A Conversation with Charlie Munger & John Collison - [Invest Like the Best, REPLAY]

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0:25 Operate smarter and stay ahead of the curve. See what Ridgeline can unlock for your firm. Schedule a demo at ridgeline.ai. Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest Like the Best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at joincolossis.com

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1:29 We've had this interview with Charlie Munger scheduled to air for a while, coinciding with Stripe Price's launch of the amazing reprint of Poor Charlie's Almanac, which is launching today. Tammy Winter and the team at Stripe Press created a beautiful book worth its weight in gold. You should get one immediately. We were all stunned last week when we heard the news of Charlie's passing. But having consulted with those close to him, everyone agreed that he'd want us to release the interview as planned. In reviewing his remarkable, uncompromising life, a few things stood out to me.

1:58 The word curious doesn't do Charlie justice. He was a voracious truth seeker. He was funny, he was wise. But from my perspective, maybe the most impressive of all was that he was a great teacher. The sheer number of people who shared a meal with him and learned from him was staggering.

2:14 He gave what he learned freely to those that were interested and in the process changed people's minds and their lives. That everyone listening can probably recite a few pearls of Munger's wisdom without looking it up is a testament to his reach and impact. He says in this interview. If you don't look, you won't find. For me and I hope for you, part of his legacy will be go seek, go learn, go look, never stop.

2:37 Before I turn it over to John Collison, who conducted this interview with Charlie, I'll leave you with one final quote from Charlie. He said the best thing a human being can do is to help another human being know more. Amen to that. We need more people like him. I'm thankful to be able to learn from him just one more time in this interview.

2:55 Please enjoy and may Charlie rest in peace. We are here in Charlie's house in LA where you have lived for 61 years? Yeah. And I just learned that you designed this house. Right.

3:08 So we're here in your creation. I read Poor Charlie's almanac. Pretty early in I can't remember exactly where it was, but it was pretty early the first time.

3:22 Few years. I know I feel like The book is An ode to thinking for yourself. Where at least for me

3:28 early on at that stage, there's all this received wisdom and how things work. And it requires a certain bit of confidence to work up to actually question some of that received wisdom or come at things in your own way. I took away Obviously there's the multidisciplinary thinking and multiple mental models, which have been very useful for me.

3:47 But I feel like part of it as well in thinking about say Forмі the страй бізнес. But the quality of businesses generally is I feel like a lot of what you get at is a sort of a map territory confusion where The професіонал фаншо.

4:01 very much discusses the map and, you know, the numbers of a business, whereas you're much more obsessed with, is this a good business? Is it long term sustainable? Like imagine all Financial world. It's pretty reliable if you want to Use electrical engineering.

4:16 Or automobile transportation or a lot of things. But in the messy world of Running businesses and institutions and so forth. The conventional religion is Asinine.

4:28 And uh My theory from the very beginning was I want to eliminate All the most conventional as an entity. And I saw that if I could just do that I'd have an advantage.

4:39 Over most people. And so I collected S anities. As things I should Avoid. And when you get to the way the

4:48 Wealth advisory businesses created. You can hardly find a place in the world where so many high IQ people are doing so many dumb things. And so was a hog heaven field for somebody who could develop anti and as an entity. Because it was so much of it to be avoided.

5:04 And I was lucky that my temperament and my location forced me into the business of investing My own money shrewdly. And I was shrewd even when I didn't have much money. Yeah.

5:15 That's the way I got ahead. And when it worked. I just kept doing more and more of it and so forth. And I never paid any attention to the boundaries between disciplines. I

5:26 early got the idea I would learn the big ideas in pretty much all disciplines. And because you're big ideas to fluency by constantly using them. That would give me an advantage in what might be called But other people call common sense. Somebody says

5:43 That old Joe has common sense. They don't mean that. They mean he's got uncommon sense. The people who are Sensible and Partily everything they deal with.

5:53 They're uncommon, not common. Most people are a mass of crazy prejudices. Did you learn the big ideas in the various disciplines because you were just intellectually curious about them, or because you thought they would be instrumentally useful in the work? Both. I saw

6:07 Instantly, for instance when I was introduced to the math. Oh. Pascal and elementary probability. I saw immediately how important this math was. My math teacher had no idea that he'd come to a part of math that was very important in the practical world.

