047: Charlie Munger at the 2021 Daily Journal Meeting

Table of Contents

1. Charlie, Charlie, Charlie

1. Charlie, Charlie, Charlie

I really love watching Charlie Munger each year at the Daily Journal annual shareholder’s meeting. I savor his terse answers and that he regularly admits he doesn’t know an answer or “can’t contribute.” If more of us would say it out loud when we don’t know an answer, we’d have a much more intellectually honest world.

Part of my personal practice is to take written notes of Charlie’s answers. I started writing his comments down for myself a few years ago because I’m a horrible audible learner and taking notes helps me digest what’s been said. Then I started sharing the document out to a few people, and now I share it here, with our wonderful investing practice community.

The notes below are taken from the 2021 Daily Journal annual meeting, the video of which you can find here, and are extremely paraphrased and decidedly not verbatim, so don’t quote them without going back and checking the video.

If you want to skim for the extra-interesting stuff, you’ll see a few bits bolded, with my notes below. Occasionally I included time stamps to make it easier to orient and find certain answers on the video.



Daily Journal Meeting, February 24, 2021

(After some annual meeting prepared statements and ratifications.)

Q: You said DJCO’s share price increased by speculative buying – same in broader market. How can investors cope with a buying frenzy?

A: These things happen in a market economy. In Dot-Com boom every building in Silicon Valley rented expensive offices and a few months later they were vacant. There are these periods in capitalism. My policy is to just ride them out. That’s what shareholders do. In fact, what shareholders actually do is pile in to buy stocks, frequently on credit, because they see it going up. That’s a very dangerous way to invest. I think shareholders should be more sensible. Don’t just buy them because they’re going up and they like to gamble. Kipling once wrote a poem, “The Women,” in which the concluding line was to the effect ‘you should learn about women from him instead of yourself, but I know you won’t follow my advice.’

(Note from Danielle: I looked it up, and it’s a poem called “The Ladies” and involves some language very much not acceptable nowadays, so I’m just going to leave it there.)

Q: What are your thoughts on the GameStop short squeeze, and implications of it in the future?

A: Kind of thing that can happen when a bunch of people gamble on liquid stock markets as they would bet on racehorses. It’s a frenzy, fed by people who get commissions, out of this new bunch of gamblers. Get extremes like that short squeeze. Clearing houses clear all these trades. When things get crazy, like with GameStop, there are threats of clearing house failure. So it gets very dangerous. And it’s really stupid to have a culture to have gambling in stocks by people who have the mindset of racetrack betters. Of course it will create trouble. I have a simple idea on this subject. “I think you should try to make your money in this world by selling other people things that are good for them.” If you’re selling them gambling services and take money off the top, like many of these new services that lure the gamblers in [with zero commission trades], “I think it’s a dirty way to make money and I think that we’re crazy to allow it.”

(Note from Danielle: I love that he said that the way to make money (and, therefore, the way to be an ethical and successful investor) is to sell people stuff that is not only good stuff, but good stuff for them. I can’t think of a better Mission statement for my investing practice. I want to be connected to companies that sell other people things that are good for them.)

Q: What do you hope the future of DJCO will be in a decade?

A: Hopes DJCO modernizes all these courts in the modern world. Hopes the newspaper survives too. Neither one is a sure thing.

Q from Matthew Peterson: The highly configurable JTI product may help e-suites integrate deeply into new jurisdictions as agencies and citizens become familiar with courthouse software. Today, the majority of contractual revenue that can be identified is from implementations and licenses. What are the main sources of ancillary revenue once the products have gone live and how meaningful will the various products become?

A: We don’t know where it’s all going. We do know the courts of the world are going to be taken into the modern age. You wouldn’t want to be invested in a parking lot by the courthouse for the future because a lot is going to go online. In Estonia they’re all on the internet and think it’s a very good idea. So what we’re doing is a big going field. The bad news is it’s not clear who’s going to win all the business, or how much money will be made. Generally people assume we’re a normal software company like Microsoft. We’re in a more difficult business than Microsoft. Software RFP business is demanding and less profitable and less sure than Microsoft. But we love it anyway. It’s doing a big public service.

