DJCO 2021 Annual Meeting
At 97 years old, Charlie Munger showed how sharp one’s mind could be in old age. One further example to keep in mind when one hears the hymn of excuses of those in their 30s, 40s, and 50s say age is a limiting factor to do anything. Given the god-like fanaticism Munger has with his followers, it might even be appropriate to start the sharing of my notes with a prayer for his good health.
On markets. To the parallels of 2021s market condition to the euphoria in the 90s, Munger said “I know it must end badly but I don’t know when.” The prudent thing to do would be to expect the worst. As to ‘when’…I think Matt Levine said the indication of a peak (for bubbles) was when its believers would get angry and violent towards opposing views.
On incentives. One shouldn’t forget that “investment bankers will sell shit as long as shit can be sold.” Such straight talk is what I (and I’m sure many) love about Munger. Such behaviour of ’selling shit’ is applicable to fund managers selling their products, promoters of SPACs, etc… Some might be genuine attempts of learning in public but some can also be masquerading an intention to sell shit.
On getting rich. “I didn’t get rich by buying stocks at high price earning multiples amidst crazy speculative booms and I’m not going to change. But I’m willing to hold….” He goes onto say he’d hold even in crazy multiples. Business quality matters. But in the off chance all the work you did turns out to be wrong…the entry price can bail you out. Of course, good companies trade at expensive multiples. One doesn’t get rich by agreeing with the herd.
On Bitcoin. Munger is never gonna own it and recommends you don’t. Fine by me. I quite enjoyed his use of Oscar Wildes’s quote on fox hunting to portray this: “the unspeakable in pursuit of the uneatable."
On Costco. The reputation for consistently providing value greater than Amazon. I went to Costco for the first time in 10+ years and I left being baffled. The “value” Costco provides seems unparalleled and I find it immensely difficult to imagine Amazon taking their lunch.
On culture. Munger never invested in GE because he never liked the culture there (it blew up spectacularly afterward). It was refreshing to hear Munger tout the importance of culture. Once again, referring to Costco’s cost and value discipline as the importance of culture as well. I still think most investors consider culture an after-thought near the bottom of a checklist instead of the inverse.
On home team bias. “Everybody can’t be better than everybody else.” Like most people believing they are an above-average driver. Every person in every country thinks their country is the best. China copied Adam Smith and took out free speech and did well. Jack Ma’s arrogance got him in trouble with the CCP and maybe that might’ve been allowed in the U.S. but once again, one cannot extrapolate what is allowed in another country to condemn the actions of what is not allowed in the other. By that right, the U.S. gun laws and death tax are ridiculous, and saying that will result in the demise of the U.S. economy would be warranted.
On the need for poverty in a prospering system. The free market system is a self-correcting system. Free market systems make a nation rich but that means poverty will grow while the rich get richer too. But poverty is a required ingredient to make a nation richer. But the systems need to be let to play out over the long time. This goes in tandem with viewing business success via the lens of biology. It’s an arena defined by the evolution and death of companies. Not all companies are well-off in successful economies. The same logic can be applied to its citizens.
On synthesizing psychology. “[It’s] one of the most ignorant professions in the world” a criticism on the incentives in academic institutions not focusing on the synthesis of psychological knowledge with application in the world and a mere focus on individual concepts without ways to apply.
On learning from Lee Kwan Yew. Spend time to figure out works. And do it! The key is to spend the time to figure out what works. That takes effort and time. Then more effort and time to do what works over time. “If you have a fixable disadvantage remove it. If it’s unfixable then remove it…..what can’t be fixed you endure.”
On management promoting stock. DJCO stock sells much above what Charlie would pay for a new share of. Furthermore, he believes management should tell it like it is for their share price, not be a promoter of it.