Two.
Right. Ladies and gentlemen, the meeting will come to order. Hello, everyone. I'm Steven Myhill-Jones, the new Chairman and Interim CEO of Daily Journal Corporation as of the end of March 2022. I'm here today at our Los Angeles headquarters with an individual who really needs no introduction, the legendary Mr. Charles T. Munger, who until last year served as Daily Journal Corporation's chairman for many decades. I'm grateful that Charlie, who remains a director on our board, has agreed to join us today. I also want to acknowledge and express our gratitude that Mr. Munger continues to manage Daily Journal Corporation's considerable portfolio of marketable securities and at no cost to the business, I might add. Thank you, Charlie.
Over the years, this annual shareholder meeting has become an increasingly popular event, given it's been a unique and wonderful opportunity to hear from and ask questions of Mr. Munger. My goal is to go through our formal business as quickly as possible without sounding too much like an auctioneer. I also wanna say that we really wanted to return to an in-person format this year, with an audience of our shareholders actually here with us, and with the other members of our board, Mary Conlin and John Frank, joining us on stage. However, for health and safety reasons, we opted to err on the side of caution again this year, and do another round of the online approach that we've followed over the pandemic.
I recognize we're all done with COVID, but COVID doesn't quite appear done with all of us. Before I turn things over to Becky Quick of CNBC to moderate the Q&A, we'll now proceed to the formal business of the annual meeting. Michelle Stephens, Executive Vice President and Secretary of this meeting, and Ellen Ireland is Inspector of Elections. Ellen, will you please report the number of shares represented at this meeting?
On December 16th, 2022, the record date fixed by the board of directors for determining the shareholders entitled to vote today, there were 1,377,026 shares of common stock of the corporation outstanding. I have a list of the shareholders who were of record of that date, certified by the corporation's transfer agent, Equiniti Trust Company. I also have an affidavit certifying the completion of the mailing of the notice of this meeting, the proxy card, and the 2022 annual report, along with a prepaid postage return envelope to the shareholders. The total number of shares represented by proxy at this meeting is 849,758, which is more than a majority of voting power of all outstanding common stock of the corporation. The meeting may proceed..
I will attach the affidavits to the minutes of this meeting and have a copy of the minutes of the last annual meeting.
Thank you. A majority of the voting power of the corporation is represented at this meeting. This meeting is ready for the transaction of business. As the first order of business, we will act upon the first proposal, which is the election of a board of directors. Four directors are to be elected at this meeting. The following people have been nominated and received the number of votes and are thus elected to serve: Charles T. Munger, Mary Conlin, John V. Frank, Steven Myhill-Jones. The Inspector of Elections has tabulated the vote.
The nominees have received the following number of votes. Charles T. Munger, 428,537. Mary Conlin, 516,625. John V. Frank, 573,419. Steven Myhill-Jones, 543,229.
Since each of the nominees has received the number of votes required for his or her election as director, I declare that each has been elected director to serve for the next year until his or her successor has been elected and qualified. The second proposal is the ratification of the selection of the independent registered public accounting firm. The audit committee and the board of directors have selected Baker Tilly US LLP for this fiscal year, and the ratification requires a vote of the majority of the shares represented at this meeting. The Inspector of Elections has tabulated the vote. For, 846,716. Against, 1,097. Abstain, 1,945. Proposal two is hereby declared approved by this meeting. The third proposal concerns the advisory vote on executive compensation.
Tu To, our CFO, and I are the only executive officers of the company, and our compensation is described in the proxy statement. The approval requires a vote of the majority of the shares represented at this meeting. The Inspector of Elections has tabulated the vote, and the following votes have been cast. For, 608,903. Against, 1,296. Abstain, 3,005. Proposal 3 is hereby declared approved by this meeting. The fourth proposal concerns the advisory vote on the frequency of the advisory vote on approval of executive compensation. The option of one year, two years, or three years that receives the highest number of votes cast will be the frequency for the advisory vote on executive compensation selected by the shareholders.
The Inspector of Elections has tabulated the vote, and the following votes have been cast. One year, 185,735. Two years, 4,281. Three years, 416,321. Accordingly, the stockholders have elected to hold the vote on executive compensation once every three years. Since there is not any further business to be brought before the meeting, the meeting is adjourned. We'll now transition to the Q&A once again with Becky Quick of CNBC serving as our moderator. Thank you in advance, Becky. I recognize most questions will be for Charlie, and I'll likely answer the occasional question if it's specifically about Daily Journal or Journal Technologies. Thanks, everyone. Over to you, Becky.
Steven, thank you very much. Welcome, everyone. We got a great number of questions that came in, and I've tried to sort through as many as I could. We'll go through as many of these questions as we can during the session. First of all, Charlie, thank you for taking the time today. The first question that we have comes from Ryan Fusaro, and his question is related to Journal Technologies. He says, "Can you give an update on the company's new CEO, Steven Myhill-Jones? He was appointed as interim CEO nearly 1 year ago. How is he performing, and when will a decision be made on selecting a permanent CEO?
The answer is Steve chose his own titles coming in, and we'll change it whenever he wants to change it. How's that?
That sounds fair enough.
Yeah, no.
Steven?
You know, I, yeah, I'll say that when we were in discussions a year ago, I told Charlie that I was committed to ensure the success of the business but that I wasn't sure I would be the right long-term CEO. I had incomplete information at the time, and I thought it was important that I have the optionality to hire someone better suited or promote from within if we discover that'd be a better path. You know, I founded and helped grow a geography software company with no background in publishing or the legal and court sector. And what I can say now is that the parallels between the software company I built and Journal Technologies are remarkable, and I believe I can add value.
I like the business and the potential for it. I expect we'll have clarity on our long-term approach sometime later this year.
Okay. Steven, thank you. The second question comes in, and it's in regards to capital allocation. This is from Paul in Linwood, Michigan, Paul Pham. "In the past year, in the past, you've described Daily Journal's unique position of being a newspaper which generated enough excess cash in the past to invest in an equity portfolio. Now, its fastest-growing subsidiary, Journal Technologies, accounts for a large part of the company's earnings. Is the technology business a natural area to allocate excess capital for the best return on equity for the company?
The sound has gone off.
Oh, can you hear me, Charlie? I'll keep talking.
I can't hear her.
One, two, three, four, five. I'll test this out. Maybe you guys can play me... I don't know if there's a voice of God you could play to the floor there, but I'll keep talking in the hopes that Charlie can pick up on this. Charlie, just let me know when you do hear this. This is the question again. Sounds like they're not hearing, folks. I don't know in the control room if you guys have any ideas about what's happening. Again, this is the annual meeting for the Daily Journal shareholders meeting. We have a lot of questions that have come in for Charlie Munger, and we're gonna be getting to those questions as soon as we can get the audio fixed for this.
Becky, we can hear you over.
Okay.
Someone's brought a tablet over.
Okay.
We can hear you over the tablet for the time being.
Okay. Steven, thank you. Charlie, I'll just wrap up. I don't know where this got cut off, but this is from Paul Pham. He was asking about...
Get a little closer to me, will you?
-capital, capital allocation, He's just wondering if the technology business is a natural area to allocate excess capital for the best return on equity for the company. How should we think about or how does the current investment manager think about investing in the equity portfolio in relation to reinvesting in growing areas of the business or share buybacks?
Well, it's all very simple. We made a lot of extra money out of the publishing business in its heyday, and that was about $30 million. That was all made in the foreclosure boom. Of course, in the old days, we had a information monopoly on publishing the appellate court's decisions daily in newsprint. When the Internet came along, it destroyed our position. Our circulation went way down and so forth. We've had a drastic change in good fortune in our publishing business. Steve actually ran a small software company in Canada for years and years and years, which is quite similar to what Journal Technologies does. That's how we got together. The future of this business is not in the publishing side. It's on the Journal Technologies side.
The good news is that we're in a huge market because all the courts of the world are in the Stone Age still in terms of automating with modern technology, and so it's a big market. The bad news is it's a long, slow slog.
Mm-hmm.
where you deal with a lot of bureaucracies in response to RFPs, requests for proposals. It's just a very slow, difficult business. We got a slow, difficult business of chewing our way into a huge market that's not going away with one big competitor in it. That's the future. Like many a publishing company which use newsprint, it's a miracle when any survive. If you look in the small and midcap edition of the Value Line books, you'll find there are two entries left. One is Gannett, which used to own the monopoly newspaper in, I don't know, 50, 60, 100 different cities. The executives used to ride around in giant airplanes and be treated like lords of England when they went to publishers convention.
Every newspaper publisher that, you know, was hugely powerful in his own community, so they're like the lords of England, all these publishers. Now mighty Gannett is just a pale shadow of itself. With all newspapers shrunk down to a tiny little few and very limited assets and so forth. There's been an unbelievable change in the technology and competitive outcomes in publishing ordinary newspapers on newsprint. By and large, the safe rule is they're all dying. They're just in different states of near death. If this place has a future, it's in the Journal Technologies side. That's a long, slow grind. The only reason we have a lot of marketable securities is we had the extra money, and we preferred the marketable securities to cash in an inflationary world.
Of course, there's been a minor miracle that we've got as much as we have in marketable securities because our investments have done better than average.
As a follow-up
The good news is we survived so far, and we got some surplus wealth. The bad news, it's a long, slow slog ahead, and the main future is in Journal Technologies.
As a follow-up to that, this is a related question. It comes from Gareth Moore in Northern Ireland. Maybe you can both comment on this. He says that given the extended amount of time that it will take to digitize the court systems because of complexity, risk, and bureaucracy, and the fast-moving world of software innovation, how can shareholders be assured that Journal Technologies solution remains cutting edge long enough to reward shareholders? How do you think about the risk of arriving in 2030 with a great software business, but which only lasts a few years until it gets disrupted by some new technology?
Sure. I mean...
Steve, you take that one.
Yeah. You know, of course, there are no assurances. At the same time, you know, I do have some background dealing with this challenge, because I did it for 19 years with my former company. We earned consistent and appealing profits, and I expect the model is still working well for the folks who acquired us. You know, I think a key responsibility is to get technology change working for us and our customers rather than against us. It takes advanced planning and an investment to engineer software with change over time in mind. It's inherently upgradable.
I think this model works great if you can establish a sufficient licensee base to fund that proactive R&D to evolve products in a way that manages technology change so that. It also needs to be highly repeatable. I think all of this requires a mindset that enterprise software development is an ongoing process and not a one-time event. So are our customer deployments.
Okay. let me move on to another question that comes from Gage Sanchez. Gage writes in with a question for you, Charlie. Two years ago, during the 2021-
Yeah.
Yeah. Let's try that.
Okay. We can hear now.
Go ahead. You got the speaker there? Okay. Gage Sanchez writes in and says, "Two years ago, during the 2021 annual meeting, you said Daily Journal's $350 stock was selling way above the price that you would pay for the new shares. As I write this, Daily Journal trades for $305 a share, a $420 million market cap with a total equity portfolio value of over $310 million. Debt charge is covered several times over by the bank's dividends and Journal Technologies' off financial statement value and huge market. Do you still hold the same belief?