6:21 To everybody. But I saw it immediately and I just utterly mastered it. And I used it. I'm still using it. I used it routinely all my life. Quite intensely.

6:32 And when I got to studying the Harvard Business School In the early days at the Harvard Business School, they were proudest of something called decision tree theory. And they taught it at the Harvard Business School with a lot of pomp and ceremony and many examples. All these graduate students. Decision three the theory at the Harvard Business School in those early days.

6:51 What they were teaching you was that Pascalian probability math works in real life. Here's the Harvard Business School. Needing to do remedial high school math. To a bunch of graduate students and they weren't wrong. They were right in those days to teach decision tree theory'cause

7:08 Other people. Hadn't mastered Probably math the way it should be mastered. My teacher in high school. If you don't pay attention to anything else, this stuff you ought to master.

7:17 And she explained how Carney operators and casinos take advantage of ordinary people. It should have been taught and it wasn't taught right in high school. And I wasn't taught right in college. Yeah, it wasn't taught right.

7:29 Finally the Harvard Business School got so the Taught high school math to graduate students. And you can say, How could that be correct to te but it's because the earlier education was so ineffective. In Pur Charlie's Armanac, you advocate the multidisciplinary approach and Knowing the

7:46 Big ideas from all the different disciplines. And one of the ones that I particularly liked and stuck with me. Was The one from biology of

7:56 stable ecosystems and understanding how Entities prosper within ecosystems and in particular And now they perish too. How You don't want necessarily to be in this robber baron monopolistic rent extraction.

8:10 But instead of the year. Businesses that sustain and endure over the long term are ones where They are not rent extracting in those days. And

8:22 There are a lot of real estate operators that are basically sleazy. And They don't even think their business is sound unless they're doing something sleazy. They're not doing something C they have a safe advantage. And of course that's exactly opposite to my idea. My idea is so simple.

8:37 Yeah, if you Make your living. Selling things to other people that are good for them. That is safer and more profitable. averaged out and selling them stuff that's bad for them.

8:50 Like gambling, drugs, crazy religions. All kinds of things that are terrible for people. And so of course you want to sell things that are good for And it's amazing the people who Don't pay any attention to that role.

9:03 Well, I think of the sleazy products and investment banking as perfectly willing to sell. And the Sleazy. Stuff that compensation consultants. I'm probably willing to sell.

9:15 And I just decided I wasn't gonna do any of that. I was going to sell the kind of stuff that I would buy if I were on the other side. And I also wanted to work with the kind of people that I admired. And That's a very important thing. To learn to just

9:29 Search out the reliable people. Uh you can Trust and be the kind of person dealing with everybody else. That they can trust. It's just a huge advantage if you start doing that young and keep doing it consistently through life.

9:42 It isn't very hard. Stay awake in high school, man. And Deal with the good people instead of the bad people. And sell what you would buy if you were the buyer, not what

9:52 You can sell by misleading people. These are very simple ideas. And but it's just a absolutely amazing. How well they work for people. Who relentlessly follow these simple ideas.

10:04 Just'cause it's easy advice or simple advice does not mean it's It's better, but simple. You would presumably also add be reliable to that. That's a point that you make if you're 10. Who wants to be

10:15 Deal with an unreliable person. You mentioned the lesson your dad taught you. A bar. Was your switch from the law to investing

10:24 partly informed by this question of the counterparties you were dealing with, where in the law there'll be adverse selection in the people who buy a lot of legal representation. Sottomer people get into a lot of trouble. Or skirting along the edge of dangerous regulation because they deserve to be dangerously regulated. It's extremely dangerous. If you wait a list You can hardly figure

10:45 A more unethical way of making money in capitalism than the Sackler families did when they started selling. Illess it drugs. Under the cover of being a Legitimate.

10:56 Pain removal. If you looked at the law firms and advisory firms and accounting firms that helped the cyclers along the way. They'd be a lot of very respectable names. I think it's stupid to take clients like the cyclists. You don't want people to get even to know your address.

