have a similar attitude.

Berkshire should use more leverage

Moderator: Has your thinking changed over the decades?

MUNGER: No, Warren is still very concerned about safety, more concerned about the safety of Berkshire's shareholders than anything else, and if we use a little bit more leverage throughout, we're going to have three times as much leverage right now, and it's not as risky, and we don't want leverage to destroy our safe-haven position.

Moderator: Berkshire's leverage, without exception, is money without prepayment requirements, that is, "stable money". Let's say you open a new store, of course, using leverage, without capital, and who wouldn't want to have a business with no inventory, right, owe a lot of money to suppliers on the first day of opening a store, and those goods sell quickly. What do you think?

Munger: Eventually, things will be reversed.

Moderator: What do you think about debt?

Munger: Many manufacturing companies can now force suppliers to bear all inventory costs. These manufacturing companies work with suppliers to shift the inventory burden onto their suppliers.

Moderator: Back to the topic of partnerships, David and I have been partners with this podcast for 10 years. Of course, such a partnership is not the same as an investment, but it is still a business that needs to be done together. After 50 years of working with Warren, what advice do you have for building a lasting partnership?

Munger: It helps if you like each other and enjoy working together. But I don't use either formula. Many long-term partnerships that work well together are sustainable because one person is good at one thing and another is good at another. They have a natural division of labor, and everyone likes what he is doing.

Costco's Jeffrey Brotman and James Sinegal, for example, are very smart but not retailers, and when all the board members decided to make Brotman chairman and CEO, Sinegal objected. It was a very unpleasant board meeting and a big infighting, and Brotman gave in.

Moderator: Was this infighting after you joined the board?

Munger: It was before.

Moderator: Do you think that you and Warren don't live in the same city is good for your long-term partnership?

MUNGER: It might help me, but Buffett has a very close relationship with everybody and eats lunch every Saturday at Berkshire headquarters. Warren Buffett and I spent a lot of time together when we were younger, because there wasn't that much to do. As they get older, they have more things to do and more other things in their lives. It's different from when you were younger.

Investing success is very difficult, and in the world of venture capital, it is almost impossible to succeed again and again.

The VC industry as a whole is doing poorly

Moderator: What are your thoughts on Venture Capital?

MUNGER: Some projects can get really hot, you have to make quick decisions, everybody is just gambling.

Moderator: Do you think VC has played its due role in society?

Munger: No, I think the VC industry as a whole is doing very poorly.

The rest of Charlie Munger's thoughts on VC were not recorded, but the conversation turned to Bitcoin.

Moderator: You've mentioned Bitcoin in a lot of comments, and I'm curious what you think about this particular angle: is Bitcoin a good thing as a standalone store of value that isn't tied to the state?

Munger: Globally, it's beneficial to have a currency that is accepted globally. In the past, the British pound was the dominant currency in the international investment landscape, then gradually shifted to the US dollar, and is still dominated by the US dollar. Some countries, such as China, have large dollar reserves because they buy American products and services, and the United States can issue its own dollars.

Moderator: What about ordinary people who don't have access to dollars?

Munger: When people have enough money on hand, they can always get dollars. U.S. dollars are easily exchanged and easily accessible no matter where you are.

Moderator: Going back to the topic of the role of venture capital in society, what would you do if you could design a perfect system to fund a country?

Munger: VC is done, it's a very legitimate business. If you want to empower the right people and nurture them, you have to help them. You know the trick of this game, so you can help them do their business without interfering them too much. They will hate you. In general, after being exposed to a large number of people from VCs, people in the enterprise tend to hate this group of VCs.

They don't feel that the VC is their partner, they don't feel that this group of VCs is helping them, on the contrary, they think that the VC only cares about themselves, so they don't like this group of VCs.

Moderator: Is there any other possible way to do this?

MUNGER: Not like that in Berkshire. Berkshire's strategy is not to invest in other companies as they raise their prices. If there are problems with a business and Berkshire is unable to fix them, we may sell the business. If a business is a halfway decent business, Berkshire usually doesn't sell it. This strategy helps build a reputation and sustain long-term business relationships.

