Charlie Munger's advice on investing and life choices that make a person wealthy

a business empire needs decisive leadership but also a steady hand for more than 40 years Charlie Munger has been Berkshire Hathaway's ladder as vice chairman of Berkshires Munger, 95, is Warren Buffett's right-hand man and is also an

investing

legend In his own right Munger ran a company in the 1960s and 1970s that earned returns of more than 24% annually. He is here to talk about how to

make

investment decisions and

life

choices

that help ensure prosperity and longevity. I'm Andy, welcome to influencers and welcome to our guests. Vice President of Berkshire Hathaway, Charlie Munger, Charlie, it's good to see you here, so you just had the Annual Meeting and I have to ask you what your favorite moments were.

What I like is that both the shareholders and the employees are extremely enthusiastic and it's not just that they've made a lot of money and have good careers, they think they're on the right side and you know, they come there to hear them talk all the time. day and yes, like a sect, it is like a sect, yes. in a good way, although you know good coke is good coke, okay, I mean the things they hear, some of their new things, some of their old things and a lot of them are common sense and you were talking about all that Common sense, right?

Of course, when people use the word common sense, what they mean is uncommon sense because the standard human condition is ignorance and stupidity, they say old Joe has common sense, they mean he has uncommon sense. I guess he's a bit of a misnomer then, but he really is. Do you know why people can't think clearly about investments or decisions in their lives? Well, they don't think very well about sex or gambling either. No. The standard human condition is very Miskin and there are ways to take advantage of it. That or yes, you take advantage of other people, you can improve your own

life

by eliminating your erroneous cognitions.

Let me change the subject a little bit, Charlie, and ask you about the US economy and what your opinion is on where things are right now. Well, obviously, we are booming, but you know the economy is sometimes booming and sometimes not and you have to live your life through both episodes and the right thing to do is to keep swimming and sometimes the tide is in our favor and sometimes against us. , but we keep swimming. Either way, are you surprised how long this expansion has lasted? It lasts a long time, but what was really remarkable is that we never printed so much money and spelled it so fast and bought back so much public and private debt, so this is total. terra incognita in economics and now I know what he knew for sure how it was going to work, so is it risky?

So of course it was risky, but it worked and I don't think they had much else, it would work, they weren't. were prepared to stimulate much controversy. Democratic inertia somewhere had to do something and the only thing they had left was to simply print money and start buying things and that's what they did and it turned out to be a very wise response and what's even more remarkable is that both the Congress as well as the presidency and under both parties made the same decision, everyone cooperated, it was the last time, but where will that ultimately leave us, well, that left us licking the Great Recession.

Try cooperating again since it works so well. Once, how much is President Trump responsible for this current economic situation? Well, I think he deserves some credit, but a lot of that just happened in the business cycle, yes, and in the decisions of his predatory predecessors, what do you think of the president's campaign to pressure the Federal Reserve to reduce? rates or keeping rates low, well, I think presidents have always done this. If you are a politician, you know democracy, of course you want people to generate money to spend and of course that is not a good idea.

The best example probably in the entire world is Singapore. that has no deaths and never prints money and spends it and is one of the most successful places in the world. I wish we were like that, but there is only one Singapore. Well, some people now say that the federal debt is not a problem at all. I think you believe in the Tooth Fairy because then we won't have to have taxes anymore, we'll just rent money and live happily ever after. Obviously it won't work, so there comes a point where printing money is counterproductive, right? at that point or you can no, I don't think we're at that point, but no one knew where the point was going to go and now we don't know, none of these people who are so pompously confident because we all want peace of mind and So they provide it, but no one You really know how much of this is too much.

Do you have any thoughts on Jay Powell and the job he's done well? I think it's a great choice. I think it's the best choice we could have made. consequence of this expansion or actually precedes that it's just something that's happened in our economy over the last 50 years really has been wealth and income inequality, you know, one, do you see that as a problem?, second, If so, how do we address it well? The problem is that there are enough politicians screaming about it that it

make

s it a problem. If it weren't for that, this will go away on its own.