Well, he accurately stated our circumstances. We do have a lot of surplus wealth, but we need it to attack this big market. These courts, why would they gamble on a little company with no net worth? The courts that are letting the RFP contracts. We're using our net worth to help the business.
Does that get at the question of whether you'd buy this stock at $305?
Well, I don't buy it, and I don't sell it. That's what the Mungers have been doing. You know.
We now have audio.
... it's not a crazy valuation considering what everything else is selling for these days. I have no feeling that it's almost foolishly high on some crazy mystique. Some people go, "Well, it's a small Berkshire, and it'll double like rabbits," you know. Of course, it's not a small Berkshire. I'm 99 years old, for Christ's sake.
That question mentioned the bank dividends that you all have at DJCO. Another person wrote in, Norman Bergman, who asks, "Charlie, Berkshire has unloaded the bank stocks. If it's not good enough for Berkshire shareholders, why is it good for us?
I might have different ideas. If you own securities, marketable securities within a corporation located in California, you pay huge state and federal taxes if you sell things at a big gain, that affects our willingness to sell Those bank stocks I bought on the bottom tick in the foreclosure crisis. Literally, it was the bottom tick, they're practically all gain. I immediately give the government 40 some % of everything we sell out of that, out of those bank stocks. Of course, The dividends are almost tax-free. Based on what we would get if we sold them and the return we're getting out of the dividends, it's not so bad for us. The answer is we're not in a normal position. All factors considered, we're willing to hold them for a while.
There is a big disadvantage in having this huge layer of federal corporate taxes and state taxes between us and any money we make in a state like California, which is a very business-unfriendly state. It isn't like people are rushing to come out and incorporate in California. There are all kinds of states that have no income taxes and deliberately use that lure to bring in corporations. California is trying to force its wealthy people and its wealthy corporations out of the state. I must say it's working fine. They're leaving just one after another. That's just the way it is. You know, if we succeed in this software business, it will all come good in the end.
If we fail, we have a crutch under us in our real estate and our securities, which means we won't lose so much from the present market price. It's not a crazy thing to own now at the market valuation, but it's not cheap either.
All right. All right, this next question comes from Thomas Sliney, who says he's a longtime Berkshire shareholder, but a pretty recent Daily Journal shareholder. He says, "While I know that Daily Journal is not a mini Berkshire, I'd have suspected that there would be some shared principles in the area of governance. Specifically regarding the board of directors, I'm surprised to see such a small ownership. Three of the five own zero shares. A fourth owns 100 shares." Thomas says, "Pretty unimpressive. Doesn't suggest much alignment between the board members and shareholders." He says he's not trying to be rude, but he thinks it's a fair question.
What happened is we used to have Guerin and Munger, and we were the 2 biggest shareholders. Of course, we've been partners for years and years. We took no fees, no directors' fees, no expenses, no nothing. It was a very user-friendly Berkshire-type place. Guerin died finally at age 90 some. Now we're down to one last survivor of the old guard. Of course, we need a certain number of new directors, and our new directors are pretty damn smart. They're all rich, by the way. It's still a very Berkshire-like board. Smart and rich and thinking like a capitalist. We have that.
I would add that, you know, while I don't have equity yet, I'm certainly keen to participate in future growth of the business. What should the timing of that be with someone as new as me? I think that's an interesting question. Thomas.
We'll work it out.
Yeah. Right now I don't think that's impacting my drive or decisions. I already feel enormous skin in the game that Mr. Munger and the board entrusted me to take the reins of the business is something I take very seriously.
It's really quite interesting to have a pile of securities and one interesting activity in a very high-tech field, and with a lot of politics and travel and difficulty in it. It's a huge, huge market, and it isn't like there are a lot of other people in it. Most of the big corporations that would be our natural competitors are places where they hate RFPs. In other words, one of the reasons the business is good for us is a lot of the big companies just hate what we're doing. They want the easier money of adding some standard piece of software and just repeat it over and over again. They're spoiled. We're willing to slug it out of the mud of all these little consulting contracts, and that makes us have really a few competitors in the field.
Charlie, since you brought up Rick Guerin. Oh, go ahead.
No, go ahead.
Well, since you brought up Rick Guerin, I want to get to this question from Ronit Pereira in Mumbai, who says, "Your friend Rick Guerin passed away about a year ago. He was your longtime friend and business partner for several decades. How was he as a person, as an investor, and how do you remember his legacy?
Well, he was just terrific as a person and an investor, and I miss him terribly. Of course.
Yeah.
We were together for years and years and years. We were poor together. That creates a bonding. When we met in 1961, we were both poor and struggling and young. We had a long ride together.
Mm.
All things end, you know. That's the nature of the human condition.
I wanna get to a question from Lee, just the first name from this shareholder. Wrote in a question about ChatGPT and artificial intelligence and the impact on the Daily Journal's business model and civilization at large. Says, "I'm not sure if you've tried to converse with ChatGPT given all the rage in the news lately. Briefly, it's artificial intelligence known as a language model. It's trained on a large dataset of texts like books and articles. What are your thoughts on AI's impact on Daily Journal's business and more broadly, our civilization at large?
I think artificial intelligence is very important, but it is also a lot of crazy hype on the subject. Artificial intelligence is not gonna cure cancer. It's not gonna do everything we want done. There's a lot of nonsense in it too. I regard it as a mixed blessing, all this artificial intelligence. Some people have used it in some things like insurance underwriting pretty well. A lot of people try and use it in ordinary things like buying office buildings or something, and I think that's way more I don't think it's gonna help anybody buy an office building. Not very much anyway.
Through the lens of Daily Journal Corporation, AI is something that we started experimenting with in the summer for certain types of writing of certain types of articles. That's something we're certainly tracking very closely. I think in terms of complex work, I think it's a long way off. For many types of activities, especially routine things, I think it'll be fascinating to see how disruptive it is over a relatively short time horizon for many types of work and activities.
It'll disrupt... We had our big disruption when technology kind of severely and adversely affected our publishing business. We have our opportunity in this new business. It's just a long, tough slog. There's no royal road to success in what we're doing.
Someone named Peter Furlan wrote in from Oakville, Ontario, and he had a question that he asked ChatGPT to come up with a question to ask you, Charlie, and here's what ChatGPT came up with: "Mr. Munger, you've spoken about the importance of avoiding mental biases in decision-making. In your experience, what's the most challenging bias to overcome, and how do you personally guard against it?" I'd ask for your answer to that question and then what you think of the question that ChatGPT wrote for you.
Well, what If I had to name one factor that dominates human bad decisions, it would be what I call denial. If the truth is unpleasant enough, people kind of... Their mind plays tricks on them, and they think it isn't really happening. Of course, that causes enormous destruction of business where people go on throwing money into the way they used to do things, even though it isn't gonna work at all well in the way the world is now having changed. If you want an example of how denial is affecting things, take the world of investment management. How many managers are going to beat the indexes? All costs considered, I would say maybe 5% can consistently beat the averages. Everybody else is living in a state of extreme denial.
They're used to charging big fees and so forth for stuff that isn't doing their clients any good. It's a deep moral depravity if some widow comes to you with $500,000 and you charge her 1 point a year for. You could put her in the indexes, but you need the 1 point. People just charge some widow, you know, a considerable fee for worthless advice, and the whole profession is full of that kind of denial. It's everywhere. So I had to say, and it was, I always quote Demosthenes. It was a long time ago, Demosthenes. That's more than 2,000 years ago. And he said, "What people wish is what they believe." Think of how much of that goes on. It's, of course it's hugely important. You can just see it.
I would say the agency costs in money management, they're just so many billions, it's uncountable. Nobody can face it. Who wants to... You know, keep your kids in school. You need the fees. You need the brokerage commissions. You need this or that. You do what's good for you and bad for them. I don't think Berkshire does that, and I don't think we, Guerin and I did it at the Daily Journal. Guerin and I never took a dime in salary or director's fees or anything. If I have-Business, I talk on my phone or use my car, I don't charge it to The Daily Journal. That's unheard of. It shouldn't be unheard of, and it goes on in Berkshire, and it goes on in The Daily Journal.
We have an incentive plan now in this Journal Technologies, it has $1 million worth of Daily Journal stock. That did not come from the company issuing those shares. I gave those shares to the company to use in compensating the employees. I learned that trick, so to speak, from a guy at BYD, which is one of the securities we hold in our securities portfolio. BYD at one time in its history, the founder, chairman, he didn't use the company's stock to reward the executives. He used his own stock. It was a big reward, too. Well, last year, what happened? BYD last year made more than $2 billion after taxes in the auto business in China. Who in the hell makes $2 billion who's a brand new entrant, really, in the auto business for all practical purposes?
It's incredible what's happened. There is some of this old-fashioned capitalist virtue left in The Daily Journal, and there's some left in Berkshire Hathaway, and there's some left in BYD. Most places, everybody's trying to take what they need and just rationalizing whether it's deserved or not.
Charlie, you bring up BYD. I'll jump to a question from Steven Spencer, who writes in from New York, New York. He's curious why Mr. Munger prefers an investment in BYD to Tesla.
Well, that's easy. Tesla last year reduced its prices in China twice. BYD increased its prices. We're direct competitors. We're so much ahead of BYD. I mean, BYD is so much ahead of Tesla in China, it's like. It's just, it's almost ridiculous. If you look at BYD, which most people have never heard of, if you count all the manufacturing space they have in China to make cars, it would amount to a big percentage of all the land in Manhattan Island. Nobody ever heard of them a few years ago.
All right, let me jump to another question. This one comes from Michael Ase-Aseo, who says, "Did the..." This is in regards to some movement at Berkshire, some sales of Berkshire stakeholdings. "Did the sale of some BYD and Taiwan Semi shares have anything to do with the relations between the United States and China, or was it for purely economic reasons?
Well, BYD is selling about 50x earnings. That is a very high price. On the other hand, they're likely to increase their auto sales by another 50% this year. It's We sold part of ours, by the way, years ago. Not years, but about a year ago, at a much higher price than they're selling for now. You know, We're not a mini Berkshire. We're not gonna have a big correlation between us and what Berkshire does. You can understand why somebody will sell BYD stock at 50x earnings. At the current price of BYD stock, a little BYD is worth more than the entire Mercedes Corporation.
Hmm.
Market capitalization. It's not a cheap stock. On the other hand, it's a very remarkable company. By the way, I want to tell people the great contribution I made to the success of BYD. We got into it through Li Lu, and it was a little company that knocked off the Japanese cell phones. The chairman, who's kind of a genius, said, "Oh, I buy a bankrupt, little crappy auto plant, and go into the auto business from dead scratch when he's making cell phones, little, tiny, nothing company." Both Li Lu and I tried to talk him out of it. We said, "Please don't do this dumb thing.
You get your head handed to you going into the auto business, little BYD and so forth." Last year, they made more than $2 billion in the auto business from that standing start at zero. It's unheard of. Li Lu and I deserve all the credit because we tried to talk him out of doing what worked so well. Which shows that there's some accident in life.