11:12 You don't want to have anything to do with'em. And yet A lot of law business is caused by the people who are right on the edge. And a lot of big law firms will take

11:24 Those clients if they're successful enough. I don't agree with that particular. Model of law practice. I think you ought to be quite selective. In the class you take on. What do you think is the societal fix?

11:36 S problems like The pharma companies role in the opioid epidemic. Well that's a big issue.

11:43 A lot of people rationalize selling drugs to other people to make money. If you go back to Franklin Delano Roseau. His money mostly came. From his grandfather selling opium to the Chinese and he was selling it to Chinese bandits too. And he was very respectable when he got back to the United States and lived in a big house and I'm sure behaved well.

12:03 And dealing with those tradesmen and so forth. But I don't want to make my money by selling opium to the Chinese. It's a Terribly disgusting way to s make money. But a lot of the early money that came to Harvard Yale and Princeton and so forth They also made money.

12:18 Those early tradesmen in that area. By selling opium to the Chinese. So a lot of people have rationalized all the terrible conduct in the history of the world. And I think it's a very good thing. It's safer and sure and better. Just

12:30 To eliminate that whole system from your repertoire. Just get the bad people out of your life and the bad activities out of your life. Just exclude them. One of the big takeaways I had When I read Poor Charlie's Almanac, is again the map is not the territory. It's

12:47 income statements and balance sheets. You could have a business that looks very robust by the numbers. But the question of the year. Is the management honest? Is the product actually good for the people who are buying it? And you could have two businesses with very similar income statements, but one is a much more sustainable business and one is not.

13:03 The trouble with Investment is Most business is gonna perish. It's like evolution. Over a scale of three hundred years. Practically everything perishes.

13:13 All are great retailers. Ninety percent of them have perished in the last hundred years. And lots of other fields. Kodak paris. All kinds of big things that look permanent. And

13:25 Of course successful investment. You want to Anticipate. Things are gonna destroy destroy businesses. For instance, as we said here.

13:33 Over the last hundred years, the people that control the big brands Reliably made. More money more easily with less risk and downside than practically anybody else. Brands like Watch, what's an example? Just any toothpaste, trucker and gamble or you name it.

13:49 But I remember when I piano was a Popular. Fair selling. And it went out. And it's gone totally.

13:57 And I think that their forces in fact now that are gonna make it harder for the people that control the big brands. Because these house brands like Costco has and the other house brands and the success of places like Aldi and so forth. I just think that there's more trouble coming to big brands than they've had in the last hundred years. And if you're an investor you should realize that even though you haven't seen it yet. Yeah. You wouldn't realise that modern big brands have a

14:24 Parish risk. Unless you We're familiar enough to economic history to and to remember all the other things that perish that look once look to invest them. Permanent and of course they weren't.

14:35 Because it feels like they're getting squeezed on two sides, right? On the one side you have very large retailers like Walmart or Costco or Amazon, but then on the other side you have companies selling direct to consumer over the internet where they don't need a retail distribution channel. And so it feels like the big brands. I regard all investment as intrinsically damn difficult. Because Yeah, but you think good idea is get bid to such high prices, but They get dangerous.

15:00 Just because There's no and that's not so good you can't ruin it by raising the price higher and higher. Not a more than a m a model money. This gets to one question I was wondering about, which is You and Warren famously say

15:13 That you divide investments into yes, no, and too difficult to reason about, and say much high tech. might be in that too difficult to reason about for us. For sure. Yeah, yeah, yeah. Well we're the bigger Charlotte in Apple, so we haven't totally failed. No, un understood, and I think that five percent position in Apple my understanding is it's done pretty well for you. But

15:30 You don't get to not reason about tech because you think about the Buffalo Evening News. Newspapers are fabulous toll road businesses. Until the internet comes along and then suddenly the economics of that business look very different. Basically the wealth of the newspaper industry. With minor exceptions. It just all went away. They were invincible monopolies.

15:49 Gold mines. And Made their owners Safely rich for two hundred years even. And almost all went away.

15:57 So my question is how do you think about the quality of the business when overarching tech changes are really gonna shake it up? You got to recognize But Tech changes. Do cause some

16:09 New businesses to flourish and other businesses That looked imp pregnable to fail. And that's one of the realities you have to understand. So you secretly are a tech investor, because you're reasoning about the effects of tech. On

16:22 Costco. Or on the Take, for instance, pharmaceuticals. The American pharmaceutical industry is better than any other pharmaceutical industry in the whole world. And number two is not remotely even close.