It happened by accident. We were in desperate trouble. We were on the eve of a Great Recession that could have been a Great Depression and then followed by the rise of people like Adolf Hitler and so on, so we had a real catastrophe. The only weapon they had with this enormous scale was to print money and spend it and they did it well, of course. and they raise interest rates to zero or real interest rates, well of course that raised the value of assets for people who were already rich, no one was trying to make the rich richer, it was just an accidental byproduct of a correct government decision, it was made in a bipartisan manner and since it was a strange byproduct that occurred at a strange time, it will go away on its own.

Anouk, they will surely disappear on their own, so there is no reason for much shouting upstairs. They are idiots, it will go away, but now. That doesn't mean we can't raise the minimum wage a little and expand the social safety net. Oh, we should do it as we prosper. Both sides agree on that. What do you think of the proposals presented by Alexandria Acacio Cortez and Elizabeth Warren? that would largely solve this problem, well I don't consider those two to be necessarily the best prescribers in the world, they are kind of nice, I particularly like Elizabeth Warren, she has an attitude that really appeals to me, but I disagree.

With her attitude, I don't think she has studied Adam Smith enough and what about AOC? Do you have any opinion about her? I don't think he knows who Adam Smith was. So I want to ask you a few more questions about politics. can we talk a little bit more about the markets and Berkshire, what about the situation we're in with the Muller report and the way Congress, the Democrats are fixating on that and the president is on the defensive, what do you think about that? to avoid the whole topic just as I ignore it, he died with me tied up and continues swimming.

Both sides are so partisan now that they are blinded by their anger and I don't want to be blinded by my anger so I control it and I would recommend it to both sides. I want everyone to agree with that. Why are we so divided, Charlie, right now in this country? Well, the anger when they hit each other feeds on itself, that is one of the great difficulties, it is irrational. feeds on itself, so I liked the world when I was Dwight Eisenhower versus Al Adlai Stevenson and more civility and Ronald Reagan and Tip O'Neill got along and a lot was done, my war was a bipartisan war and as a consequence , foreign policy in the United States was a bipartisan policy.

I like that world better. I hate this extreme hate on both sides. Will we ever go back to those days or will we have two new days where we don't have hate? You will probably experience the good things well enough. A lot of bad things happen, it's true, I understand, Charlie, that you were instrumental in helping Warren move away from focusing on the cigarette butt way of

investing

and look more toward companies that I guess you could call brand name companies, better businesses. , better business, right? yeah, how did you help him make that decision? It was perfectly obvious and he made a lot of money and with the other technique it was difficult for him to leave something that was working so well but wasn't going to scale, so he started looking for investment securities. and big businesses that were temporarily under pressure, changed everything for the better now we can scale to the big time our tech companies Apple and Amazon are bringing in companies, someone told me that they asked Warren if he could buy a brand that was about. 40 years ago, what would that company be, what would that brand be, and you said Gillette, which makes sense, what would that company be today?

Coca-Cola still if you take the amount of Coca-Cola that is drunk in the world and the main flavor, it is hell. brand is now a very different product from what is on the Internet. I don't have the same one. My judgment wouldn't be as good on the Internet since it's not Coca-Cola. I want to go back to Apple. Tim Cook was at the In our meeting yesterday, indeed, did you have a chance to talk to him? I did it. Can you tell us what they talked about? Nothing, we exchanged jokes, but he's a wonderful guy and of course it's a great record he's building.

Let me ask you a question. a little bit about Kraft Heinz and that situation during yesterday's meeting we found out that the marketing director was leaving the company, did you know that and what does that mean for the company? I didn't know anything beforehand what happened there was very easy the thing is that Heinz ketchup was a stronger brand and Kraft cheese and they paid more for it, so one acquisition worked brilliantly and the other worked poorly. Welcome to adult life. It happens to everyone you mentioned that you think Tim Sloan still could be or should be. be the CEO of Wells Fargo, yes we are running the world, Tim Sloan would still be the CEO of Wells Fargo.