Charlie, this question comes from Michael Gallagher. He says, "According to company filings, it appeared that Alibaba shares were purchased with leverage, and when the stock price fell last year, he was seemingly forced to sell," he being you. "Can you ask Charlie to confirm that it was bought with leverage, and if so, why would he do that as it seems to go against his philosophy?" I got several questions that were similar to that.
Well, yes, it's true. I operated with no leverage for long stretches of my old age, and Warren's the same way. Recently I did use a little bit of leverage here and in another place because the opportunities were so ridiculously good, I thought it was desirable to do that. That's, you're right, it's unusual for us, but we did find a few things. By the way, if you go back early in my career, I used some leverage. I sometimes ask myself a mental question. I say, "What is the appropriate percentage of your net worth you should put into a stock if you think it's an absolute cinch?" Well, if you're the kind of fellow who's right and when you think something is a cinch, the answer is 100%.
Mm-hmm.
Maybe 150%. Nobody teaches people to think that way in finance. If the opportunity is great enough, the logical answer is 100%.
Mm.
maybe 200%.
Somebody else wrote in, and I don't have the email in front of me at the moment, but he wrote in, quoting you where you said the three things that ruin people are ladies, liquor, and leverage. Why would you use leverage when?
You're right.
... it's one of the three things that can destroy somebody?
Well, I used a little on my way up, and so did Warren, by the way. The Buffett Partnership used leverage regularly every year of its life. What Warren would do is he would buy a bunch of stocks, and then he'd borrow on some stocks, and he'd buy into these, they used to call it event arbitrage, liquidations, mergers, and so forth. That was not didn't go up and down with the market. That was like an independent banking business. Ben Graham's name for that type of investment, he called them Jewish treasury bills. It always amused me that that's what he would call them. Warren used leverage to buy Jewish treasury bills when on the way up, and it worked fine for him. I don't think neither of us ever buys. Well, no.
Berkshire has stock in Activision Blizzard.
Mm.
You can argue that that's. Whether that'll go through or not, I don't know. But that's a Jewish treasury bill.
Arbitrage? The arbitrage play on Activision?
Well, yes, event arbitrage. I mean. We sort of stopped doing it because it's such a crowded place. Here's little Berkshire doing it again in Activision Blizzard.
Mm.
Munger using a little leverage at the Daily Journal Corporation.
is leverage...
You can argue that I used that leverage to buy BYD. You can argue that it's the best thing I've ever done for the Daily Journal.
Is leverage the least evil of the 3 Ls?
I think most people should avoid it, but maybe not everybody need play by those rules. I have a friend who says, "The young man knows the rules, and the old man knows the exceptions.
All right, another question.
At least if he's lived right, he knows them.
Yeah. Another question comes in from Brandon McKee. He's also asking about some of the situations with Alibaba. He said, "How should investors view geopolitical events in regards to their investment in foreign countries? How do you look at the situation of the recent Chinese spy balloon in regards to the Alibaba investment?
Well, of course, it was a very interesting thing. Jack Ma was a dominant capitalist in Alibaba. One day he got up and made a public speech where he basically said, "The Communist Party is full of malarkey. They don't know their ass from their elbow. They're no damn good, and I'm smart." Of course, the Communist Party didn't particularly like his speech. Pretty soon he just sort of disappeared from view for months on end. Now he's out of BYD. It was pretty stupid. It's like poking a bear in the nose with a sharp stick. It's not smart. Jack Ma got way out of line by popping off the way he did to the Chinese government. Of course, it hurt Alibaba. But I regard Alibaba as one of the worst mistakes I ever made.
In thinking about Alibaba, I got charmed with the idea of their position on the Chinese internet, and I didn't stop to realize they're still a goddamn retailer. It's gonna be a competitive business, the internet. It's not gonna be a cakewalk for everybody.
Just about China in general, I had a lot of questions that came in regarding that. I'll ask this one from Wilko Schutzendorf, who's coming in from Walnut Creek, California, who just said, "Previously, you stated that despite certain shortcomings, China was generally moving in the right direction. However, with the recent actions taken by the Chinese government, such as capriciously punishing technology and educational companies, declining to import effective COVID vaccines, escalating threats towards Taiwan, do you still maintain that China is a viable investment option for foreign capital? Or is China experiencing a similar regression as Russia has seen under Putin's leadership that culminates in the invasion of Taiwan?
That's a very good question, of course. I would argue that the chances in a big confrontation from China have gone down, not up, because of what happened in Ukraine. I think that the Chinese leader is a very smart, practical person. Russia went into Ukraine as what looked like a cakewalk. I don't think Taiwan looks like such a cakewalk anymore. I think it's off the table in China for a long, long time. I think that helps the prospects of investors who invest in China. The other thing that helps in terms of the China prospects are that you can buy better, stronger companies at a cheaper valuation in China than you can in the United States. You're getting the extra risk can be worth running given the extra value you get.
That's why we're in China. It's not like we prefer being in some foreign country. Of course, I'd rather be in Los Angeles right next to my house. You know, it'd be more convenient. I can't find that many investments, you know, right next to my house.
Just to follow up on that, Alex writes in. Alex Formanski, I'm sorry, it's very small print, writes in, "How have political events in China over the last few months affected your thinking on the country? Several people, including me, were taken aback by the forceful withdrawal of former President Hu Jintao at the October 22 annual Congress. President Xi seems to have consolidated power, and his actions have indicated that he thinks very differently about the role of business in Chinese society.
I have more optimism about the leader of the Chinese party than most people do. He's done a lot right, too. you know, he led a big anti-corruption drive. He's done a lot of things right. I don't know where this man lives. Where is there a place where the government is perfect in a world of sin and sorrow? The democracies aren't that brilliantly run either. it's natural to have some decisions made by government that don't work well. It's natural to have decisions in each individual life that don't work very well. We live in a world of sin, sorrow, and misdecision. That's what human beings get to cope with in their days of life.
I don't expect the world to be free of folly and mistakes and so forth, and I just hope I'm investing with people who have more good judgment than bad judgment. I don't know anybody who's right all the time.
Anne Keate from Cupertino, California writes in, this is in the same vein but a little more focused. "How should we think about the political climate around Taiwan and the long-term impact on the semiconductor industry? Specifically, do you see the CHIPS and Science Act favorably?
Well, the semiconductor industry is a very peculiar industry. In the semiconductor industry, you have to take all the money you've made and with each new generation of chips, you throw in all the money you've previously made. It's compulsory investment of everything if you wanna stay in the game. Naturally, I hate a business like that. At Berkshire, we like a whole lot of surplus money to come in that we can do something else with. Of course, now, if you're enough ahead of it, like Taiwan Semiconductor is, then that may be a good buy at these prices. I It's not at all clear to me that they're not gonna succeed mightily. It's a difficult.
It's a business with enormous promise for the big winner, it's a difficult business in requiring everybody to keep increasing the bets on and on with all the money. It's not perfect, that semiconductor business. Remember when Intel owned the world?
Yeah.
Intel was once the Taiwan Semiconductor business of the world.
Yeah.
They invented the damn business, they dominated it for decades. Intel, it's not clear to me that Intel's gonna have a very decent semiconductor business getting as far behind as they are now. My answer is it's not so damn foolproof as it looked.
Even with the incentives to build plants here in the United States, like Intel is doing in Ohio?
Well, of course, that will really help. There's no indication the government is going to forgive the loans or something. It's not like the recent loans to business where they said, "We'll loan you the money and then, you know, we'll go ahead. Go keep the money." The government is not planning to do that with these new semiconductor loans. Look, it's not a field where I feel I have a lot of expertise. What the hell do I know about semiconductors?
Do you worry about any conditions that the government would put on companies that end up using any of that money, with semiconductors or anything else?
Well, of course, all of that, it's deeply intertwined with government policies of both China and the United States. I would rather have something that's more foolproof myself. I do think Taiwan Semiconductor is the strongest semiconductor company on Earth. I'm a big admirer of what they've achieved. It's just incredible what they've achieved.
Speaking of things you like better, Omniplex-
By the way, it may be a wonderful investment. The fact that I don't like it because I'm an old man and I don't like learning new tricks, that doesn't mean it isn't right for some younger person that understands it better than I do.
Okay. Actually, that's I'm gonna switch gears. We'll come back to this question in a minute, but that leads me to this question about crypto that Benjamin writes in. He says, "In 2007 at the USC Gould School of Law, Charlie said, 'I'm not entitled to have an opinion on this subject unless I can state the arguments against my position better than the people who are supporting it.' The question is, does this also apply to your The Wall Street Journal article on banning cryptocurrencies? If yes, would you care to share the arguments against your position?
I don't think there are good arguments against my position. I think the people who oppose my position are idiots. I don't think there is a rational argument against my position. This is an incredible thing. Naturally, people like to run gambling casinos where other people lose.
Mm-hmm.
The people who invented this crypto crappo, which is my name for it, and sometimes I call it crypto crappo, and sometimes I call it, well, crypto crap. It's just ridiculous that anybody would buy this stuff. You can think of hardly nothing on Earth that has done more good to the human race than currency, national currencies. They were absolutely required to turn man from a goddamn successful ape into a modern, successful humans and human civilization 'cause it enabled all these convenient exchanges. If somebody says, "I'm gonna create something that sort of replaces the national currency," it's like saying, "I'm gonna replace the national air." You know? It's asinine. It isn't even slightly stupid, it's massively stupid. Of course it's very dangerous, and of course the governments were totally wrong to permit it.
Of course, I'm not proud of my country for allowing this crap, what I call the crypto crap. It's worthless, it's no good, it's crazy. It'll do nothing but harm, and it's antisocial to allow it. The guy who made the correct decision on this is the Chinese leader. The Chinese leader took one look at crypto crap, and he says, "Not in my China." Boom, oh, well, there isn't any crypto crap in China. He's right, and we're wrong.
Well-
There is no good argument on the other side. I can't support it.
Does that counter what you said back at USC?
Do you think.
You shouldn't have a position unless you can counter it?
No, it doesn't counter. I do think you ought to be able to state at a lot of issues, you ought to be. How big should the social safety net be? That's a place where reasonable minds can disagree. You should be able to state the case on the other side about as well as the case you believe in. When you're dealing with something as awful as crypto crap, it's just unspeakable. It's an absolute horror. I'm ashamed of my country that so many people believe in this kind of crap, and the government allows it to exist. It is totally, absolutely crazy, stupid gambling with enormous house odds for the people on the other side. They cheat in addition to the cheating and the betting, and it's just crazy.
That is something that there's only one correct answer for intelligent people there is just totally avoid it. Avoid all the people that are promoting it.
How do you feel about the gambling that took place at the Super Bowl and surrounding that and the legalized gambling taking place in this country at this point?
It's not as bad as crypto stuff. I don't think there's much harm in betting a modest amount you can afford on a Super Bowl game. That strikes me as pretty, you know, particularly if you do it with a friend and not with a bookie. I don't have the same feeling. I obviously don't think you should have a gambling compulsion to run around betting against odds. If you take all the money that I have bet against odds in my whole life, I don't think it's more than a few thousand dollars.