(Noted that Rick Guerin passed away, and Charlie said some very kind words about his friend.)

(14:30) Q: Now that DJCO is cash flow positive, what is the thinking about capital allocation?

A: Our business that has the most promise is software in the courts. Going to play that as hard as we can. The securities are just – we prefer holding stocks than cash under current conditions. Kind of an accident we hold so much in marketable securities.

Q: DJCO succession planning?

A: The people doing the software are doing magnificently well. Hope they continue. Very difficult, lots of competition. Can’t promise we’ll succeed.

(Note from Danielle: Lengthy answer involving details of business, but no real answer about succession at all.)

Q: Is this market a close parallel to the late 90s? Must this end badly?

“Yes, I think it must end badly, but I don’t know when.”

(Note from Danielle: Mic drop. Charlie said the above and turned to stare silently at the camera, hahahh, cracked me up.)

Q: SPACs? Seems like everyone is getting into the business of promoting their own SPAC? What do you think?

A: Think world would be better off without them. Speculation is a sign of an irritating bubble. “The investment banking profession will sell shit as long as shit can be sold.”

Q: Last year, you spoke about wretched excess in the financial system. Now?

Most egregious with trading by novice investors lured in by Robinhood. Civilization would do better without it. First bubble in a stock market was South Sea Bubble and it blew up so badly that England didn’t allow hardly any public trading for decades thereafter. Created the most unholy mess. Bubbles happen time to time, and wise people just stay out of them.

Q: In past speeches, you mentioned “functional equivalent of embezzlement” to describe when bubbles can form because both parties in a bubble believe the asset to be worth more than it truly is. What about treasury bonds? Extra dangerous because treasury assets underpin every other asset?

A: I don’t think we have a bubble in treasury securities. I think they’re a bad investment when interest rates are this low. I don’t buy any. But I don’t think treasury securities are a big problem. I do think we don’t know how economies are going to work in the future as govts print all this extra money. I don’t think anyone knows for sure. Larry Summers says we have too much stimulus. I don’t know whether he’s right or not.

(23:40) Q: You said you didn’t get to where you are by going after mediocre opportunities. In past few years, equity prices are way up and cash has become riskier. Would you lower your standards now?

Everyone is willing to hold stocks at higher priced earnings multiples when interest rates are as low as they are now. Not crazy that good companies sell at way higher multiples than they used to. On the other hand, as you say, I didn’t get rich by buying stocks at high priced earnings multiples in the midst of crazy speculative booms. I’m not going to change. I am more willing to hold stocks at high multiples than I would be if interest rates were a lot lower. Everybody is.

Q: Is value investing still relevant in a GDP-decreasing world? What about passive investing?

A: Value investing the way I conceive it is always wanting to get more value than your pay for when you buy a stock. That approach will never go out of style. Some people think value investing is when you look for companies with a lot of cash and lousy business or something. But I don’t regard that as value investing. All good investing is value investing, it’s just that some look for value in strong companies and some look for value in weak companies, but every value investor tries to get more value than you pay for. Some consider themselves more professional if they own 100 stocks rather than 4 or 5. I regard this as insanity. Much easier to find 4 or 5 investments where I have a pretty reasonable chance that they’re above average. I think it’s much easier to find 5 than it is to find 100. I call it “diworsification”. I’m much more comfortable owning 2-3 stocks I know something about and where I think I have an advantage.

Q: Why is Berkshire selling Wells Fargo, but DJCO is holding?

A: Not required we be actually the same on anything. We have different tax considerations. Regarding Wells Fargo: the old mgmt were not consciously thieving, but they had a horrible culture and bad incentives. When evidence came in that the system wasn’t working, they came down hard on the customers instead of changing the system. Big error in judgment. You can understand why Warren got disenchanted with Wells. I think I expect less out of bankers than he does.

Q: What is wisdom behind holding bank stock compared to other stocks? Are they more stable?