16:36 So we have one of the great achievements in the whole history of the world. In science and technology and so forth. At the same time there's a fair amount of sleaze in the way pharmaceuticals are distributed. Everybody rooks the government. All the PMs, yeah. That's just the system. By and large, we haven't invested in pharmaceuticals. Because we've got no edge.

16:57 I don't know enough about Biology and medicine. And chemistry. To have any edge in guessing which New pharmaceutical attempt is likely to succeed. And other people

17:10 Who know those things. Not that they have perfect knowledge, but it's way better than mine. Why in the hell would I play against other people in a game where they're much better at it than I am. When I'm playing for something desperately important to me, like my way of feeding my family. So of course we didn't go near it.

17:25 I would argue that they're In practical life you want to succeed. You gotta Do two things. You gotta have a certain amount of competence.

17:33 You have to know what you know and what you don't know. You have to know the edge of your competency. And if you know the edge of your competency You're a much safer thinker and a much safer investor than you are if you don't know it. And I constantly meet people better to have an IQ of one hundred and sixty and think it's one hundred and fifty than an IQ of A hundred and sixty, you think it's two hundred?

17:54 That guy's gonna kill you. Because he doesn't know the edge of his own competency and he thinks he knows everything. Partly Warren and I. We pretty much know what we No, we don't know what we're good at and we're not good at.

18:06 And one of the things we're not good at is guessing which new pharmaceuticals so we don't even look at it. After all it's a big universe out there, and if we have to leave a certain kind of investment behind because we like the capacity to deal with as well as some other people. That's all right. We don't need an infinite number of opportunities. Why did you never invest in Amazon? It feels very similar to Costco. In the thesis of how it operates, economies of scale.

18:29 Delivered back to the consumer in the form of lower prices, compounding over a long time. We've actually started a business or two. And we bought some little ones that we made big. So we have done some things that Look like

18:42 Venture capital. And some of them have been quite successful. But average that we bought existing businesses that had a lot of momentum as well as a lot of talent. And just wrote those things. So we made way more money.

18:55 Bye. Finding something that's already working in a business and just buying it. Then we have Starting new ones from scratch. NetJets was an interesting business.

19:06 We lost money or broke even for ten or twelve years. And now it's just a gold mine of a business. We look like venture capitalists. I guess we were in that case. NetJets is now a very good business. Good is an understatement.

19:19 It's not an adequate word. So One thing I observe about a lot of the Very successful businesses that you're obsessed with. Is they seem particularly well designed.

19:30 To be capital efficient. And so NetJets and Coke. might not look like similar businesses on the surface. We think about Coca Cola. They are the brand, they do the advertising, they manufacture the syrup, but the capital intensive bottling work happens with

19:45 Partners. Who take on that Capex. Similarly with NetJets. They pioneered the model of not owning the aircraft, but they put the ownership and appreciation onto other people. What you said is exactly correct.

19:56 Of course it's better to have a business that earns large profits without requiring any capital, than it is to Have one that has a lot of capital to make the money. Course that's true. Naturally.

20:09 Everybody's drawn to a business that will produce huge profits with no capital or a huge return on the capital put up. Do you specifically look for businesses that are good at pulling in other partners to who invest the capital? So you know, Domino's Pizza We don't have any one model of being good. The Berkshire Respect businesses are good in various ways. And all we care is is the way working. And by and large they're working pretty damn well.

20:32 But sure, of course w everybody loves the business. This is a lot of money without repairing any capital. Costco requires no working capital. Why not? Because the turnover is so high.

20:45 That they don't have to pay the supplier until they've been paid by the They've shifted the inventory by the time they need to pay the supplier. Somebody else is financing their inventories. And we could if we wanted to at least all the properties. We don't, we own own all the ones. We can. But basically you could run

21:02 Costco with practically zero capital if you wanted to. A lot better than ordinary businesses. There aren't many, unfortunately. Would you agree that this is something that's much misunderstood in business? Is People are obsessed with percentage margins.