Moderator: Is a buy-and-hold strategy a key factor in aligning interests and goals between investors and asset managers?

MUNGER: A lot of people approach things in a standard way, and lawyers use standard documents. In a given investment environment, most people have achieved similar results. You don't want to make money by scamming investors. Many venture capital firms have resorted to unethical or exploitative methods to make profits.

The world is flooded with private equity funds like those set up by Goldman Sachs partners, who have raised billions of dollars or similar amounts, charging investors a 2% management fee and other fees. This practice allows them to reap great rewards. But investors don't get very good returns.

Moderator: Do you think this is a problem with the structure of fund management fees?

Munger: Unless you're able to achieve extraordinary investment results, you shouldn't charge extra fees. It's easier to pretend to be able to achieve excellent investment results than to actually achieve them, so the venture capital business appeals to people who don't fit the industry, those who see venture capital as a means to high returns, rather than for real investment success. Those who make the most money from venture capital tend to be similar to investment bankers, deciding which hot new area to enter.

Moderator: What do you think should be done by large endowments?

Munger: They're already in action. These endowments have indicated that they are still willing to pay high management fees, but will not pay any management fees for doubling the fund's next investment cycle. This represents a 50% reduction in management fees, and this change in fee structure is taking place across the United States. They were angry and misled by the high management fees, and at the same time felt that such a fee structure was unreasonable.

It's getting harder and harder to invest

Moderator: As for the question you just raised about venture capital, is there still an undervalued and valuable investment opportunity in the current market with abundant capital and fierce competition, and the current investment environment is far from the "Cigar Butt" era of the past?

Munger: Somebody will see some opportunities, but it's getting harder and harder. I think one of the simplest cases is that Home Depot decided to emulate Costco's business model and put it directly into the furniture space. It was a good business decision, and Home Depot also made a lot of money as a result.

Moderator: Is anyone else imitating Costco's business model?

Munger: There's another, Floor & Decor, which mimics Costco in their flooring sales, but it might be problematic to keep adding a variety of other categories.

Host: Why hasn't Walmart competed with Costco?

MUNGER: They're too attached to what they already have, and that's everyone's problem. They just can't accept new things because the space is already occupied by old ideas. They have developed the habit of buying real estate, even if it is worthless, so the cost of moving into it is often zero. And they know how to build big stores, that's their strategy.

So for them, they feel offended to settle in an affluent location and pay for it. Costco only focuses on good places for the wealthy to live, and Walmart has done nothing about it for years, which is a grave mistake.

Moderator: Do you know Sam Walton, the founder of Walmart?

Munger: I haven't met him, I know one of his sons. He divided the Walton Enterprises into six parts, so they never paid much tax.

BYD is a miracle

Moderator: Tell us about your views on the automotive industry and the automotive manufacturing industry.

Munger: It's very difficult to get into the automotive industry and get high profits right now, and no one knows who will be the winner. The advent of electric vehicles has revolutionized the entire automotive industry, and entry requires significant capital investment. There has also been a change in the way cars are sold, coupled with the presence of strong unions in the automotive industry. So he didn't even pay attention to the automotive industry.

Moderator: Because of the disruptive innovation of electric cars, do you think the automotive industry is more worth investing in today than it was 50 years ago?

Munger: Maybe yes for one or two really good EV companies. But for other companies it is certainly not.

Moderator: Do you think BYD is one of the two?

Munger: BYD is a miracle. That guy (Wang Chuanfu) works 70 hours a week and has a super high IQ. He can do things you can't, and he can look at parts from other car manufacturers and figure out how to make them.

Interviewer: You invested in Hyundai Motor, how did this investment affect you?

Munger: They're smart too. I lost some money but not much, and I was stubborn and kept going until I almost got back to my heart before selling.

Japan is an obvious investment opportunity

Moderator: Regarding Berkshire's investment in Japanese trading companies, why is Warren Buffett's investment in Japan the best choice?