Alan Shea writes in, and he says.
I'm all in favor of betting with the odds.
With the odds, yeah. Alan Shea writes in-
Yeah, sure.
... he says, "If Mr. Munger thinks that Bitcoin and Ethereum are rat poison, has he ever profited by shorting them?
No, I don't short. I have made three short sales in my entire life, they're all more than 30 years ago. One was a currency and there were two stock trades. In the two stock trades, I made a big profit on one of them, made a big loss on the other, and they canceled out. In my currency bet, I made $1 million, but it was a very irritating way to make $1 million. I've stopped.
Not worth the headache, I guess.
You can laugh, but that's true. It was irritating.
Because you were worried?
Well, because they kept asking for more margin. I kept sending over treasury notes. It was very unpleasant. I made a profit in the end, I never wanted to do it again.
Charlie, I said I'd come back to this question. This was about something that you do like as an investment. Ami Patel from Montreal, Quebec, writes in that you love Costco. What do you think can hurt Costco's economic moat in the long term?
Well, as long as Costco keeps the faith with its strong culture and their extreme low markup policy, I don't see any stopping it. The trouble with Costco is it's 40 times earnings. Except for that, it's a perfect damn company. It has a marvelous future. It has a wonderful culture, and it's been run by wonderful people, and I love everything about Costco. I'm a total addict. I'm never gonna sell a share.
All right, the next question comes from David Kass, who's a professor of finance at the University of Maryland. He says he's a shareholder of the Daily Journal Corporation and would appreciate it if you'd answer one of these questions. The question that I'll ask from is, President Biden has proposed increasing the tax on stock buybacks from its current level of 1% to a new higher level of 4%. What are your views on taxing stock buybacks?
I'm strongly opposed because I think if you're. A good culture has a lot of people that are good fiduciaries, and it is like stealing to do something dumb with the corporate money once you can get more advantage for your shareholders for buying back your own stock. I like encouraging morality and decency and honor and so forth in your dealings with the people you're the fiduciary for. I agree with our president on some things, but this is not one of them.
Vehemently disagree?
What?
Vehemently disagree?
Say that again.
Do you vehemently disagree?
Well, I'm not vehement because it's not as bad as cryptocurrency. It's a forgivable error. Yes, I disagree strongly. I think it's a big mistake to adopt that policy. You know, I'm a Republican. I sometimes vote for Democrats, but I am a Republican.
Another question on stock buybacks comes in from Ed Prendeville in Morristown, New Jersey. He says, "Berkshire share repurchases slowed considerably from $3 billion in the first quarter of 2022 to $1 billion in the second quarter and $1 billion in the third quarter, even though the price declined somewhat, as did the general market. One would think the buyback would increase with a lower stock price. Does Berkshire adjust its buyback price based on the intrinsic value of the approximately $300 billion stock portfolio or the quoted price?
I never pay any attention to how they do it. They're cautious and careful people. If you take the amount that's been bought back in the last three years, it's a lot. I thoroughly approve of what we're doing, and I don't consider it at all fair that we're being taxed because we are doing something good for our own shareholders.
The President laid out the case today. I think he had said something like north of 90% of executives are paid with stock compensation, at least in part. He said, maybe this was yesterday that he said this. He said that that's not fair. The best way to goose your own compensation is to buy back your shares, so it helps the executives, it helps the shareholders, but it doesn't help the employees or other constituents.
Well, there's no question about the fact that he sympathizes with the employees more, and that's understandable. A lot of people would have the President's orientation on that issue. I don't have a big opinion about how wealth ought to be distributed in the country. I don't know the answer. I do think we need a capitalistic system if we want to have a productive economy that makes civilization advance.
All right. The next question comes in from Michael, and I think his last name is Moussa, but I'm going based on the address from the email and not a given last name. He says he's a very longtime Berkshire shareowner who read an irritating recent Barron's article that stated, "Berkshire shareowners could benefit after Warren as the company could come under pressure to break up." I don't see how we would benefit with our businesses being broken up, as you and Warren have long stated the company as a whole is stronger and one division could always aid another division in need. He said he knows Warren and you, Charlie, have said that the current structure and philosophy will be preserved after your departures, and I hope for a very, I hope not for a very long time.
Please offer us shareowners reassurance that the company would never succumb to these silly pressures to break it up.
I don't think it's at all likely it'll be broken up for a long, long time. A lot of companies are worth more dead than alive, meaning at the current price for whole businesses, you could sell things at higher prices. You can only do it once. The shareholders would pay a big tax. You'd have the problem of what to do with the money and so forth. I think all factors considered, and with Berkshire buying out its own shares when they're reasonably priced, I think Berkshire's a pretty damn good bet for shareholders to hold it long term in the future, and I don't think it's any hardship that it isn't being broken up. It works pretty damn well. Everybody that bought Berkshire and held it for 20 years has done well.
I think that will be true for those who buy it at the current price.
What about the potential for pressure by activists?
I don't think it'll be as good in the future as it was in the past, but it will be okay considering how poorly everything else is gonna do.
Why do you think everything else is gonna do so poorly?
Because the valuations start higher now, and because government is so hostile to business.
That's a view over the next 5, 10, 20 years? How far out are you thinking?
I would say it'll fluctuate naturally between administrations and so on. I think basically the culture of the world will become more and more anti-business in the big democracies. I think taxes will go up, not down. I think the investment world is going to get harder for everybody. It's been almost too easy in the past for the investment class. It's natural it would have a period of getting harder.
Uh, Mi-
I don't worry about it much since I'm gonna be dead. You know, it won't bother me very much when I'm lying there dead.
I guess you want to point out to people you're 99. Nobody lives forever. That's what you're referring to. You're not sick at the moment.
Yes. I know, 99, right.
Yeah. You're not sick at the moment.
Right.
Right?
Well, no, I'm eating this good peanut brittle.
Yes.
That's what you ought to do if you want to live to be 99.
We did get some people who wrote in asking about.
I hate to advertise my own product, but this is the key to longevity.
See's peanut brittle, I can see. I saw the box earlier. We did get a lot of people who wrote in questions just asking what your daily habits are, what you do every day, if you exercise, if you think exercising a lot when you're younger is important to longevity.
I have almost no exercise except when the Army, Air Corps made me do exercise. I've done almost no exercise on purpose in my life. If I enjoyed the activity, like tennis, I would exercise. For the first 99 years, I've gotten by without doing any exercise at all.
You're not planning on changing that anytime soon?
No, not at all. I'm not changing it.
Other people's mileage may vary. Yeah.
I'm looking for one question that somebody wrote in because I wanna word it properly, and it has to do with what you've just been talking about. I don't know if I can find it. There's a lot of questions in here. Oh, here it is. Somebody said, this came from Aditi Ganti in Australia. "What would the 100th day of your life look like, and how would you want to spend it when you step out of bed in the morning?
Well, I step out of my bed these days and sit, then sit down in my wheelchair, so I am paying some price for old age, but I prefer it to being dead. Whenever I feel sad being in a wheelchair, I think, "Well, you know, Roosevelt ran the whole damn country for 12 years in a wheelchair." I'm just trying to make this wheelchair thing last as long as Roosevelt did.
That's a good plan. I like it. Somebody else wrote in-
Yeah.
This is Adam Mead, and he said, "Charlie, in your 1995 talk, The Psychology of Human Misjudgment, you listed senescence as a cause of misjudgment. You said, 'Old people like me get pretty skilled without working on it at disguising age-related deterioration because social convention, like clothing, hides much decline.' You went on to say that such decline was inevitable." He says, "You're my hero, Charlie, and I offer you this question with the utmost respect but feel it needs to be asked. Would 71-year-old Charlie trust the judgment and mental capacity of 99-year-old Charlie?
There's no question about the fact that you lose some mental acuity as you get older, but some people get shrewder at adapting to their limitations, and they do pretty well.
Mm.
So far I've had plenty of decline, but I'm pretty shrewd about the way I handle it, and so far the results have not been that bad in my old age.
Has evidence-
My sex life would be a different subject.
Well, I will point out to people we have not given you any of these questions in advance, you're taking blind questions.
Yeah
... um, for-
Yeah, that's all right.
Yeah, for a large stretch of time on this too. Okay, how do I follow that up? This one's another question. This gets back to investing, what we were just talking about a minute ago, but Michael Wourderly writes in and says, "Given the increasing rate environment, what are the ramifications of moving away from a close-to-zero interest rate policy? Warren and yourself have frequently spoken about Aesop and a bird in a hand is worth two in the bush to describe the essence of investment decision-making. What do you do now that the interest rate environment is changing?
Well, there's no question about the fact that as interest rates have gone up, it's hostile to stock prices but they should go up. We couldn't have kept them forever at 0 and I just think it's just one more damn thing to adapt to in investment life is that there are headwinds and there are tailwinds, and one of the headwinds is inflation. I think more inflation over the next 100 years is inevitable given the nature of democratic politics in a democracy. I think we'll have more inflation. That's one of the reasons The Daily Journal owns securities instead of government bonds, owns common stocks instead of government bonds.
When you say the nature of democratic policies and I forget exactly how you worded it, are you talking about the Democratic Party? Are you talking about democracy as a whole or the American party?
No, no, I'm talking about. Listen to that. Trump ran a deficit that was bigger than the Democrats did. All politicians in a democracy tend to be in favor of printing the money and spending it, and that will cause some inflation over time. It may avoid a few recessions too. It may not be all bad, but it will do more harm than good, I think, from this point forward.
Okay. On that point, Ron Truriotola, Ron Truriotola says, "Should we continue to maintain a debt limit? The adjustment process seems to be a very simple and mechanical process. However, such a measure only seems to create an environment rife with political jockeying and sniping. What's the purpose if we continue to budget beyond our means and then the bill comes due?
Well, if you take the history of democracy in the world and go back far enough, it fails a lot and gets succeeded by dictatorships and all kinds of awful things. As a matter of fact, the worst thing that happened to the human race in my lifetime was when an advanced civilization like Germany was taken over by a dictator as awful as Adolf Hitler. That happened as a consequence of a big worldwide depression. Would never have happened if we hadn't had the Great Depression. Once Hitler got in, that meant World War II was inevitable, and it could have worked out a lot worse than it did for the people like the United States.
The, these things are quite important, and they're not gonna be done perfectly in the future, no more than they were done perfectly in the past. Of course you gotta expect a certain amount of future trouble in the world, and your government's gonna do some things that aren't exactly right. On the other hand, I would argue that the U.S. government did some things magnificently right. I have said on many an occasion that the thing that makes me proudest of my own government is the way we handled the sequel to World War II. Instead of punishing the Germans and the Japanese, we made them into some of our best friends on Earth. That was a stunt.
It was to the credit of our country that that was done, and it was done on a bipartisan basis, and I think we can all be proud of that. That was a smart thing to do. It took some generosity. We had to give up some of our money to help them rebuild. It was a credit to our species that we behaved that well on that occasion, and I don't think our future behavior will lack similar episodes of some kind.