A: All stocks can fluctuate. Kind of executives who have a Buffett-like mindset and never get in trouble are a minority. It’s hard to run a bank intelligently and there are a lot of things you can do to make things go up next quarter. It’s difficult but not impossible to invest in bank stocks successfully.

Q: What is threat to banks? Apple Pay? Square? Bitcoin?

A: I don’t know what the future of banking is and I don’t know how the payment system will evolve. I do think a properly run bank is a great contributor. So I don’t think Bitcoin is going to end up as medium of exchange. It’s too volatile. Kind of an artificial substitute for gold, and I never buy any gold. Bitcoin reminds me of what Oscar Wilde said about foxhunting: pursuit of the uneatable by the unspeakable. (Note from Danielle: hahaha)

Q: BYD stock has gone above intrinsic value. How do you decide whether to hold a stock or sell some?

A: What happened last year was that BYD is well positioned for the transfer of chinese auto production from gas to electric. Since we admire the company and like its business, and because we pay huge taxes when we sell something, on balance we hold these positions when we wouldn’t buy a new position. One of my smartest friends in VC gets stocks at low prices and he immediately sells half so either way he feels smart. I don’t follow that practice but I don’t criticize it either.

(34:40) Q: Are valuations for electric car manufacturers insane?

A: I so rarely hold a company that goes to a nosebleed price that I don’t have a system yet. I’m just learning as we go along. If we really like the company and the management, as we feel about BYD, we’re likely to be a little too loyal. And I don’t think we’ll change on that.

Q: Why did you think Amazon has more to fear from Costco than the other way around? Do you want to go into any new Bezos ventures?

A: I’m a great admirer of Jeff Bezos, one of the smartest biz men who ever lived, but I won’t be following him. I just don’t know enough about it. Every investor, when you get into these hard questions, there are a lot of very smart people who reach opposite conclusions. Costco, I do think, has one thing Amazon does not. People really trust Costco to be delivering enormous value, and that’s why it poses some threat to Amazon. Its reputation for providing value is better than Amazon’s.

Q: How do you control your investments when reasonable companies like GE sink to the bottom of the market? Is it possible to realize a deterioration in a company is happening quickly enough to exit without a loss?

A: I never owned GE because I didn’t like the culture and I wasn’t surprised when it blew up. I do think the new CEO is extraordinary. If anybody can fix it, he can.

(Note from Danielle: Culture!!! My favorite thing to look for! Charlie has so much respect for a great company culture and it makes me more confident to hear him talk about it.)

Q: You run investments through your mental checklist. Anything you wish you had added to your checklist sooner?

A: I’m constantly making mistakes in retrospect I should have decided differently. Inevitable. I’m pretty easy on myself these days. Methods I’ve used are the correct methods. I’m grateful I found them as early as I did. I recommend other people follow my example. Reminds me of a key phrase in PIlgrim’s Progress: my sword I leave to him who can wear it. I’m afraid that’s how we all have to leave our swords.

(40:50) Q: You and Warren have been adept at sizing people up. What do you look for in a leader, and do you have any tricks, shortcuts to size people up quickly and accurately?

A: If a person’s a chronic drunk, we avoid him. Everybody has shortcuts to screen certain hazards. We probably have more of those shortcuts than others. They’ve served us well over the years. We’ve associated with a lot of marvelous people. Also true of the Daily Journal. Jerry was running the Munger Tolles law firm and even though he knew nothing about newspapers, they put him in charge of the Daily Journal and he’s made every decision wonderfully ever since. That’s our system. “System of management is delegation just short of total abdication.“

(Note from Danielle: I want to try to decipher their shortcuts to size people up. I’m sure they’ve told us over the years.)

Q: Crazier: price of bitcoin or tesla?

A: To quote Samuel Johnson, can’t decide the order of precedence between a flea and a louse. I feel the same between those choices. I don’t know which is worse.

Q: Should there be a tax on buying stock now that Robinhood trades are free?