Munger: It's an obvious investment opportunity. If you're as smart as Warren Buffett, maybe two or three times in a century, you'll get that idea. Interest rates in Japan have been 0.5% per year for 10 years. And these companies are really entrenched and old-fashioned, and they have all this cheap copper and rubber base, so you can borrow all that money 10 years in advance, go buy stocks, and pay a 5% dividend.

With a lot of cash flow without investing or thinking, how long will it take you to find such an opportunity? If you can get one or two of these opportunities in a century, you're lucky enough. We can do that because of Berkshire's credit, but no one else can't.

Munger: Remind me, I've been researching Nike lately. But I don't like this kind of fashion company. If it were Hermès, I would invest, but other than that, I wouldn't want to invest in a fashion company.

Big brands have strong pricing power

Moderator: What do you think of LVMH as a company?

MUNGER: If you have the time, patience and the ability to do it, you could be able to achieve something like LVMH in a lifetime or three or four generations. However, even with so much time, it is not easy to achieve a career as successful as theirs.

Moderator: What do you think is the enduring value of the world's best brands, Hermès and LVMH? What makes them endure?

Munger: They have brand loyalty, and it's taken a century to do that.

The discussion turned to comparing Kirkland Signature to the Hermès brand.

Moderator: How do you see the value of the brand?

MUNGER: It's hard to dislike brands. Because we were once fortunate enough to buy Joy Candy for $20 million, this was our first acquisition. We quickly discovered that we could increase prices by 10% per year, and no one cared if they went up or not. We boosted our bottom line without increasing sales. In those 40 years or so, we've increased our prices by 10% per year. It's a very satisfying company.

It doesn't require any new capital investment, and that's the benefit of it. Before and after we bought it, the basic situation of the company has not changed much, and it still has two large kitchens and some rental shops. When Charlie See's eldest son, Laurence See, died, the See family was desperate to sell the company due to the high inheritance tax they had to pay. When we bought the candy in 1972, it had a pre-tax income of only $4 million.

Moderator: So the buying opportunity only comes when See family needs liquidity to pay the estate tax

MUNGER: We know about this because Charlie Se met Robert Flaherty, an investment advisor at Blue Chip Stamps, on a cruise ship to Hawaii. We paid Robert a discovery fee, although we haven't paid since.

Moderator: What do you think about the brand in the category where Heys or Hermès is located?

Munger: I think the chances of buying a company like this are very low, so I'm not going to look for it at all. I only believe in and look for those investment opportunities that I think are likely to find.

Moderator: What do you think of the well-known brands in other categories? For example, packaged food or others

Munger: There are a lot of professional investors who don't buy anything but stocks of well-known brands. They usually start with Nestlé and then just fill in the gaps. They may perform slightly better than the market average, but they won't be hugely successful.

Moderator: Why does Heinz have pricing power but Kraft doesn't?

Munger: It's interesting. Brands in certain categories are very important to consumers, such as Heinz ketchup, and people may be willing to pay a higher price for a particular brand because of the taste of a particular brand. As a result, we can increase the price of Heinz ketchup. However, for other products, such as Kraft, people may not care as much about the brand, so trying to raise the price may lead to market resentment, including the end consumer (housewife).

Host: Because sauces are unique flavors that are hard to imitate and are a business opportunity, this brings a return on pricing.

Munger: yes. People will get used to it and love it. This has also happened in South Korea, where one Chinese has a 95% market share of each major sauce.

Moderator: Is this the case with Coca-Cola?

Munger: yes, absolutely.

Three elements of successful people

Moderator: What is there that you believe at the age of 99 but you will not agree with at the age of 70?

Munger: At 70 I knew it was hard to invest, but now I know how hard it really is. But some investors who charge high management fees and royalties will say it's easy and start to kid themselves, but investing is very hard.

Moderator: If you were in your thirties and forties, would you still choose to invest in the industry?

Munger: Maybe, because it's in my nature. But I really don't like the high management fee and sharing model, and I prefer to invest my own funds, which I think is better because it brings more freedom. This way there is no need to be forced to deal with investment banks, investment advisors and VCs, and there is no need for anyone else. One of the purposes of being rich is that you no longer need to be dependent on others.