Well, why did he leave then? Well, he made this decision, but they were putting a lot of pressure on him. He did it for the benefit of the company. much of this partisan hate was fading against Wells Fargo, understandably it had been there for a long time, the company had defrauded its own customers, apparently no one was being punished for it and some people's minds listen to the CEOs who were put under pressure, I'm sorry. a lot of punishment, so I don't think these people were failing with their anger, they fired two CEOs and so on, but now they're gone, it's like Tim Sloan wasn't responsible for the crazy incentive system that created the problem, so he did it they threw out Notice the way you take out the maid when you're ready to bet us we'd go back to Coca-Cola, you mentioned it would be a bad idea if she got into cannabis.

I mean, why not? It doesn't make sense, that's how it is. a healthy brand associated with happiness, why wouldn't we want to associate it with a recreational drug? That would be a terrible idea. What about Boeing and the 737 Max? I mean, they're going to fix that. Would you go on the plane after them? He said it was fixed, yes of course, and they will fix it well, but I don't think it was very excusable for them to make the mistake. I wouldn't ask you to ollie a little bit on that, it was a bad mistake, you know?

They are still working on it, yes they will fix it. Boeing probably has the best safety record in the world if you take 60 years and this was a very unusual lapse, there may not be another one for 60 years, although that lapse is symptomatic or indicative of us developing software that is too powerful, we don't understand the consequences of that, no, I don't think the problem was I think it was just an absolute lapse of being a huge bureaucracy that you also mentioned in the meeting yesterday that does billions of dollars of business overnight. . with very short contracts, yes, we have always done that, has that ever caught your attention?

I can't think of a single example in my entire life. We kept things simple, which worked against us, we made mistakes, but we didn't. because we kept it simple and that's simple, I would say the main advantage that Berkshire has had a good track record is that we have avoided the pompous bureaucratic systems that we have tried to empower very talented people and let them make things very quick decisions I want to ask you about something that is talked about all the time with you, which is succession and you talked about it again, you talked about it all the time and countless barrels of ink have been spilled, but if you are getting older, how do you make the decision to Take a step back if you may not have the mental acuity to make that decision well.

I think you'll be surprised at how well both War and I are able to take a step back when we feel like our powers are getting too impaired. I'm sure you talked about it and the Lord has told people to talk if the time comes, if we have been rational all this time, do you think we are not going to try to be rational until the bitter end, it is theprocess. More or less in the middle of the process you've been giving more and more control or authority to Ajit, Greg, Todd and Ted, so it's kind of a continuous process like that, of course, and by the way, it's working well, it's amazing how Well, this next generation is so immersed in our non-bureaucratic ways, there are these big bureaucracies that think the work is done if you get it out of your inbox and then into the inbox of someone else who isn't doing it. when it's done, not when it's in someone else's inbox, you know, if everyone is in a big committee meeting all the time, you're exhausted at the end of the day, you haven't done anything, our Ted and Todd take all the stock decisions at this point no of course no more I'm stepping in and doing great things, where do you think Charlie the biggest opportunities are globally right now?

Well, I don't think we have a master plan for where the opportunities are, we're trying to find smart things to do with a torrent of excess cash. and we have always had a torrent of excess cash and we are always looking for smart things to do with it and if we find things that are smart to do, we do them and if we don't find anything, we let the cash accumulate. What the hell is wrong with that? Not much, yeah, not much is fine, so I know you guys have talked about England or it seems like you have, because Warren talked about how doing this article in the Financial Times is basically a way of pointing out potential given interests.

That Brexit can create some opportunities is that the case, what the hell do I know about Brexit? I don't even know how it was voted in England. I don't know much about it, but I will react to opportunities wherever they are and we were the vicissitudes of politics as they are, but it is a little more than a vicissitude to leave the European Union. I mean, it's a good business, this country was huge. Lee helped before all the colonies together we had internal tariffs against each little one. As a colony the United States wouldn't be as big as it is so it's understandable what Europe wanted to join and in addition to the advantages they got from free trade they had a long history of wars and we were all kind of a big place to trade On the other hand, it will be safer.

Those were very good ideas. I don't disagree with the basic ideas, on the other hand, if there is unlimited immigration from one country to another that caused us a lot of tensions, look at Germany, Merkel brought more immigration than she wanted her people, she was leading a parade and she looked back and no one was following her, so these few people want unlimited immigration from a different culture, that doesn't mean we made it work in America, but we had an empty continent to work on it. it was easy oil rich bacon minerals wonderful soil we should continue allowing immigrants into this country I think we should have a lot more control of our borders than we have isn't John promising right there like the Democrats are committing suicide by being So?