Will lack similar episodes or will have?
We'll do some things very right and some things very wrong. That's the way it happens.
That's very Churchill-esque, right? We'll try everything, all the wrong.
Yeah
... the wrong things until we do the right thing.
No, I will keep doing both wrong and right as far ahead as you can see.
Charlie, Al Pitton writes in from Chicago and wants to know if you think we might have on-and-off waves of inflation like we did prior to when Volcker stepped in at the Fed, the seventies era.
Of course, it will happen some in the future. Yes, I think we'll have some of that in the future.
Do you think we'll have it immediately, right now, with what Jay Powell is dealing with?
I don't regard myself. I think I'm pretty good at long-run expectations, but I don't think I'm good at short-term wobbles. I don't have the faintest idea of what's gonna happen short-term.
Okay. Well, let me ask this one as a follow-up. It's, it's similar, and you may not wanna answer this one either, but Jake Pollard says, "Do you have faith in Jay Powell? Are you expecting a soft landing?
Well, I'll tell you the way I feel about Jay Powell is that I feel he's about as good as we have any right to expect. I think he's honorable and intelligent and doing the best he can, and I have no feeling that I know a lot of people who would do it a lot better. I'm glad we have him.
Charlie, another question comes in from Chris Freed of Philadelphia, Pennsylvania. He says, "You've recommended the use of an index fund for the average investor. As these index funds continue to expand in size, their influence on corporate boards and ultimately management is ever-increasing. This concentration of voting in the hands of a few index funds is alarming to me. Do you see this concentration as alarming as well? What reforms would you suggest to address that issue?
Well, of course it's a very serious issue because it's an enormous amount of power. For a while, all these index funds got the feeling they were suddenly made godlike to clean up the world, but Vanguard has retreated from that policy, I think wisely so, and I have some hope that Larry Fink will follow. I don't think it's smart for these index funds to try and influence the policy and politics of the country just because they're an index fund. I think they should be satisfied to eliminate some of the folly from investment management and do a better job for their clients, which I think they do very well. I think they should be pleased with that and not try and run the whole damn country as a matter of corporate governance.
I have no feeling that anybody at Vanguard or Larry Fink's operation has any special genius at how American corporations ought to be run. To the extent they ask Berkshire to do this or that, I wish they'd stop.
Ask Berkshire to do what? Oh, to follow their guidance.
Anything. I'm just not interested in their views as to how Berkshire should behave.
All right. This next question comes from Carson Fedoroff, who's an equity analyst from Germany, and his question is: Stock-based compensation is a popular means of incentive compensation in many companies. In some cases, these take on alarming proportions. It feels like companies are competing to outbid each other. In some companies, 20% of sales are paid out in stock-based compensation. How do you perceive this development in recent years, and what's a healthy level of incentives?
Well, I think you will find in American corporations very good incentive systems and others that are too liberal and others that are too niggardly. What else would you expect of human nature but a certain amount of variety? I agree that some of this. In many a corporation, everybody would vote to being allowed to have stock-based compensation you didn't count in computing the earnings. They just want any damn way of making the earnings appear higher. It's just human nature. Of course, they want their. It's like your little kid goes off to school, they want to bring home good grades, not bad grades. So it's a. Sure, there's a big problem of excess corporation paying in some places. Other places, like Costco, I would say the compensation system is damn near perfect. It's.
There's a fair amount of stock, but we always buy in enough stock in Costco to pay for the stock we're issuing. A lot of people in high tech, they issue the stock, and they don't buy it in, so it's a net dilution. I think there's a lot that's wrong in American compensation systems. Why wouldn't there be?
Yeah.
By the way, when I was young, it wasn't so bad.
Why?
This is something that's happened in the last 50 years. I don't know. It's just the history of the way things came up and the greater hardship and the pioneering ethos or God, whatever it was. When I was young, nobody complained about executive compensation. Now practically everybody in the investment world thinks in many cases the executive compensation has gotten too high. Take General Electric in its heyday. Think of all the big compensation packages they paid, and think of how they were phoning up the earnings and so forth to pay for it. It was disgusting. Of course, if that kind of crap creeps in everywhere in our civilization, the civilization will perish. We need more honor, not less. I have no suggestion as to how to fix the places where it's excessive.
It's a difficult issue, really difficult.
Geoffrey Malloy writes in and asks this question. He's from San Francisco. He says, "Do you think Elon Musk's ownership of Twitter, specifically his hands-off approach to content moderation, is good or bad for American society?
Well, you know, I don't use Twitter, so I'm not a good judge on that subject. My policy on Elon Musk is that he's a very talented man, but also peculiar. I don't buy him, and I don't sell him short. I just say, well, he's a very unusual person.
You said some nice things about him the last time I talked to you and what he's done with Tesla.
It's unbelievable. Who else has done it except BYD? It just shows how tough capitalism is. Even if you're a gen-genius like Musk is in some ways, there's always some little BYD that comes out and does better. Capitalism is not easy.
All right, this question came in from Jeremy Salzberg in Costa Mesa, California. He says, "Charlie, last year in 2022, a Missouri court awarded a victim $5.2 million in compensation from Berkshire subsidiary GEICO after a woman was infected with an STD in a car that was insured by GEICO Auto Insurance. The claimant says that the man was negligent and didn't tell her about his health diagnosis. Your grandfather was a judge, and you have a background in law. Did the Missouri court get this verdict right?
Well, I would doubt it myself, but it's in the nature of things that not every court is gonna be right in every verdict or every judgment. I do think that. Again, you raise a very tough subject. You will get occasional verdicts that are just totally outrageous, and that's inevitable. Of course, that's what appellate courts are for. Sometimes the appellate courts are very sympathetic with crazy verdicts. Again, I can't fix everything that's wrong with human life, including a few crazy verdicts.
You'd put that in the category of a crazy verdict, though?
Yeah, sure.
This question comes from Stefan Armand, who is writing in from Toronto. "There was a lot of excitement about the relationship between Berkshire and 3G for the Kraft Heinz transaction. Has your perception of the private equity business changed on the back of that partnership?
Well, like every other human being on earth, some deals work out better than others for 3G. They would love to have a way of going back and turning all their bad deals into good deals. Berkshire would like to have the same option. We don't get it either. Averaged out, 3G did pretty well. Recently they've had some... Their approach hasn't worked as well in recent years as would be ideal. Again, welcome to human life. It isn't so damned easy.
Art Presser writes in and says, "The Florida governor and legislative body has recently taken a stand to try and control Disney's exclusive self-governing authority previously set up in Florida under the founder, Walt Disney. As your organization," I guess, by this they mean DJ Co., "still owns, Disney shares, you think Disney shares are still a good investment given this backdrop?
We've never owned Disney shares.
That's my mistake then.
It is your own. No, but Disney is an interesting case. Practically every business that Disney has has gotten tougher than it used to be. Again, welcome to human life. Think about Disney once owned the world. The Lion King was running a long run on the, on the theater district in New York. They went from triumph to triumph, marching, marching. All of a sudden, on practically every front, it's more difficult. This is what happens. Imagine Kodak, which totally dominated photography in the world, and they invented this new technology. Kodak wiped out its common shareholders.
You think Disney's headed down the same path, or you think that they'll be able to pivot? I mean, I know you followed the company closely.
No, no. I think Disney has a lot of assets in it, but-
Yeah.
It's unpleasant to have something... How would you like running the sports ESPN now at Disney compared to its heyday? It's gonna be way harder for them.
The stock's up this year.
The Movies look to me like it's gonna be a bloodbath, too. It's not a bit easy. It was easy. In the heyday of ESPN, Disney made nothing but money out of ESPN. It was a total goldmine.
What about other movie businesses? I'm thinking of Paramount, which is a huge holding that Berkshire now owns recent.
I live within a few blocks of Paramount Studios. I don't even know anybody at Paramount. I have avoided the movies like the plague as an investor all my life. I've never made an investment in a movie business in any way, shape, manner, or form. It always gives me the willies. I don't like the unions. I don't like the crazy agents. I don't like the goddamn crazy lawyers. I don't like the crazy movie stars. I don't like the people who sell dope to the musicians. Yeah, everything about it is not my culture. I liked those old English actors when they came over. You know, I grew up with them. Basically, movies is not my scene. I've avoided it. It's always been very hard for the people who put up the money.
It may be a very good place to make a living as an actor or a writer or something or a musician, but it's a hard place to make money if you're an investor.
This one's an interesting question. It came in from Erik Howe in Milwaukee, who says, "The population of the world is thought to have increased by more than fourfold time since you were born. Mind you, I'm not holding you personally responsible, but there has been that magnitude of growth. Is there a point where the biggest existential threat to humanity is the growth of the population and humanity? If so, how do we discern when that point has arrived?
Well, that's an interesting subject. If you'd looked at the way things have happened in the past, you would have concluded, like Paul Ehrlich did, that the world's headed for an absolute population disaster. What actually has happened is quite different. What's happened is that as the world has gotten more and more prosperous, including in places like China, the birth rate has gone down, down. There's actually sort of a population shortage in a place like Japan.
Mm-hmm.
The prediction of all the great experts based on extrapolating the past graphs, they turn out to be totally wrong. It now looks as though the world's population in the advanced countries will sort of self-limit.
I mean, that kind of puts you in the same camp with Elon Musk. He's made some of the same arguments, that it's really shrinking population that's a bigger threat to humanity.
Well, as I said, he's a smart man. Sometimes. Sometimes. Like all the rest of us.
Danny Poland writes in and says, "When assessing the character and competence of a business's management, have you ever made a mistake? If so, when did this occur, and what did you learn from the experience?
Well, everybody makes mistakes. I'd say one of the most interesting things that happened in my lifetime was the rise of IBM and the fall of IBM. IBM was the most admired company in America for most of my young life. They just marched from triumph to triumph to triumph. You know, in the last 10 or 15 years, they've slipped, and they're falling back in relation to other people in their field. As the Apples and the Googles and so forth came ahead, IBM just kinda missed the boat. I think that's almost inevitable. Kodak missed the boat of the change to digital photography, too. I've heard Bill Gates say that it's almost a rule of if a really disruptive technology comes along, the incumbents screw up their reaction to it.
It's hard to change your ways when they've been successful for a long time and go into a totally different way of behaving and thinking.
Right. This.
Look at where we're sitting. We're sitting in Daily Journal Corporation. We're adapting to the new world. Think how different it is publishing a newspaper and being inventing software for courts to automate. These are two radically different businesses.
This question comes in from someone named Jean who says, "Mr. Munger, do you think that currently in the United States we have systemic racism?
We have what?
Systemic racism.
Well, I suppose we've got some, sure. Of course, you're gonna have a certain amount of animosity, one group toward another. In the whole history of the human race, we've had a certain amount of that. I think it's gotten way better in my lifetime, however. I would argue that the racism has gone down a lot.
Charlie, this question comes in from Neil Doss, who says, "What, if any, impact do you think the insurance industry will see because of climate change over the next 25 years?