Moderator: If you and Warren Buffett were both 30 years old now, and you started working together, do you think you would still build a company similar to Berkshire that it is today?

Munger: No, we won't. Almost all people who achieve outstanding results have three elements: very smart, very hard-working, and very lucky. If you start early and keep trying for a long time, maybe you'll eventually have one or two of these elements.

Interviewer: If you had to start over today, would insurance still be your choice?

Munger: It depends on personality traits. Insurance is ideal for people with a certain personality, and it requires a great deal of patience and time to reap the rewards. In addition, it is difficult to compete with competitors for a long time.

Moderator: I've heard your point of view that once you have enough wealth to take risks out of it, you should try not to buy insurance again.

Munger: Think about why people who have problems after drinking excessively and then file huge claims with insurance companies would pay their share to cover the losses of those who acted unwisely.

Interviewer: Do you have insurance now?

Munger: I don't have fire insurance.

Interviewer: Do you have car insurance?

Munger: I have to do it, and that's the only way it's legal.

The tech giants are the biggest winners

Moderator: Now that everyone is very concerned about technology, I'm curious about you not coming from a technology background, how do you think about investing in Apple, and what makes you so confident?

Munger: Every investor needs to have some significant involvement in 12 companies in order to do better than the others. You need to re-invest in at least two or three companies to make your investments perform better, and if that's what you think, Apple is a very reasonable choice, and it's not hard to think of that.

Moderator: It's not difficult to list the targets to invest in, such as FAANG or Meme stocks, Microsoft, Apple, Google, Facebook (renamed Meta). But it's very difficult for me to pick one and invest hundreds of billions of dollars and create hundreds of billions of dollars. How did you choose?

Munger: We don't look for any other stocks to invest in.

Moderator: Because of valuation?

Munger: yes, we buy at a low price and we get about 10 times the benefit.

Moderator: I probably bought it for the first time in 2015. For me, the concept is interesting, and if you look at distressed debt, I think Warren pointed out in his last Berkshire letter that these are some very good decisions. Or you look at venture capital, which is classically power-law distributed. The performance of any one of these assets can be boiled down to a few very good decisions that have been made throughout his career.

Munger: Exactly.

Moderator: But there is no asset to use these strategies over and over again.

Munger: No, no, the opportunity hasn't gone away, it's become small.

Moderator: You mentioned the idea, and when we talk about Apple, there are some companies that are very important. Do you think these big tech companies are the biggest winners? Do you take it for granted that all pensions, Berkshire and university donations and everybody's pension are invested in these companies? Do we have to end up this way?

Munger: Yes, rightfully so.

Moderator: What caused this outcome?

Munger: Human nature and competition.

Moderator: Which factor is the most important?

Munger: This kind of crazy risk-taking capital, when they all get stupid, has a natural result.

Moderator: Will there be a $20 trillion company in the future? And then bigger companies emerge?

Munger: Yes, I think it will.

Optimistic about China's economy

Interviewer: Will you continue to invest in China? What is your position on this?

MUNGER: My position on China is, first, that China's economic prospects for the next 20 years are better than any other large economy, and second, that China's top companies are stronger and better, and they are valuations that are much cheaper. Therefore, I am naturally willing to include some Chinese risk assets in Munger's portfolio.

As for what the risk value is, it's not a scientific question, but I don't mind if it's 18% or whatever, as long as the Munger family thinks it's appropriate, I agree.

Moderator: Will you hold TSMC at this time?

MUNGER: I like companies that really own the brand like Apple. (No positive answer)

Only look at cheap stocks and great brands

Moderator: I'm curious, are there any other big companies that have not been mentioned and whose merits are worth looking into for investors? For example, what are the advantages of Costco?

Munger: I only look at two kinds of companies. Well, I'm Ben. A big fan of Ben Graham. If some company's stock is really cheap, even though it's a bad company, I'll consider holding it for a while. I do this occasionally, with some success.