I hate him so much that they are against him even when he is right, it seems that borders are combined with immigration policy, sometimes it is true, I mean, and of course it is, but I think we all have some control over immigration, some effective control. I think most people want to be very nice to the people who are already here, including all the people from Latin America, but they want to have more control over the inflows. Are you concerned about this rise in somewhat nationalistic leadership around the world, such as in Türkiye? in Brazil in China in the United States we may possibly take Brazil who I would like Brazil has a great climate in a great country but we have to take it goodbye, well, are you referring to the new leader or simply to what happened a lot, to what what happened overall Yeah, okay, that requires a strong man to take over, although well, I don't think he has a deep understanding of exactly what works well and the internal politics of all the other countries.

Who would have guessed that the Chinese communists would enhance their great power? country as much as they have done in the last thirty years, that's the price, well, they didn't do it in the first 20 years, they had the Cultural Revolution, it was crazy and now they have one of the greatest records of success in the history of The humanity. I don't know about you, but I didn't predict it, I didn't do it, but what is the secret of China's success? So they copied Singapore, which is a member. The communist leader said: I don't care if the cat is black or why they care. if you hunt mice and they copied a famous and wonderful Chinese man in Singapore and lo and behold they found the right Chinese leadership outside of China which amuses me, no he was Chinese but look at the way it worked overall.

In the history of the world, no nation this big has advanced so fast and they did it by making a group of poor people say that half of their income they didn't use the wealth of the rich world to get ahead, they used the savings of the poor. I am a great admirer of what the Chinese have achieved and I say to you: Did you ask me who is the man who did the most for China? It was Lim Kuan Yew Lee Kuan Yew from Singapore, they copied it Are you still saying Lin about the future?

For China right now there are a lot of concerns about slowing growth and leverage in the system. I'm quite optimistic, they have been successful for a long time, sure they have ups and downs and make mistakes as well as good decisions, but if the average is how far are the Chinese advancing? They are not backing down. What do you think the economic relationship between China and the United States will be like? Let's say that within two years, if both parties have the feeling that they will become better and better friends and adjust all the differences. you just start raving madly on both sides to not make a friend or the other really powerful nation on earth.

I want to ask you a little bit about some things in Silicon Valley. I mean, yesterday you said you were ashamed of losing at Google, yeah, we could. Let's look closely at our own companies and we will see that their advertising works much better than other advertising, we just weren't paying enough attention, so is it too late? I don't know, I don't know everything, you know well, we'll leave. Other than that, but you know if you look at these technology investments, now it's Apple, Amazon, did you know about the Amazon purchase? Were you involved in that decision?

No, of course not. I have never owned an Amazon stock. I'm a big fan of Basil I think he's been something like Lee Kuan Yew, he's a leader who stands alone, he's a perfectly incredible human leader, but he's always been too complicated and uncertain for my particular temperament, oh he's interesting and I find all the things I can do that will work. Well, someone told me the other day that they thought you could actually think of Apple and Amazon not so much as technology companies but as big brand growth businesses, which would be something that would be attractive to you.

Oh, you're both right. brands and technologies, it is difficult to separate the effect of one from the other, and as for what is happening in Silicon Valley right now with unicorn IPOs that go public and have no profitability or prospect of profitability in the short term , what do you think? From that situation, well, there are many things that they don't think about and one of them is that companies are losing two or three billion dollars here and they go public. It's not my scene. You have looked? You are not interested in Uber companies. So necessarily well, I have to be interested in that important thing, so sweeping the world would not share your practice, but I don't have to invest in everything that interests me.

I'm looking for things that I think I can do. predict what is going to happen with a high degree of accuracy and I don't feel like I did it very well. I want to ask you about architecture, which is something you've been interested in for a while, how did you get interested in it? and what is your current one, I have an option as an architect and I have always thought that I was the queen of the arts, in other words, I think that architecture does more good than painting or sculpture, so I think that architecture is very important , very interesting and it does enormous good when it is done well, so I am a big admirer of the potential of the profession, but I think that many people dedicate themselves to architecture because they are kind of frustrated sculptors and they don't think with enough sense common or uncommon in what the hell are you doing.