A: Robinhood trades are not free. When you pay for order flow, probably charging your customers more and pretending to be free. Very dishonorable and low-grade way to talk. Nobody should believe Robinhood trades are free.

Q: Western world does not understand China. What can we do to increase appreciation?

A: Natural for people to think their own civilization is better. China’s economic record is the best that ever existed. Lots of people assume since England led the industrial revolution and had free speech, that free speech is required to have a booming economy. But Chinese have proved otherwise. They copied Adam Smith and left out the free speech and it’s worked fine for them. Would have come out worse if they were like the west, they needed extreme methods, totalitarian methods if you will, to get out of hte fix they were in. Pompous to tell them they should behave like us. Entirely possible our system is right for us and their system is right for them.

Q: What about the risk of China nationalizing BYD?

A: Very unlikely. Jack Ma was very arrogant to be telling the Chinese gvovt how dumb they were. Not going to work in that system. We all love the civilization we have, I’m not saying I want to live in China, but I do admire what the Chinese have done. Take a huge country out of poverty. There are factories full of robots. Amazing. Joining the modern world rapidly and getting very skillful at operating.

Q: Keeping interest rates near zero exacerbates inequality. What can we do?

A: Complaint about the rich getting richer during covid, misplaced concern. Nobody was trying to make the rich richer. Trying to save the whole economy. By and large made the most practical decisions available to us. Made the rich richer as an accidental byproduct of trying to save the whole civilization. What happens is, to make a nation rich, you need a free market system. The poverty that makes everyone miserable is also the system that makes people get out of poverty. It makes the whole thing very awkward. It’s a shame textbooks don’t emphasize how much you need poverty to try to get out of poverty. If we could make the world richer by raising the minimum wage to $100,000 per second or something, of course we would do it. But we can’t.

Q: Modern monetary theory?

A: It means the people are less worried about an inflationary disaster like Weimar Germany from government printing money and spending it. So far, maybe modern monetary theory is right. Put me down as skeptical. I don’t know the answer to that one.

(54:30) Q: Fed appears to be supporting asset prices. Long term consequences?

A: I don’t know how well the economy will work in the future. I don’t think we or the Daily Journal is getting ahead because we’ve got some wonderful macroeconomic insight. I’m way less afraid of inequality than most people who are bleating about it. Inequality is an inevitable consequence of having the policies that make a nation grow richer and richer and elevate the poor. I don’t mind a little inequality. I notice the rich families lose their privilege and wealth, and pretty fast, so I don’t mind the country is getting ruined by a few people are getting richer ahead of the rest of us. Chinese were pretty smart, turning a whole bunch of billionaires there. Death tax? In China it’s zero. That’s what the communists are doing. I think they’re probably right by the way.

Q: Wealth tax?

Any rich nation ought to have a social safety net that expands with its wealth. That’s what we’ve been doing throughout my lifetime and I applaud the result. Would have been worse had either party been in control the whole time, so founders created checks and balances that created pretty much the right policies. But politics is getting more full of hatred and irrationality than it used to be in America, and I don’t think that’s good.

Q: Wealthy people leaving California?

A: More and more rich people are leaving California. Washington state is considering a wealth tax at state level. Insanity. If they do that, more and more will leave Washington.

Q: Future of commercial real estate?

A: Office buildings and retail is in trouble, apartments will come through better. But it’s in some trouble. I don’t think I’ve got a lot to contribute.

Q: Healthcare – thoughts on Haven?

A: Don’t know anything about it.

Q: You’ve said the best way to learn about business is to study the multi-year results of great companies. How could that be taught in schools?

A: Here’s what I meant. Harvard Business used to start with the history of business. Saw ebb and flow of industry and destruction and economic changes. Background which helped everybody. If I were teaching business, I would start that way. I think if they stopped, you’d be stealing the best cases from the individual professors and it was academically inconvenient for them. But of course you’d start with the history of capitalism and how it worked and why, and [business schools] don’t do that very well. If you think about it, business success long-term is a lot like biology. What happens is everything dies. Whoever dreamed when I was young that Kodak and General Motors would go bankrupt. It’s incredible. That history is useful to know.