But I'm kind of like Howard Marks, having made one or two particularly big bets and not hundreds of times. The easy money that you get hundreds of times is almost non-existent.

Moderator: One is "Cigar Butt" and what is the other?

Munger: Great brands, to buy at the right price, the trick is to take the rare opportunity to bet on a really cheap one. Costco's current share price is okay, but it's going to get tougher.

Moderator: Regardless of the outlook for stocks, how do you see Costco's business in the next 10 years?

Munger: It can be done very well.

It's getting harder for young people

Moderator: One more question. What advice would you most like to give to young people?

Munger: I don't give advice to any young person, I think carefully about timing and who I want, and I don't want to be a spiritual teacher. The world is full of deception and madness, and it is getting harder for young people.

Moderator: Everything seems to be overrated, where can you go to find attractive opportunities? Is it possible to find it?

Munger: Of course it's possible, it's only possible, and in fact it may have happened.

Moderator: How can you become rich if you have sufficient capital but opportunities are scarce?

Munger: That's the nature of nature. Biological evolution has led to the emergence of highly evolved organisms like humans, but in any case, this process has been achieved through brutal competition and tens of thousands of years of cannibalism. In other words, nature's system of improving intelligence through competition is not pleasant for those who lose.

Host: So over the last hundred years, we've brutally transferred all this value from labor to capital. Right now, capital is competing for very small opportunities.

Munger: Capital is never easy, it's just that if you look back a long time ago, it was relatively easy compared to today.

Moderator: If it continues to get difficult, you're going to get the result of natural competition.

Munger: yes, what happens when there are some challenges to modern democracies? God knows what will happen? Maybe like in Europe, it's quite abnormal.

Moderator: Isn't it too pessimistic to think that there are not enough good ideas in the world to match the amount of capital that wants to invest in them?

Munger: Success is never easy, and I know from the bottom of my mind that it's never been easy, and it's getting harder now. You need to be mindful of how you deal with people and build a good reputation.

Moderator: I don't think you're saying that there aren't any opportunities, but that expectations are lower and wealth is less.

Munger: The beauty is that you only have to get rich once, you don't have to climb the mountain four times, you only have to do it once.

Moderator: Well, that's your two-sided philosophy, you have to be patient and wait for the great opportunity, but when the opportunity comes, you have to be aware.

Moderator: One more question about Costco, what I've always wanted to ask is, how are multiple strategies like low SKU and high inventory turnover so beautifully put together so beautifully, so obvious, why hasn't any other company done it?

Munger: It takes a lot of execution to do that. You really have to do it and analyze it every day, every week, every year, for 40 years. It's not easy.

Success = Business Model + Culture

Moderator: So do you think success has to depend on business model and culture?

Munger: yes, culture plus mode. Yes, absolutely. Very reliable, diligent and determined to carry out for 40 years.

Moderator: Take the story of tomato sauce as an example. You can increase the price of tomato sauce by 3% and no one will notice, but if you do, it will destroy everything.

MUNGER: I would say that the core principle is not to raise the market price, try to keep it low and stay that way for a long time.

Host: This reminds me of the hot dog story. When Craig took over as CEO of Costco, he did try to raise the price of hot dogs, is this story true?

Munger: I don't know, nobody has talked to me about that.

Moderator: Wasn't it discussed at the board level either?

Munger: No. They don't think it's important to discuss the price of a hot dog.

Moderator: One of the things that fascinates me about Costco is that they only seem to be able to grow by 10% per year, even though they don't have capital limits. They seem to do so even if they have access to a lot of money for free.

Munger: What I can tell you is, it's hard to open too many stores in a year. New stores, new managers, new political environment, and so on. These are hard things. And there's a lot to learn, teach, and put in place. So they don't want to do more than they can easily handle.

Moderator: One of the things I find interesting about Costco is that although their prices are the lowest, most of the customers are wealthy people. Was this an accident that was discovered over time, or was it already aware?

MUNGER: Saul Price realized this during his time at the Price Club, and he always wanted the rich to try to save money.

Moderator: It's not just because they're the richest customers, they're smart customers, they're picky, wealthy customers.