Yeah, right. Well, I'm not sure I have any good at answering that kind of a question.
Are you raising rates at any of the Berkshire insurance companies?
I don't think I know particularly how well. I think there's a good chance that climate change will be less important than a lot of people think. That doesn't mean it'll be unimportant, but I think it won't be an absolute full-blown horror capacity with no possibility to adjust.
Oh, I wait because sometimes when I wait, you say more on things. I'll give you time to...
No, it's all right.
Okay. Let me get to this question from Donny Huang. He says that he's teaching the introduction of personal finance and the introduction of corporate finance to undergraduates at Indiana University in Bloomington. Most of his students are non-finance majors, and this will likely be the only finance class that they take in college. What should he teach them, incorporating as many writings and speeches that you've given over the years so that they have the foundations and common sense to effectively deal with their personal or corporate finance problems later in life?
Well, that-- if that's a good question, but of course it's a big question. If you have good judgment, your life will work a lot better than if you have bad judgment. You get good judgment gradually over time, partly by making bad judgments and having them not work out poorly. My counsel has always been to start trying to be better and keep trying to improve all your life, and you got about half a chance. If you don't do that, you got, like, no chance. I... It's... I used to say I can only teach what the other person almost knows. I can just tool him over the brink when he's hanging on the edge. If the guy is not within miles of even starting, I never make any public. I never succeed.
In removing idiocy, I have 100% failure talent. I've never succeeded.
What would you push in that direction if you got a class full of finance students in college? Maybe one of the, a few lessons.
Well, I would teach to the people who can learn, and if the others couldn't keep up, the hell with them. I, well, you can't be improved. I just don't believe in butting my head against the wall. That, by the way, that's the way most education works. They just throw out those who can't keep up. That's the way academia works. That's the reason it gets so good at the top. I talked yesterday on Zoom with a law professor at a great place. My God, this is an admirable guy, and he's just so goddamn smart and balanced. He's like incredible. He's a very senior law teacher at one of the great law schools of the world. I would expect him to be pretty good, but he was more than pretty good. He was awesome.
I thought, "My God, academia is quite competitive, you know. By the time you get to the top of the professors at a good place, you find some very remarkable people." What they can't. There's a limit to what they can accomplish. One of the reasons they turn out such good people is they take in such good people. That's their secret. They can't fix the clods. Nobody can.
Tough love.
There's an old saying, "Dumb is forever.
Dumb and diamonds. Alejandro Salcedo writes in, he says, "Reading many entrepreneurs and famous people, they always say that you have to dream really big. Instead, you say, Charlie, that the secret to a happy life is having low expectations. Could you please expand on that?
Well, yes, you climb as hard as you can by just advancing one inch at a time. That's the secret of life. Now there's always somebody who's a little nuts and who succeeds, but for every guy who succeeds, there are 1,000 failures.
Is this an underpromise, overdeliver situation too?
Well, of course Who in the hell in his right mind would like going around making a lot of commitments and failing time after time after time at doing what you'd promised to do? Everybody would hate you, right? There's no more guaranteed way to make people hate you than to fail them in their reasonable expectations. Of course, you wanna live a life where by and large, you're meeting the reasonable expectations of other people. That's what civilization requires of all of us.
Charlie, someone named Joe wrote in from China. He says he's an investor from China. He's sorry that he can't see you face-to-face this year. He wants to ask you a question about life during the pandemic. He says, "I always give bits of advice to the elders in my family, like avoiding high temperatures and falling down at home. During the pandemic, especially since China reopened, I can seldom give them any advice except stay at home and get vaccinated. As a wise elder yourself, did you get COVID during the pandemic, and how do you stay healthy? What's your advice to these elders?
I did get COVID, I got it after I was vaccinated, and I had like a tiny sniffle for about 10 minutes. That was my COVID. I tested positive during that time. In terms of the general idea of cautious adjustment, I've had a lot of elderly friends who either died or had terrible injuries from falls. When I got old myself, and it got time to use something to avoid falling down, people tried to sell me on the cane. I noticed that my friends who used canes would fall down occasionally. I never used the goddamn cane. Instead, I bought one of these modern walkers, and wherever I was worried about falling down, I pushed my walker. I did that for six and a half years.
I never fell down once in six and a half years just because I was more cautious. That is my advice to old people, just be a little more cautious. Now I've gone to the wheelchair, and I've got another six and a half years probably, but some of it I've already used up. I'm just as cautious with my wheelchair. What is the harm in having a little extra caution?
Makes sense. I wanna pivot to a question from Frank Wang in Houston, Texas. This is a question about Berkshire. He said, "Berkshire previously took a position in Exxon and then exited fairly quickly. If I recall correctly," he says, "I believe you had stated that Berkshire thought it was a good alternative to cash at the time. Is the same type of thinking with Berkshire's new position in Occidental and Chevron? Is it the same type of thinking, or is it likely to be more of a long-term type of holding for Berkshire going forward?
That is a very good question. I think having a big position in the Permian Basin through those two companies is likely to be a pretty good long-term hold. I like that aspect of that position. Ben Graham used to say, "If it's a good investment, it may be a good speculation." I think that's generally true, but I don't do those short-term speculations, at least not very often. But I like the big position that Berkshire has in the Permian through those two. I kind of admire both places a lot. Both Occidental and Chevron are very admirable places. By the way, Oxy didn't start like that.
Yeah.
If you go back 30 or 40 years, Oxy was run by a crook. You know, it's evolved into a wonderful place, but it started as a sleazebag.
Who was running it 30 or 40 years ago?
A man named Armand Hammer.
Oh.
Before your time, Becky. You're too young.
I know Armie Hammer, the younger one.
Yeah. Yeah.
Yeah.
Anyway.
All right. Paul D. writes in, I believe it's Paul Davacoff, says, "Charlie, you're largely credited with Warren Buffett's evolution to buying great businesses at a reasonable price or, in simple terms, a willingness to pay up for a great business. Given Ben Graham's exceptional insights and understanding of investing, how or why did he himself not evolve to foresee the inability to scale his net-net cigar butt approach? What do you attribute your early willingness to pay up stems from?
Well, remember, a lot of Ben Graham's rise in life was during a period when there was plenty of low-hanging fruit among mediocre businesses that were way too cheap, and he was relatively rare in doing his hunting in that garden. He made a pretty good living for himself buying these. What happened is that, That low-hanging fruit eventually went away as the aftermath of the Great Depression went away.
Mm-hmm.
Ben Graham actually made more than half of all the money he made in his life out of one stock, and that stock was GEICO.
Hmm
which was a great business.
Yeah.
If you actually look at the great man's own life, you see that what he taught wasn't the way he got rich himself. By the way, he told that story on himself late in life. He carefully computed how much he'd made at GEICO compared to everything he had ever done in his previous life.
Mm.
You can argue that Ben Graham himself woke up once.
What, why do you think that you, so early on, were willing to come up with this idea of paying up for great businesses?
Well, because it's so obvious, and I'm good at doing things that are obvious. Of course it was obvious if you wanted to have a particularly good result, you got to have a great company, you know? I recognized that greatness was good, you know? Big deal. Charlie Munger, genius, recognizes greatness is good. Of course, greatness is good.
Paul Lountzis from Toronto, Canada writes in. He says, "When you're evaluating a company for potential investment, what do you place the most emphasis on, the business or the management? Do you differ with Warren when it comes to what you place first?
No, I don't. I think we're the same. I think we like the business great first, and then second, we want a great manager. We have not made a huge success by investing on great managers who take over lousy businesses. That is not the way we rose.
Matt McAllister writes.
If you're a lousy manager, you really, you really need a great business.
Can a great business be run by a lousy manager, the inverse?
Sometimes. Coca-Cola was run for years by a man with very severe mental impairment, and the directors just assumed he was drunk and let him stay there year after year. That's my idea of a wonderful business that you can be mentally defective and run it pretty well. That was Coca-Cola in its heyday.
How far back are we talking?
Oh, well, 25 years.
I'll let somebody else do the math on that, figure out the timing. Matt McAllister writes in and says, "Charlie, you've described too much diversification as divorcification, being at best an average return pro-producing strategy. In light of that thought, if one was allowed only one stock to hold for a very long time, and it would be the most important asset to him and his family and their future well-being, please describe what you would look for in that stock or company, and also talk about the features that you would consider most important when you're trying to figure that out.
It helps to have a, somebody that's lucked into a good position. A great business would be what you'd like, and of course you'd like a great management too. Occasionally we've had both to ride together for a long, long period. Of course, everybody's looking for the same thing, and the trouble with it is you will find when you get into those good businesses, in a place that's picked over and analyzed as American stocks are, and you can imagine the amount of time spent thinking about American stocks. You will find, by and large in America, if it's really a great business, it's at least 25 times earnings and maybe 30 or 35 or something. That makes it much harder, of course, because if something goes wrong, you can lose a lot of your investment.
Of course that's what makes investment so difficult is the fact that the good businesses don't stay cheap. You gotta somehow recognize a good business before it's recognizable as a good business. That's very hard to do. Some people get good at it, but not many. I don't think I would want 95% of the people who are America's professional asset managers, I wouldn't want working for me.
Really?
I mean, it's that hard. I think you need to be in the top 5% to have a reasonable chance. It's, I mean, it's very difficult. Now, it's not difficult just to buy an index fund and sit on your ass. That's the great default position.
Your assets?
By the way, look at the Daily Journal Corporation. We just put in a 401 plan. What are the investment options for the people that work? Zero. It's all index funds.
And, and if you-
What percentage of American 401(k)s have our plan? Index funds required. About 0%. Am I right or am I wrong? Of course I'm right.
And-
It's the logical thing to do.
Okay. worth 2.20%.
Sometimes. Sometimes. Being worth 2 and 20, I would say that is way less than 5%. The man who's worth 2 and 20, that is really that's getting very rare indeed, particularly under modern conditions where every niche is occupied.
Okay.
You really. If you take early-stage venture capital like Sequoia does, how many people have a Sequoia-like record? I don't think there's 1 in 100 that has a Sequoia-type record.
Chris Freed from Philadelphia, Pennsylvania, writes in and says, "You've said previously that you-
By the way, even Sequoia makes an occasional mistake. You know, everybody does.
Overall, you still think it's worth it?
Go ahead.
Yeah, okay. Chris Freed writes in from Philadelphia and says, "You've said previously that you should destroy at least one good idea that you have each year. What good idea did you destroy in 2022, and anything in 2023 so far?
The idea that I destroyed it wasn't a good idea. It was a bad idea. When the internet came in, I got overcharmed by the people who were leading in the online retailing, and I didn't realize it's still retailing, you know. It may be online retailing, but it's also still retailing. I just, I got a little out of focus, and that made me overestimate the future returns from Alibaba. I have never gotten twice about eliminate mistakes.
I think I just lost Charlie's audio. I'm not sure.
What I do, though, is I.
Can you guys hear?
I keep rubbing my own nose in my own mistakes.
I can. I can hear.
like I am doing now because I think it's good for myself.