Q: You say you learned the various methods of learning. What’s YOUR method of learning?

A: I had the right temperament. When people gave me a good idea, I mastered it and just used it the rest of my life. I don’t think everybody does that. It’s such a simple idea. Of course, without the method of learning, you’re like a one-legged man in an ass kicking contest. Not going to work very well. Jerry didn’t know one damn thing about the daily journal and we made him head of it. But he knew how to learn what he didn’t know. I think to some extent you have it or you don’t.

Q: Why are some people capable of learning?

A: It’s a quirk. Some people have a natural trend toward good judgment. Some people, their life is a series of mistakes over and over again.

(1:05:30) Q: In 2005 you updated talk on human misjudgment. 16 years later, any new material?

A: Of course some, but by and large, most of the knowledge has been available for a long time. What prevents the wide use of helpful psychological insight is that psychology gets really useful when you integrate it with all other knowledge. Don’t teach that in the psych department because academics don’t support it, instead of synthesizing with the rest of knowledge. No incentive to master the rest of knowledge, so they can’t synthesize it with psychology. It’s an interesting example of self-learning. I learned those tendencies well enough to synthesize them with the rest of knowledge. Psychology is one of the most ignorant professions in the world.

Q: You’re known as an advocate of learning from one’s mistakes. What did you learn from a building investment in Brentwood?

A: Avoid zoning work.

Q: Advice for someone trying to stay in circle of competence, but finding the pace of tech innovation is rapidly reducing that circle?

A: Of course, if they bring in a brand new technology you don’t understand at all, you’re at something of a disadvantage. If you have a fixable disadvantage, remove it, and if it’s unfixable, learn to live without it. What else can you do? You fix what can be fixed, and what can’t be fixed, you endure.

(1:09:30) Q: How to hold two opposing insights at the same time?

A: I have a standard that has helped me. I think [to myself], that I’m not really equipped to comment on this subject until I can state the arguments against my conclusion better than the people on the other side. If you do that all the time, looking for disconfirming evidence, and putting yourself on the grill, that’s a good way to help remove ignorance. What happens is every human being believes way more than he should in what he’s worked hard to find out, or what he’s announced publicly. While we shout our knowledge out, we pound it in, we’re not enlarging it. I was always aware of that, and except at these damn annual meetings, I’m pretty quiet.

Q: Bankers of today could learn a lot from Gene, but little is known of him. How did Gene achieve such low loan loss rate?

A: He lived in a small town, he knew everybody. He was the perfect banker if you wanted to never have any trouble. Of course it really helped to have known everyone in town. If I had stayed in Omaha, I would have been a hell of a banker, because I knew a lot about who was sound and who wasn’t sound. Leery of dumb loans. He hated costs. Very old fashioned, sound thinker. But it’s hard for anybody else.

(Note from Danielle: I missed who this question was about – Gene Abag?)

Q: You’ve been a long admirer of Singapore and Lee Kuan Yew. How did you start your interest? What would the world learn from Singapore?

A: Best record as a nation builder. Took over malarial swamp. His mantra: Figure out what works, and do it. Most people don’t do that. They don’t work that hard to find out what works and what doesn’t, and they don’t keep at it the way he did. He was a very smart man. Had a lot of good ideas. Absolutely took over a malarial swamp and turned it into modern Singapore in his own lifetime. Incredible. It was a one party system, but he could always be removed by the electorate. He was not a dictator. Hardly anything he touched that he didn’t improve. When I look at modern Singapore health system. It costs 20% of Americans cost. And much better. Time after time, he would choose the right system. In Singapore you get a savings account the day you’re born, and if you don’t spend it, it eventually goes to you and your heirs. So it is your money. And of course people behave more sensibly when spending your own money. Time after time he would do something like that that recognized reality. I have a bust of Lee Kuan Yew in my house. I admire him that much.

(1:16:30) Q: What is the biggest lie currently being perpetuated by the investment complex?