Moving on to a few more topics outside of Costco, you mentioned at this year's Daily Journal conference that young people know the rules and older people know the exceptions.

MUNGER: It's an old Peter Kaufman saying.

Interviewer: What have you found to be the most useful exception in your life?

Munger: Take these hot dogs at Costco, which are an exception, and other people would have raised the price of hot dogs a long time ago. They just don't do it, they know that hot dogs are one of the selling points and will attract a lot of families to come and shop. Even if there is an opportunity to raise the price of hot dogs, they don't do it.

Wang Chuanfu is a genius and is better at manufacturing than Musk

Moderator: There's one thing I've never fully understood. I know you're a big fan of BYD, the Chinese company that makes batteries and electric cars.

Munger: I may be a big fan, but what I'm sure of is that I was very nervous when this company was speeding around the track. This company is very ambitious.

Moderator: Is this dangerous for a company?

MUNGER: Absolutely, that's what makes me nervous.

Moderator: So, do you think this company should grow at a rate that is lower than its ability to achieve more sustained growth?

Munger: If it's safer, easier, etc., you can do that. But Costco, for example, has had positive results with its approach to such an extreme matter as hot dog prices, and in some things they have wisely chosen not to change those ways.

Moderator: This looks like a pedigree, with Costco on one side, it's not a fast-growing company because it's difficult; On the other side is a company like BYD, which has achieved crazy growth.

Munger: BYD has sold at least 2.5 million vehicles this year, mostly electric, which is unheard of. Much more than Mercedes.

Moderator: It's also far more than Tesla.

Munger: Really? Every company has had a lot of troubles and losses, and they have also had terrible troubles, made the wrong type of vehicles, made a lot of mistakes.

But fortunately, they are at the forefront of the electric vehicle industry. Its acceleration performance far exceeds that of other brands, making it more dynamic than most cars. I really like BYD's electric car, in many ways, it performs better.

When making a 90-degree turn, the BYD car can move directly to the opposite parallel position and then continue to move forward like that. The tires turn 90 degrees and move forward. If one tire is flat, the other three wheels can still work for a hundred miles.

Moderator: Would their economic model be better because there aren't too many parts?

Munger: Better because they're simpler.

Interviewer: Have you made similar investments before? You invested $270 million in BYD, which is now worth about $8 billion.

Munger: A lot of "smart people" make VC type investments. BYD is actually a listed company with low liquidity, and our investment is not VC type. They were very aggressive in their actions, like putting their foot on the gas pedal and giving it their all.

We discouraged them from entering the automotive industry. BYD entered the automotive industry by acquiring a bankrupt car company. I think it's a grave for them, why do it. But they didn't heed the advice and continued to act.

Interviewer: When he told you about the plan, had you already invested in it?

Munger: yes, after making a huge mistake, it worked really well. It almost went bankrupt because of the early dealer system, just a little bit.

Moderator: What attracted you to invest in BYD?

Munger: That guy (Wang Chuanfu) is a genius. He did his Ph.D. in engineering, and he knew how to make them by looking at parts from other companies, and I had never seen anyone like that, who could do anything.

He is a natural engineer and is good at executing and solving problems, which is very important. He's a collection of all sorts of talents, which is very useful. He has solved many problems in the field of electric vehicles, including technical challenges in the areas of electric motors, acceleration and braking.

Moderator: How does his BYD compare to Elon's Tesla?

Munger: Wang Chuanfu is a fanatic who is obsessed with making products with his own hands, so he is closer to the front line. In other words, Wang Chuanfu is better at manufacturing than Musk.

The newspaper business is a gold mine

Moderator: Charlie, you'll be 100 years old on January 1 next year, which is an unbelievable day. Do you have any plans?

Munger: I'll throw a party.

Interviewer: Is there anything you've been fascinated by lately, or what are some of the fun?

Munger: Personally, it's all fun. Even if the politics itself is bad, it's funny.

Interviewer: When you look back, when did you have the most fun in your time with Warren?

Munger: It's always been fun.