What are some projects you have been involved in? Oh, I've built houses, I've built office buildings, I've built apartments, but what's that like? I helped charities and educational institutions build things. I built science centers. I do a lot of things, but I like it. Is this a creative outlet for you? Yes absolutely, do you have any projects you're working on right now? Some are core projects, what are they about? well, I'm working at Brody UCSB, University of California Santa Barbara and it's basically housing, but of various types. I want to change the subject and ask you a little bit about the share buyback that you said at the shareholders meeting.

I predict you'll get a little more. liberal in share buybacks, how much more aggressive will it become? Do you think that's going to be a potential problem for Democrats? Well, a politician is a business of howling about something, trying to create a sense of outrage, they are always complaining about something, but and it is true that many people became so popular by buying stocks that some people find it painful to buy them back even when they had price too high, we will never do that, we will only buy them back if they are too cheap and but of course that should be done if you had a partnership with three of your crippled relatives and one of them needed some money, wouldn't you buy bankruptcy with the company's money?

It's just simple morality, but I think it's being overstated. by some people and it is certainly being done to prop up values, which I consider to be an inappropriate use of the share buyback technique. If there were laws about it, there aren't laws, but we shouldn't be telling people what the right price is. Well, I want to ask you a little bit about the social safety net that we were talking about and Medicare. Do you support Medicare for all? It would be something that would interest you. I'm one of the few Republicans who would be interested.

I've talked to him before and he thinks we should have a single-payer system, but not one of the type we're trying to get. If you look at Singapore's single payer system, it costs 20% of what ours costs and that is an advanced system. civilization becomes a nation and of course the people are much healthier, well of course I would rather spend 80% less and have healthier people and of course I would like American manufacturers to not have this terrible burden of unnecessary health costs that affects your health. competitors in the world so we have a crazy medical system that grew like Topsy by accident with the help of many dumb government interventions, it wasn't all dumb but it was and the system is ridiculous if a young family has to pay. a $5,000 deductible to have a baby they really don't have health insurance it's not just Medicare that is wrong, the whole damn system is malfunctioning and the amount of unnecessary testing and unnecessary prolonging of inevitable death that is occurring is a national disgrace Of course I don't like it, have you ever thought about moving to Singapore, Charlie?

Well, no, but I would like to translate some of the results from Singapore to the United States. They have virtually no deaths from opioids. They have a low crime rate. There is no debt for the entire country, yes, no, no, they are doing many things well. I wish our politicians from both parties would spend a lot more time studying Singapore, but some people say a lot of people say it's an authoritarian government, there's no lack of freedom, it's a democracy, it does such a good job that people keep re-electing it and that's why That's why I like that result.

What the hell is wrong with your head? I was actually hanging out with some people a few minutes ago and they were telling some of their zingers do you spend time before the meeting? Say oh, I have like these six zingers that I'm going to put out during the annual meeting. Do you ever think about all the people you know? I have tried to take one more step to fall. a cliff well, I'm not happy now, that just occurred to you, yeah, I think the meetings worked better if they were spontaneous, if we were writing scripts, I don't think people would like it, so you and Warren don't say anything in everything before you feel zero, you have no idea what's going to happen, that's right, that's fantastic, so I want to ask you just one or two questions about growing up and you were at the University of Michigan, you dropped out and you joined the army, right?

I certainly did and we all did in those days yes, so how did the army influence you? Well, everything influences you in your past life and yes, of course, that includes me. I never wanted to be in a big bureaucracy. I was at the bottom. I eventually became a second lieutenant in the army. I was way down in the ranks and no one gave a damn what I thought about anything.topic, they just gave me a little job to do when I was supposed to do it and of course I did it. I don't like that, plus having free rein to control my own destiny and so on, so I'm much better suited to being a capitalist operator than being a cog in a bureaucracy.