A: Commission-free trading is a very good candidate, if you want to emphasize disgusting lies. Commission-free trading is not free.

Q: Better to invest early or wait until company is clear winner of mature industry?

A: Warren and I are better at buying mature industries than we are at backing startups like Sequoia. Best VC operation is probably Sequoia, and they’re very good at early stage investing. I’d hate to compete with them, they’d run rings around me. For some folks early stage investing is best, and for other folks, what I’ve done in my life is best.

Q: You’ve said recently Sequoia is the greatest investing firm ever. Do you think this time is different, and conventional valuation is dead, or is this like 1999? How do you pay huge amounts for a growing but unprofitable business?

A: Generally I don’t try and compete with Sequoia. You can argue I got close to Sequoia when, with Li Lu, we got into BYD. That was not a startup. So small and thinly traded though, we were buying into a venture capital type investment, but in the public market. With that one exception, I’ve stayed out of Sequoia’s business because they’re so much better at it than I would be, and I don’t know how to do it the way they do it.

Q: What moats will be most important of the years ahead, and what combos of competitive advantages will create new moats?

A: Too hard and general a question for me. A lot of the moats that looked impassible, people found a way. Look at monopoly newspapers. Used to essentially be part of the government of the US, almost. They’re all dying, every damn one of them almost. A lot of the old moats are going away, and of course, people are creating new moats all the time. Nature of capitalism. It’s like evolution and biology. New species are created and old species are dying. Of course it’s hard to negotiate. But there’s no rule life has to be easy on the mental side. Of course it’s going to be difficult.

Q: How are great investors and great chess players alike or different?

A: What’s interesting about chess, is to some extent, you can’t learn it unless you have a natural gift. Even with a natural gift, you have to learn at an early age. People have the theory that any intelligent hardworking person can become a great investor. I think any intelligent person can get to be a pretty good investor and avoid certain obvious traps. I don’t think everyone can be a great investor or a great chess player. I knew someone, Henry Singleton, who could play chess blindfolded just below a master level. He was a genius. If you’re not a genius, you’re not going to win at chess and you’re not going to be a great investor. These things are very difficult. By and large it’s a mistake in investment management to hire armies of people to make conclusions. Better to concentrate decision power in one person, like Lu Lu partnership does, and choose the right person. I dont’ think it’s easy for ordinary people to become great investors.

(Note from Danielle: Pretty good is good enough for me!)

Q: What do you think about hydrogen powered transport? Trucks v. cars in particular, with gas stations and truck stops.

A: I hope we don’t have less truck stops because Berkshire is deeply involved in truck stops. Of course more automation in transportation of all kinds in the future. I don’t think I’ve got any great insight about hydrogen. Having a whole system tos ell hydrogen is difficult. On other hand, the buses in LA work on natural gas. Saved LA a fortune because natural gas is much cheaper than gasoline. Have seen a whole bus system shift, so it obviously isn’t impossible, but you have to create a new system of supply for it. Don’t know how much more dangerous it would be to deal with hydrogen than with gasoline, which is also a dangerous substance. You’ve reached the limit of my circle of competence, I can’t help you.

(1:25:45) Q: What would DJCO management do with a sudden windfall of profits?

A: Not easy to handle accumulated money in the current environment with stocks so high and real estate of some kinds is also very inflated. All I can say is we’ll do the best we can. When it gets difficult, I don’t think there’s any automatic fix of difficulty. When difficulty comes, I expect to have my share.

Q: Does management have a moral responsibility for shares to trade as close to fair value as possible?

A: Can’t make that a moral responsibility, because if you do that, I’m a moral leper. Because the Daily Journal sells way above the price I’d pay if I were buying a new stock. So no, I don’t think it’s a responsibility of management to ensure where the stock sells. I think management should tell it like it is at all times and not be a big promotor of its own stock.

Q: DJCO used to employ more people, and it’s still falling. Why? Productivity improvements?

