Munger speaks, 2022

The Daily Journal annual meeting gave Charlie Munger an occasion to hold forth.

Getting rich is gonna get harder:

It is hard. It’s going to be way harder for the group that’s graduating from college now. For them to get rich, stay rich, and so forth is going to be way harder than it was for my generation.

Think what it costs to own a house in a desirable neighborhood in a city like Los Angeles. I think we’ll probably end up with higher income taxes too, and so on.

I think the investment world is plenty hard. In my lifetime, 98 years, it was the ideal time to own a diversified portfolio of common stocks that updated a little by adding the new ones that came in like the Apples and the Alphabets and so forth. I’d say people got maybe 10 or 11% if you did that very intelligently before inflation and maybe 8 or 9% after inflation. That was a marvelous return. No other generation in the history of the world ever got returns like that. And I don’t think the future is gonna give the guy graduating from college this year nearly that easy an investment opportunity. I think it’s gonna be way harder.

He’s not that worried about global warming (his term):

I’ll be very surprised if global warming is going to be as bad as people say it’s going to be The temperature of the Earth went up, what, one degree centigrade in about 200 years. It’s a hell of a lot of coal and oil that was burned and so forth. It was one degree. I’m just skeptical about whether it’s as bad as these calamity howlers are saying.

On his weird dorm:

Question: What was it specifically that prompted the idea for windowless dorm rooms? Please walk us through this decision. This is in regards to your design for student housing.

Charlie Munger: Nobody in his right mind would prefer a blank wall in a bedroom to a wall with a window in it. The reason why you take the windows out is that you get something else from the design considered as a whole. If you stop to think about it big cruise ships have huge shortages of windows in bedrooms because too many of the rooms are either below the waterline or they’re on the wrong side of the aisle. So in the very nature of things you get a shortage. You can’t change the shape of the ship. You have to do without a lot of the windows to have a ship that’s functional. That’s required by the laws of hydrodynamics.

So we get the advantage of a big ship but it means a lot of the rooms can’t have windows. Similarly, if you want a bunch of people who are educating each other to be conveniently close to one another, you get a shortage of windows. In exchange, you get a whole lot of people who are getting a lot of advantage from being near one another, and they have to do without a real window in the bedroom. It doesn’t matter. The air can be as pure as you want and the light that comes in through an artificial window can mimic the spectrum of daylight perfectly.

It’s an easy trade off. You pay $20,000/week or something on a big cruise ship to have a room with an artificial window. For a long time on a Disney cruise ship, they had two different kinds of window rooms, one with a window and one without a window. They got a higher price in rent for the one with an artificial window than they got for a real one. In other words, they reduce the disadvantage to zero. In fact, they made it an advantage.

So it’s a game of trade offs. That poor pathetic architect who criticized me is just an ignoramus. He can’t help himself. I guarantee the one thing about him is that he’s not fixable. Of course, you have to make trade offs in architecture.

Emphasis mine.

You’re lucky if you’ve got four good assets.

Some of his:

Question: How will this all play out? And what’s the best advice you have for individual investors to optimally deal with the negative impact of inflation other than owning quality equities?

Charlie Munger: Well, it may be that you have to choose the least bad of your options. That frequently happens in human decision making. The Mungers have Berkshire stock, Costco stock, Chinese stocks through Li Lu, a little bit of Daily Journal stock, and a bunch of apartment houses. Do I think that’s perfect? No. Do I think it’s okay? Yes. I think the great lesson from the Mungers is that you don’t need all this damn diversification. You’re lucky if you got four good assets. If you’re trying to do better than average, you’re lucky if you have four things to buy. To ask for 20 is really asking for egg in your beer. Very few people have enough brains to get 20 good investments.

He’s anti gamer:

Some of the games are kind of constructive and social and others are very peculiar. Do you really want some guy 40 hours a week running a machine gun on this television set? I don’t. But a lot of the games are harmless pleasure. It’s just a different technique of doing it. I like the part of it that’s constructive but I don’t like it when people spend 40 hours a week being an artificial machine gunner.

Speaking (admiringly) of the history of modern China. (tw if you find abortion to be nasty):

China could never have handled its life with a government like ours. They wouldn’t be in the position they’re in. They had to prevent 500 million or 600 million people from being born in China. They just measured the women’s menstrual periods when they came to work and aborted those who weren’t allowed to have children. You can’t do that in the United States. It really needed doing in China. And so they did what they had to do using their methods. I don’t think we should be criticizing China, which has terrible problems, because they’re not just like the United States. They do some things better than we do.

Agony:

If you stop to think about it, what makes capitalism work is the fact that if you’re an able-bodied young person and you refuse to work, you suffer a fair amount of agony. It’s because of that agony that the whole economic system work. The only effective economies that we’ve had that brought us modernity and the prosperity we now have, they imposed a lot of hardship on young people who didn’t want to work

Finally a stock pick:

But I would argue that if I was investing money for some sovereign wealth fund or some pension fund with a 30,40, 50-year time horizon I buy Costco at the current price. 

full transcript put up by Oliver Sung of Junto Investments.



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