I can hear. You can hear me, but I can't hear you. You dropped out during that last question. Can you do me a favor and just raise your hand if you can hear me?
I can hear you fine.
Okay. Charlie can hear me. I'm not hearing him, so if you guys can call. I'm hooked in directly to the line. Now I'm hearing program. Not this program. I'm hearing live on air program coming from here, music that's coming in. Charlie, I'm gonna ask you another question just so that everybody else doesn't have to listen to me talking this through. We're gonna try and get this fixed here in the control room. This question comes in from... Let's see. Let's go to this one. Chris Fanassi, who asks the question about. He says, "Hi, Charlie. A notable theme during the last Daily Journal conversation revolved around positive and negative trade-offs between different systems, frameworks, and choices.
Can you discuss your views on the healthcare industry, specifically the trade-offs between capitalist systems like the United States and single-payer systems like Canada and the U.K.?" I'm asking this single-payer healthcare question because, for those who don't know, you served for a long time as chairman at a hospital in Los Angeles, so you do have some insights into what the situation is. Feel free to talk a long time while they're fixing this.
Well, yes. Well,
I don't hear anything.
When somebody asked Warren what happened when their experiment with JPMorgan Chase and Amazon and so forth, and they were gonna improve the, what was wrong with the American medicine and its cost. When they gave that up as a total failure, Warren just said, "The tapeworm won." That's what happens. I think the American system costs way too much. Can you hear me?
Charlie, I see your lips have stopped moving, so I'm gonna ask another question.
Yeah. Oh.
I'm hearing Power Lunch in my ear right now, if anybody's paying attention in the control room. This question comes in from Brad Heck. Brad Heck is in South St. Paul, Minnesota, and says, "Charlie, I'm a big fan of your disciplined approach to life. Do you get up at the same time every day and go to the bed at the same time? Finally, what's the first thing you focus on each day?
Well, I vary a little in my time, but I'm pretty regular. I'm a pretty good sleeper in my old age, so I'm very lucky in that respect.
Seeing your lips have stopped moving, so I'm gonna ask-
No, I stopped talking.
Got you. I got you. Finally. I hear you. Okay, Charlie, let me ask you this question.
We got sound again.
Yeah, I've got you now.
Modern technology. It really works.
Yeah, I know. You'd think we'd be a little better at this.
Sometimes.
Sometimes it works. Jim Noel writes in and said, "If you could inaugurate anyone for president in 2024, who would you choose?
Well, I think I'll duck that one. I don't want to get into presidential politics.
Okay. I hear that. I can understand that. Charles writes in and says-- First of all, he wants to thank you, Charlie, for gifting some DJCO shares to establish that new Daily Journal management equity incentive plan. You talked about that earlier on. He said, additionally, he's excited about the rumored new edition of Poor Charlie's Almanack. First of all, is that true? The real question he has for you, he said, You said that you admire Benjamin Franklin. Can you please elaborate on this subject and highlight the qualities that you admire in Ben Franklin?
Well, Ben Franklin was a genius. It was a small country, but remember, he started in absolute poverty. His father made soap out of the carcasses of dead animals that stank. Now, that is a very low place to start from. He was almost entirely self-educated. Two or three years of primary school, and after that, he had to learn it all himself. Well, to rise from that kind of a starting position and become... By the time he died, he was the best inventor in his country, the best scientist in his country, the best writer in his country, the best diplomat in his country. You know, thing after thing after thing, he was the best there was in the whole United States.
He was a very unusual person, and he just got an extremely high IQ and a very kind of pithy way of talking that made him very useful to his fellow citizens, and he kept inventing all these things. Imagine, imagine inventing the Franklin stove and bifocal glasses and all these things that we use all the time. I'm wearing bifocal glasses as I'm looking at you. These are Ben Franklin glasses.
Mm-hmm.
What the hell kind of a man that just goes through life and his sight gets a little perfect. He invented the goddamn bifocals. It was just one of his many inventions. He was a very, very remarkable person, and of course, I admire somebody like that. We don't get very many people like Ben Franklin.
No. Thinking the library system, I think of Benjamin-.
He was the best writer in his nation and also the best scientist and also the best inventor.
How did that happen?
When does that ever happen again?
Yeah.
Yes, yes. All these other things, yes.
Is there a new edition of Poor Charlie's Almanack?
He played four different musical instruments, in addition to everything else.
That part I didn't know. Yeah, that part I did not know.
One of which he invented.
Which one?
The the glass thing that, you know, when he rubbed his fingers on the glass and the...
Oh.
It was. They still play it occasionally.
Yeah. With, like, different layers of water in it.
He actually played on four different instruments.
Yeah, he was a diplomat.
Yeah, yeah, no.
write the rules of the country, and taught us about compound interest with the trust that he set up for both Philadelphia and for Boston that still hundreds of years later are paying out.
He was a very amazing person. We were lucky to have him.
Is it true? Is there a new Poor Charlie's Almanack coming out?
Well, they're creating an online edition.
Okay. You've talked about.
The Chinese edition sold way more than the one in the United States.
Well, there's more people there.
That's not the sole reason.
Why else?
A rich old man looks like Confucius. In their system, there's nothing better than a rich old man.
Yeah. Charlie, Sang Park writes in a question. This is about delayed gratification taken to the extreme. How rational is it for a person of your age and wealth to practice delayed gratification? If it's not rational at your age, how is it rational to delay gratification for the average adult? What's the rational point in life to live with no delayed gratification?
I'm still doing the. Now that I'm old, I buy these apartment houses. It gives me something to do. We're different from the way we run them than the way everybody else runs them. Everybody else is trying to show high income, so they can have high distributions. We're trying to find ways to intelligently spend money to make them better, and of course, our apartments do better than other people do because the man who runs them does it so well for me. The men, there are two young men that do it with me, and it's all deferred gratification. We're looking for opportunities to defer. Other people are looking for ways to enjoy it. It's a different way of going at life.
Did you start out that way or-?
That way you get more enjoyment out of life doing it my way than theirs.
Did you start out, having to work at delayed gratification, or is that just how you were born?
No, I learned this trick early, and you know, they've done that experiment with the 2 marshmallows with little kids.
Yeah.
They offer.
How long can you sit?
two marshmallows if you'll wait.
Yeah.
Yeah, yeah, they've watched them, how they work out in life by now, and the delayed gras... The little kids who are good at deferring the marshmallows are also the people that succeed in life.
Hmm.
It's kind of sad that so much is inborn, so to speak, but you can learn it to some extent, too, so.
I'm gonna go home and test that out on my kids. See who does well.
I was very lucky. I just naturally took to deferred gratification very early in life, and of course, it's helped me ever since.
Matt McAllister writes in and says, "First, thank you for sharing your wisdom. Those of us fortunate enough to listen have benefited significantly." We've come to know Warren Buffett as a learning machine because of your candid descriptions. Aside from this quality, what others would you credit to Warren that has helped make him one of the greatest investors and compounders that the world's ever seen?
Well, Warren is not only a very good thinker and a good learner, which is important, but Warren has a big, strong fiduciary gene. He cares about what happens to the shareholders. Warren and I were lucky in that the early shareholders were people who trusted us when we were young and didn't have a reputation and so on. Naturally, we feel an exceptional loyalty to those people. Of course, naturally, they're all dead now, but we're still loyal to them. I mean, Warren and I still care what happens to the Berkshire shareholders, a lot. I think that helps us. I think that it helps if you're good at loyalty. Go ahead, Becky.
Bala Thirupunam bakam writes in and says that many large companies, including Meta, which owns Facebook and various insurances, are choosing to self-insure against liability, either for directors or for the business risks. If it's carried to extremes, as it no doubt will be over time, this could cause potential systemic issues. Would you share your thoughts on this, please? He says he's been a shareholder of Berkshire Hathaway for 16 years and thanks you for your stewardship and sharing your thoughts generously with the younger generations with thoughts like these.
I In my own life, I'm a big self-insurer, and so is Warren. It's ridiculous for me to carry fire insurance on my houses because I could so easily rebuild a house that had burned down. Why would I wanna bother fooling around with a claims process and all kinds of things? insurance is. You should insure against things you can't afford to pay for yourself.
Mm-hmm.
If you can afford to take the bumps, you know, some unusual expense coming along doesn't really hurt you that much, why would you want to fool around with some insurance company? If your house burned down, I would just write a check and rebuild it. All intelligent people do it my way. Well, I won't say all, but maybe I should say all intelligent people should do it my way. There should be way more self-insurance in life. There's a lot of waste. You're paying when you buy insurance for the other fellow's frauds, and there's a lot of fraud in life. If you can afford to take the risk yourself and not fool around with claims and this and that and commissions and time, of course, you self-insure. It's simpler and so forth. Think of what I've saved in my life. I never...
I never carried, never, I think once, with one exception, I never carried collision insurance on a car. Once I got rich, I stopped carrying fire insurance on houses. I just self-insure.
That's a little bit of a surprising take for the guy who was vice chairman at a big insurance company.
That's the right way to do it. That is the right way to do it.
There's-
What?
That's a little bit of a surprising take from a guy who's a vice chairman at Berkshire, which has so many insurance companies.
I'd rather tell it the way it is than tell it in a way that helps Berkshire. I'm not gonna tell it differently than I think it really is just because it's better for Berkshire. Even though it's bad for Berkshire, I wanna tell you, if you can afford to self-insure, self-insure.
Even on things like medical? I just think you might think you can afford these things.
Yes. No, that is different. The insurer pays the doctor and the hospital is a small fraction of what you pay. That, that's a different kinda calculus. Everything in medicine is... The cost of American medical care and the medical insurance, it's a disgrace. If you go to Singapore, you will find that they do the whole thing better than we do, and it costs 20% of what we pay.
Again, I, my audio was out.
By the way, I have no idea of how to get from where we are to where Singapore is because all the people who are getting all that extra money fight like fierce tigers to hold on to it.
Right.
They control boards and cities and states and every other guy. I don't know how to fix the costs in American healthcare. They're totally out of control. Warren tried to fix it with Amazon and all that stuff. He failed, too. Everybody's failed with it. Everybody in America has a marvelous record failing in handling our cost of medicines.
Matt McAllister writes in, and I realize he's asked a couple of questions. I didn't realize this was a repeat send in, but I like the questions. He said, "What are some of the most important things that we need to know about Greg Abel? Have you experienced examples of him also being a learning machine? If so, could you share one?
Yeah. Well, Greg is just sensational at being a business leader, both as a thinker and as a doer. He's also sensationally good at smoothly getting things done through other people. He's a very remarkable human being, and Berkshire is very lucky to have him. He's also is a tremendous learning machine.
Mm-hmm.
You can argue that he's just as good as Warren is learning all kinds of things. One of the interesting things about Greg is there's some things he's better at than Warren is. Warren knows that, he just keeps dumping on Greg Everything that Greg can do better, it's a lot. The system at Berkshire is working pretty damn well. We're very lucky to have a 92-year-old in as good shape as Warren, we're very lucky to have a chief executive like Greg. Greg is very remarkable. Greg is trusted by insurance regulators by utility regulators, rightly so. He is trying to run all those utilities as if he were the regulator. How many people think that way? It's such a smart way to think.