A: Of course it’s downsized, had to, because the traditional newspaper business is shrinking. Jerry, being a sound thinker, did the very unpleasant work of shrinking it appropriately. I don’t think quality has gone down, though I hardly think editorial quality has gone up.

Jerry: A number of factors. Technology is very important. Systems are in the cloud, except for the legal advertising system we had to build, because no one else has the volume we have. Advertising, accounting, all in the cloud. Disruption from decline in newspapers had had a significant impact. Classified ads are way down. Got out of conference types events. Look at the price of real estate and rentals in California, we’ve reduced office space, and lots of competition for reporters with all the internet sites.

Charlie: It’s very hard to have a shrinking business. Jerry has done magnificently well. It was totally required.

Q: Is the market going through a long-term value slump, like 1999, or has technology caused a permanent change in how companies should be valued?

A: I don’t know how permanent it’s going to be but it certainly caused a change. Of course it’s hard to know what the future holds in a complex system where you can’t predict a lot of things. Generally what people do is have financial reserves so they have options if trouble comes, and they adapt as Jerry has to required downsizings or upsizings. At DJCO we made all that money in the foreclosure boom. So were like an undertaker who suddenly got prosperous in a plague year. Funny way to make money. That happened because Jerry I bought little newspapers all over the state as a precaution to make sure we could serve public notice advertising (Jerry: one stop center) and that turned out to be a wonderful idea and that’s one reason we made all this money. Shareholders have been lucky to have someone ike Jerry who could learn what he didn’t know and fix it.

Q: How should schools and hospitals manage their endowments over the coming decades?

A: One charitable institution I have some influence at has every hotshot there is on the board. That institution has two assets in its endowment account: big interest in Li Lu’s China fund, and the other is a Vanguard index fund. As a result of those two positions, we have way lower costs than anybody else and we make practically more money than anybody else. So you now know what I do in charitable institutions. By the way, that’s not the normal outcome in America. The wealth management industry has a crisis on its hands. They really need the world to stay the way it is. And that isn’t necessarily right for its customers.

(1:36:15) Q: Buffett donates a lot to Gates Foundation, which has saved many lives. Are the managers at Berkshire aware their business success has saved so many lives?

A: Not the way he thinks about it. Buffett doesn’t mind not getting credit for his charitable contributions.

Q: Is oil and gas industry the new newspapers?

A: I don’t think so. Oil and gas industry will be here for a long time. Even if we stop using hydrocarbons in transportation. Hydrocarbons are also needed as chemical feed stocks. Not saying oil and gas is going to be a wonderful business, but I don’t think it’s going away, so I don’t think it’s like the newspaper business.

Q: Is global warming an existential threat?

A: Rich civilizations can afford to do it. If seas rise 60 feet, which it could, we’d have a serious problem. Bill Gates has written a book on it and thinks it could be handled. I admire the way Bill takes on these very hard problems. I tend to avoid the ones I’m not good at, and I’m not good at a lot of different problems.

Q: Book recommendations?

A: Skipping this one.

Q: If you could do life and investing over, what would you do differently?

A: Ben Franklin was one of the wisest men who ever lived, and of course he’d skip his mistakes, as we all would, but of course if we had a chance to do it again we’d do it better. The number of people who had the chance to do it again is zero. So it’s a theoretical discussion. Old German proverb “man is too soon old, and too late smart” and that’s true whether you’re Ben Franklin or Joe Klutz. We all live with that problem, and we’re all pretty forgiving of ourselves too, which is probably a good thing. I wouldn’t change my life all that well. Most people, assuming tolerable success in life, are about as happy as they were ordained to be and they wouldn’t be much happier if they were richer or poorer. I think most people are born with a happy stat. And their happy stat has more to do with their happiness than their outcomes in life.

Q: More specific about how to choose a good spouse?

A: [Lee Kuan Yew’s] example can’t be beaten, he married the top ranked student in school. His son is now prime minister of Singapore. A little wisdom in spouse selection is very desirable. You hardly think of a decision that matters more to human felicity than who you marry.

Q: How to use physics in investing?