Did you ever get in trouble in the military, of course? tell us about that, well my senior officers realized it, I thought they were wrong and I tried to hide it and they could still tell and of course those who like a junior officer, you look over there and he is clearly indicating that he thinks you are an idiot, so that didn't work very well, it worked well. I did my job well enough to not be bothered, but it wasn't an environment I was going to be successful in, so how did you know? Many people look at your life and know that you would want to emulate what you have done.

It's something people can do. Look at someone like you and see your way. I mean, you're in real estate law and you're not investing. You even consider yourself a businessman, how would you describe what you do well? I don't consider myself. I think my way of thinking will work for anyone, trying to be very rational and disciplined, so I think a lot, but flitting between different careers and going into other colleagues' professional territory and trying to do it and do all kinds of things like that, I think It won't work for most people, which is why I always say that I always get a visit from a young man who says I'm practicing law and I don't like it.

I prefer to be a billionaire, how can I do it and I say, well, I'll tell you a story, a young man goes to see Mozart and says Mozart, I want to start composing symphonies and Mozart said, how old are you? Ice is 22 years old and he said that you're too young to write symphonies. . My boy says yes, but you were 10 when you were writing some of these and most people say yes, but I wasn't running around asking other people how to do it. do it right, so I think that's floating around in business, it's something that not everyone should try, yeah, I think if I tried it again, maybe it wouldn't have worked as well, you said, just figure out my way, for what were you lucky, yes, I think I was a little lucky.

Yeah, well, but I think there's more to it than that. I mean, where were you? Yeah, the combination of luck and skill, that's what all good drives are right, so let me ask you a few more questions and do you eat all that peanut brittle? That's right, yeah, is that your one and only peanut brittle day or, do you really know? Yeah, so the other 364 days you don't eat much, they put it there. I think it's a warning, so he likes to promote peanut brittle at the annual meeting. Don't the other Berkshire brands get jealous and say once you put like a train up there or something, we have a whole showroom full of other brands promoting each other at the treasurers meeting, you can't say they were under promotion?

Never say that, but you know the Koch people and the C people have a special place up there. Yes, they do, but those are two-way Cs. It was our first big brand and Koch is one of the big ones. It is a great soft drink brand. the world, so they have the right that we have a special place for other companies that are asked to set up there, although hey, everyone tries as hard as we allow them, I mean, yes, they, of course, want be pushed. up and finally

charlie

, I want to ask you a little bit about philanthropy and you know it seems like the war has been a little more direct about that with Bill Gates and The Giving Pledge and I know you're philanthropic like Well, what do you think about that?

Well, I wouldn't sign with Gibbon because I've already transferred so much to my kids that I've already violated him, so I guess I'm asking. I'm looking for fake credit if I joined. They say I am a great philanthropist. I'm donating more than half of my wealth to charity. I've already given more than half to my children, so I can't join them. It's like coming back from the dead. I don't, but doesn't that make Warren angry for coming to Australia and angry when Warren is angry about someone else's Warren? Thanks to every Berkshire in any way to do with their own money, what do you like?

So let me continue with that. So what was your thinking in terms of giving them up, giving away money like that? Although it would simply be in itself. He had a wonderful wife. Most wives were worried that her surviving husband would get involved with some nurse or something in her decline and money. will be away from the kids and I knew my late wife would have preferred the money to go to the kids so I arranged for her to get her wish so any thoughts on how the reunion will be different next year I mean when do you start to talk about that or do you even talk about that meaning?

We never talk about it. We just do what works as long as it works and when it stops working, she indicates that it will stop working and we will stop. Apple said what? I want to have some exhibit at the convention center this year. I didn't have any conversations with them. I have no idea what they are doing. Do you think that at some point Ajit, Gregg, Ted and Todd will come with you at some point I don't know how it will transform. I don't believe that what worked in one era should be duplicated in another.

I don't think what we're doing works for many people. I think it was a historical accident. Those of us who didn't do it on purpose just got carried away when it worked, we fanned the flames but we didn't create it with any forethought and I think some later generation will have some different system. I think there is a wiser system. Sri in our meeting, then it would be appropriate forever no, I'm the main know-it-all, yes, you're Charlie Munger, vice president of Berkshire, my class, know-it-all, thank you very much for joining us. I'm Andy Serwer, you've been watching influencers.

See you next time