You mean just from a show of good faith and?
Yeah. Why not do it the way that you would want it done if you were on the other side of the transaction? How can you fail if you treat other people the way you'd like to be treated yourself? It's the golden rule. Of course it works.
All right. Someone named Jim writes in, you know, I ask this question because I got a lot of similar ones just in terms of investments. This one is probably a question that a lot of people as they start to get up 65 and beyond start to wonder. He just says, "Would you recommend I take Social Security when I'm 67 or wait till I'm 70 when I'll receive more per month?
Well, I can't make that choice for you. It depends. If you know you're gonna be dead pretty soon, I go ahead and have more money to spend. If you think you may live a long time, you may have a different calculus. I would say that most people who are healthy and so forth and who have a pretty good life expectancy, generally, they're wise to defer the Social Security taking and take more money later.
I guess it's optimistic thinking, too. If you're thinking that you're gonna live a long time, that's the way to play it out.
Mm-hmm. Well, what do you do, Becky?
I'm not 65 yet, I haven't thought about it yet. I'm waiting. My guess is I would probably work longer.
I don't think you're gonna need Social Security, Becky. I'm not worried about you.
I think I would work longer. I'm naturally conservative.
Yeah.
Leping Wuyang writes in, "You urged the U.S. government to ban cryptocurrencies as China has done. I have a more general question. With boom and bust cycles in different countries in history, what should a good government do and not do for economic growth?
Well, what you gotta do if you want growing GDP per capita, which is what everybody should want, you've got to have most of the property in private hands, so that most of the people who are making decisions about how a property is going to be cared for own the property in question. That makes the whole system so efficient that GDP per capita grows. In a system where you have easy exchanges due to a currency system and so on. That's the main way of civilization getting rich is having all these exchanges and having all the property in private hands. If you like violin lessons and I need your money, when we make a transaction, we're gaining on both sides.
Mm-hmm.
Of course, GDP goes like crazy when you got a bunch of people who are spending their own money and owning their own businesses and so on. Nobody in the history of the world that I'm aware of has ever gotten from hunter-gathering to modern civilization except through a system where most of the property was privately owned.
Hmm.
A lot of freedom of exchange. By the way, I just said something that's perfectly obvious, but it isn't really taught that way in most education. Even You can take a course in economics in college and not know what I just said. They don't teach it exactly the same way. Anyway.
That would be your best suggestion.
I.
Yeah. That... Okay.
Yeah. Yeah.
Okay.
Okay.
This one comes in from Matt, he says, "Throughout your experience with Berkshire Hathaway, what are a few of the things that have surprised you most based upon some of your previous rational thoughts and ideas? Also, how have you used some of those surprises in your quest to become a better learning machine?
Well, I would say some of the things that surprised me the most was how much dies. The business world is very much like the physical world, where all the animals die in the course of improving all the species so they can live in niches and so forth. All the animals die, and eventually all the species die. That's the system. When I was young, I didn't realize that that same system applied to what happens in capitalism to all the businesses. They're all on their way to dying is the answer, so other things can replace them and live. It causes some remarkable death. Imagine having Kodak die. It was one of the great trademarks of the world. There was nobody that didn't use film. They dominated film. They knew more about the chemistry of film than anybody else on Earth.
Of course, the whole damn business went to 0. Look at Xerox was once owned the world. It's just a pale shrink. It's a nothing compared to what it once was. Practically everything dies if on a big enough time scale. When I was young enough, that was just as obvious then. I didn't see it for a while. You know, things that looked eternal and had been around for a long time, I thought would likely be that way when I was old. A lot of them have disappeared. Practically everything dies in business. None of the eminence lasts forever. Think of all the great department stores. Think of how long they were the most important thing in their little community. They were way ahead of everybody in furnishing credit, convenience in all seasons, you know, convenience back and forth.
Use the same banks of elevators and so forth, multiple floors. It looked like they were eternal.
Hmm.
They're basically all dying or dead. That once I understood that better, I think it made me a better investor, I think.
I mean, the same could be said for managers. I've talked with Doug McMillon of Walmart, who carries around in his wallet, like on him, he carries around a list of the top retailers over the decades, and nobody's ever the same. You know.
Yes. Who are gone. Yes. Of course, retailers live in terror because you can die. I guess a better way of doing it, you just die, like those department stores did.
The ones that you invested in early on, you mean? The Baltimore?
Well, no, most of the. Think of the department stores that are gone.
Yeah.
Just chain after chain after chain in big downtown. They're not weakened, they're gone, dead. To have IBM have the huge position it once had in terms of utter dominance, and now it's just one of the also rans. It's still an admirable place. I'm sure they have a lot of talent left in IBM. It doesn't help you. You die even though you're talented and hardworking.
Arthur Kahn writes in, he's a Daily Journal shareholder who lives in Toronto. He says, "Mr. Munger, while many of us admire you and look up to you, I want to ask, who were some of the people you most admired and looked up to? What was it about them that made them so special?
Well, some of the best people, I would argue that Jim Sinegal at Costco was about as well adapted for the executive career he got. By the way, he didn't go to Wharton, he didn't go to the Harvard Business School. He started work at age 18 in a store, and he rose to be CEO at Costco. Matter of fact, he was a founder under a man named Sol Price. I would argue that what he accomplished in his own lifetime was one of the most remarkable things in the whole history of business, in the history of the world. Jim Sinegal.
Mm-hmm
...and his life. He's still very much alive, but he had one business throughout his whole life, basically. He just got so damn good at it. There was practically nothing he didn't understand, large or small. There aren't that many Jim Sinegals. I'll tell you somebody else for a job that of the kind he has, Greg Abel, in a way, is just as good as Jim Sinegal was.
Mm-hmm.
He has a kind of a genius for the way he handles people and so forth, and problems. I can't tell you how I admire somebody that has enough sense to kinda run his utilities as though he were the regulator. He's not trying to pass on the cost because he can do it. He's trying to do it the way he'd want it done if he were the regulator instead of the executive. Of course, that's the right way to run a utility, but how many are really run that way? There are some admirable businesspeople out there, and I've been lucky to have quite a few of them involved in my life. The guy who ran TTI was a genius. TTI is a Berkshire subsidiary.
Yeah.
You have your Daily Journal people think how lucky you'd be if we still had our monopoly on publishing our cases or something. We'd be like TTI. Well, TTI has just marched from triumph to triumph.
Hmm.
It was run by a guy, he got fired and created the business.
He got fired from where?
He invented the whole. It was some place, it was a defense contractor. I forget which one.
General Dynamics maybe or... Yeah.
Yeah, I can't remember exactly. He was a terrific guy, and he ran the business for us. He wouldn't let us raise his pay. How many people have the problem with their managers, they won't allow you to raise their pay?
It's pretty rare.
Yeah.
Charlie, I spoke with a friend of yours yesterday, and his question that he had for you is: what quality has helped you the most in life?
Well, that's easy: rationality. If you're just not crazy, you have a big advantage over 95% of the people. 'Cause most people have all kinds of crazy patches, and if you just are consistently not crazy, you get a big advantage in life. If you're patient and a gratification deferrer in addition to being not crazy, then it's practically a cinch. If you're exceptionally good at satisfying your commitments to other people, then you've got. You just automatically improved your resources and your chances in life enormously, and it's so simple. Why don't more people do it? It's an interesting question. I don't think you can educate your children to do it automatically. That's why if you have 10 children, you'll have some that are a lot better than others at doing this.
Is it harder with success, age, wealth to hold on to rationality?
I think it's always hard, but you get better at it if you get good at it young and keep practicing. It's never easy. That question somebody asked, "What one stock would you buy if you had to just rely on that one stock only for your sole living expenses? You weren't allowed to have any or earn any income at all. You just had to invest $1 million and live on that one stock." How many people would give an intelligent answer to that question in America? I don't think it's 1 in 100.
Hmm. I think-
They wouldn't even know how to begin.
I think one of my favorite things that I've heard you say, and it's something I repeat often to a lot of people, is, "Whatever you are, age and wealth makes you more so." came up with that a while ago. What, what led you to that?
Yes.
Do you have any-
Yes. Yeah, of course.
Yeah. Do you have any, I guess, evidence-
No, I think, I think that's true, that we all tend to get a little more so in every way. I thought of that when I woke up this morning and put on my trousers on. I thought, "You know, I really economized in buying those trousers." You know, why am I economizing in my trouser buying? The habit is just so ingrained that I can't stop.
I'd like to circle back to a question on Daily Journal to wrap things up. Daily Journal and some of your holdings. This question comes in from Moshe Segel, who says, "In a previous shareholder meeting back around 2018, you spoke about BYD and said, 'Journal Technologies is not quite BYD,' but added that, 'By the way, it might work out just like BYD.' Now a few years on, do you still find Journal Technologies can turn out similar to BYD?
Well, it won't be as fast, that I guarantee you, and it won't be as great. I can also partly guarantee that. BYD is one of the most remarkable venture capital type successes in the history of the world. He was the eighth son of a peasant, had an older brother that recognized his young kid was kind of his younger brother was a genius. The older brother sacrificed himself to get this peasant's son into some good engineering school, and he became an engineering professor and then an entrepreneur. How many times you get a story like that? Imagine buying a little bankrupt auto company in China and turning it into something that this year they're gonna sell more electrical cars than anybody else in the world. At a time when electrical cars are hot.
It's a remarkable story, again, a very unusual human being, Wang Chuanfu. In his case, it wouldn't have happened if Wang Chuanfu hadn't been so unusual.
Unusual how?
He's a goddamn he's a damn genius, and he's been thinking about the right things 17 hours a day all his life. He's a workaholic, and he can do things that ordinary human beings can't do.
Is that the favorite stock you've ever purchased, BYD or Costco?
Well, I would say yes. I have never helped do anything at Berkshire that was as good as BYD, and I only did it once. Our $270,000 investment there is worth about $8 billion now or maybe $9 billion. That's a pretty good rate of return.
Yeah. It's more than pretty good.
Yeah. We don't do it all the time. We do it once in a lifetime.
Yeah.
We have had some other successes too, but I don't think hardly anything that like that. We made one better investment. You know what it was? We paid an executive recruiter to get us an employee, and he came out with Ajit Jain. The return that Ajit has made us compared to the amount we paid the executive recruiter, that was our best investment at Berkshire, was paying an executive recruiting firm to get us Ajit Jain. Again, it only happened once.
Yeah, that's, quite an investment too.
Mm-hmm.
Charlie, I just wanna thank you.
Yeah
...for all your time today.
All right. We're all through, I guess.
Being so generous with us.
I guess our meeting is over.
We'll turn it back over to Charlie and Steven.
I'm glad I'm still here to do 1 more with you people. We've been at this quite a few years. My best to all of you. Bye.
Thanks, everyone. Thank you, Becky. Thank you, Steven. Thank you, Charlie.
No.