A: I don’t use it much but it occasionally helps me. Occasionally some damn fool will suggest something that violates the laws of physics and I always turn off my mind once I realize the poor bastard doesn’t know any physics.

(1:44:50) Q: How important is company culture in the investment process?

A: Quite important. Part of the success of a company like Costco, and it’s amazing one little company starting up not many decades ago could become as big as Costco did as fast as Costco did. Part of the reason is cultural. Created a strong culture of fanaticism about cost and quality and so forth, and efficiency, and honor – all the good things – and of course it’s all work. Of course culture’s very important.

Q: You often advocate for learning from other people’s calamities and stupidities. What is a mistake at DJCO we can all learn from?

A: Jerry, what’s the biggest mistake we’ve made?

Jerry: We don’t think about mistakes. We take the situation as it is and try to solve it.

Charlie: I can’t think…we paid high prices for some little companies when trying to enter the cort software business. But I don’t think that’ll end up a mistake. God knows it was difficult, but I don’t think it was a mistake. I don’t think we’ve made a lot of horrible mistakes. We bought these buildings cheaply, they’ve gotten more valuable. Don’t think it was a mistake to buy the Daily Journal when we did at the price we did. Paid 2.5 million for it, got a dividend of 2.5 million shortly thereafter. Everything you see is profit. I think we’ve coped pretty well so far.

Q: What would you add or revise in Poor Charlie’s Almanack?

A: I don’t have any wonderful new thoughts. To the extent my thoughts have helped my life, I think I’ve pretty well run the course, and I don’t think I’m likely to have any new thoughts that are going to work miracles either. The old ways of doing things still work. I’ve been engaged in trying to create a better type of student dormitory, and I find by working at that, I’ve been able to make some improvements even though I’m old. I’m surprised I’m still functioning at all. I’m not trying to move mountains.

Q: Do you think any psychology tests are any good to help choose a partner? (e.g. Myers Briggs)

A: I had a failed marriage, so I don’t think I’m in a perfect position to advise the young about marriage. No, I don’t have anything to contribute.

(1:49:55) Q: How to live a long life?

A: I think I’m alive because of a lucky genetic accident. Don’t think I can teach you how to retroactively get a new genetic accident yourself. Jerry and I have been lucky. I don’t have any secrets. I think I would have lived a long time if I’d lived a different ife. As for happy life, that’s very simple. The first rule of a happy life is have low expectations. That’s one you can easily arrange. If you have unrealistic expectations you’re going to be miserable all your life. I was good at having low expectations. That helped me. Also when you get reverses, if you can just suck it in and cope, that helps, if you just don’t fretfully stew yourself into a lot of misery. Then, there are certain behavioral rules. Rose blumkin had quite an effect on berkshire culture, and she created a business with 500 depression dollars that became a huge business. YOu know what her mottos were? Always tell the truth, and never lie to anybody about anything. Those are pretty good rules and they’re pretty simple. A lot of the good rules of life are like that, they’re just very simple. “Do it right the first time” from Lee Kuan Yew. That’s a really good rule.

Q: Lessons from running a business in a pandemic or starting a business in a pandemic?

A: Don’t have a lot of wonderful advice about starting a business, but what we’ve learned in the pandemic is we can do with a lot less travel, and a lot more Zooming. When the pandemic is over, I don’t think we’re going back to the way things were. I think we’re going to do a lot less travel. I think the world is going to be quite different. A lot of people will work 3 days a week in the office and two days at home. A lot of things are going to change. I expect that and I welcome it.

Q: Parting thoughts?

A: Both of us just suck it in and cope. We don’t have any other secrets, do we Jerry?

(Jerry gave some comments about the Daily Journal employees working from home.)

Charlie: There is one thing we’re quite passionate about and that is serving the customers who have trusted us. We are really interested in doing a good job in Australia and California and all the other places where people have trusted us. You can hardly think of anything more important in life than being reliable to the people who trust you. We are going to bust our ass to try and do a good job, and the Daily Journal shareholders will have to take whatever outcome comes from caring about our customers than is at all common.

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