Interviewer: Is there a particular era that you miss the most that feels like the good old days?

Munger: Well, there was a sweaty time.

Moderator: Brother Solomon.

Munger: yes, we had big problems to solve at that time, and there could be huge losses.

Host: When we look at Berkshire Hathaway on the podcast, we conclude that the entire franchise is at risk during the Salomon Brothers period, blocking Berkshire's entire reputation and future. Do you agree?

Munger: It's not that serious, it would have survived.

Moderator: What happens if you let Solomon's entire investment go to zero?

Munger: Everything is going to explode. We could have written off bad debts, we could have handled them well.

Interviewer: Do you think it was your best time?

MUNGER: We're having terrible problems with the Buffalo Evening News' investment.

Moderator: Buffalo Evening News.

MUNGER: There were two newspapers in Buffalo at the time, and we launched the Sunday edition, which sparked a lot of competition. As a result, the competitor went bankrupt.

Moderator: At that time, you were all young and very enterprising.

Munger: No, but I'm very active in getting the Sunday edition right. If it weren't for the Sunday edition, I wouldn't have owned this newspaper for 50 years, and other colleagues would have had Sunday editions.

Moderator: What made the newspaper business so attractive at that historic moment?

Munger: The newspaper business is a gold mine.

Host: The acquisition of the Buffalo Evening News and the launch of the Sunday edition were an attempt to monopolize the local newspaper industry. Yes, to play a big game, you have to play it in the city. With newspapers, you can do just that. What I mean, of course, is that for decades, newspaper EBITDA margins have been between 50% and 60%. Right?

Munger: No, it's the margins of small newspapers, and the EBITDA margins of large newspapers are between 25% and 40%.

Moderator: I'm sorry, I overlooked the size of the newspaper.

Moderator: Actually, do you still feel like eBay has been committing crimes, and have you demonized it in the past?

Munger: Definitely. So you get a big truck company and deduct the earnings from the depreciation of the trucks. Then you are lying about profitability.

GM used to be a great company

Moderator: I mean, when the concept of EBITDA margin was invented, you saw it rise with John Malone, TCI, and Liberty, right? What were you thinking?

Munger: Well, I've never been a fan of isolated extreme operations. I don't want to be called the great manipulator like John, who pays less income taxes than anyone else, he just pushes everything to the extreme.

Moderator: Maybe the last question is, what do you think are the greatest companies you've ever seen, that you own or that you don't?

MUNGER: Well, there are a lot of great companies. General Motors used to be a great company. Yes, General Motors in its heyday was a great company, it just went into decline step by step.

Moderator: How many companies do you think are predictable, when you start your business, there are a lot of companies whose business can be said to remain the same in 10 years. Do you think it's still that number? Or do you think it's harder now?

Munger: I think the future threats are going to change a lot in most places.

Moderator: Do you think it was the same 50 years ago?

Munger: There's a difference. Berkshire has a lot of what I would call specialized industrial companies that are protected from really stiff competition simply because they've been around for a long time, and they're very good at what they do, and they have a good reputation and high value, and so on.

Moderator: Aside from Berkshire and Costco, what are some of the companies today that you can confidently say will be doing as well in the next 10 years as they are today?

Munger: I think a lot of companies are pretty good, but you can't usually say what's going to happen because you might meet the kind of people who push everything just to maintain public relations. So no matter how good the business is, it's going to be a bit hypocritical.

Get along with your family

Moderator: Charlie, I have a personal question for you. David has a two-year-old child, and I'm going to have my first child in a month. What advice do you have for us to start a family?

Munger: Of course, you need to be in harmony with each member of the family, you have to help them through difficult times, and they will help you. I don't think it's as hard as it seems. I think half of the marriages in the U.S. are going very well. By the way, if both parties have to marry / marry someone else, it will go just as well.

Host: Well, you said that the best way to have a good spouse is to have one that deserves one. As long as both parties feel that way, that's the secret to success.

Munger: Absolutely, and when it comes to things like children's education, you have to trust your significant other.

Moderator: I agree with you, Charlie.

Munger: Good luck.