21:16 But the capital efficiency of a business is a function of its percentage margins And the inventory terms. And Either of those. can contribute to the capital efficiency. Well I think everybody understands that. Who goes through modern business school. But they learn the wrong culture.

21:33 They learn for instance that If you just Pay the suppliers in ninety days. And s sell in thirty days. Then you get all the somebody else's furnishing or working out. So they abuse the supplier, who's a little supplier.

21:46 Because they can get by with it. I don't think those models are Safe or good, and I think that's a dumb way to treat little subwayers. So I don't believe in that kind of brutality to little subliers. People learn the wrong religion. They say we want to produce the capital. We'll just Pay a bunch of little people when we want to trust us and love us and serve us well.

22:05 We start treating them in a very improper way. That's vastly stupid. That's not smart. So what examples do you prefer of businesses driving capital efficiency without squeezing small suppliers? Well, Costco's one. By turning the inventory quickly.

22:18 Yes, I'm doing that because they're not going to be able to do Have fewer stocking units and they're way more efficient. You're on the board, right? Yeah. I'm somewhat the older member.

22:27 But Costco, it's an amazing culture. The whole damn culture of the place is so so And it just marches from trial to triumph. It was smart to have a Small number of stocking units. Flowing through with enormous speed.

22:41 It was right to have a membership system. There are three things that Costco didn't want. Didn't want people who stole. Merchandise. He didn't want people who were c You

22:51 Bad checks. He didn't want people cluttering up his goddamn parking lot without spending a hell of a lot of money on stores. So a membership system where they except only a certain kind of a member, all of a sudden now they've got Nothing but people who buy a lot. Per trip.

23:07 Cal Costco's always had the lowest drink rate in the world. Tricks inside too, so The net theft rate at Costco was Always below two tenths of one percent. That's unheard of.

23:18 I hadn't thought of the parking lot efficiency with the membership system. You can't go to Costco just to buy a bottle of iodine and just drop in. You gotta be a member and they gotta pay enough, so it's To an ordinary person I don't gotta pay an extra hundred dollars to buy a bottle of add on or something. We keep the peach pickers, the the little buyers out. Self price to say.

23:38 A business should be careful. In the business it deliberately does without. Straight out of a Munger book. You figure out what you want to avoid. And they want to avoid Theft losses

23:51 Embezzle month's bad checks and cutting up their party you want without buying much. And their system caused all those effects at once. It's like your first speech in the book, start with the business you don't want. Work backwards. I know, but it's so simple.

24:04 Any others? Of businesses driving capital efficiency without squeezing suppliers. There are lots of others. All the aerospace businesses have learned to make very high returns on capital. How do they do it? I specialize in being good at something. Um

24:19 Handling the government well as the main customer. Did you ever look at trans time? Sure. I don't like that way of making money. Because the price increases.

24:28 It's too brutal. They figure out something that has a little monopoly due to the defense department regulations. And they raise the price ten times. And They're famous for it.

24:38 I regard that as immoral. Did you ever look at Domino's Pizza? No. You're familiar with the returns though, right? I'm familiar with that they have good returns. A lot of people get good returns, huh?

24:49 Investment when they get hot. I get. Big volume through small. Mr. McDonalds earns a big return on capital. A lot of places do. One thing you raise in the book is this question of

25:00 When you have a small number of players in an industry, say two or three players in an industry It is not always easy to predict. Who will earn good profits and who will not. And so the airlines lost money since the Wright brothers versus the serial manufacturers. Very durably profitable. If you're looking at a business today.

25:17 And you know that the industry will consist of two or three players. How can you predict will those players make money? I don't think it's possible to be a hundred percent accurate in making these predictions. But Certainly uh

25:29 Or looking backward. The people who had branded Providence like Coffee and oatmeal and so forth. Made very high profits in airlines.

25:38 Basically made no profits at all for their shareholders. But airlines were branded goods. But everybody had big capital equipment and if they didn't use it, they obviously were losing a lot of money. So every was Almost forced into a very destructive competition. By the logic of the

25:54 Individual situations. There are a lot of businesses. that are very hard to make money in permanently. You wanna go into the business like restaurants? Most people fail.

26:05 Small percentage of restaurants. even last long enough to make a living for the people who own it. Too competitive. That's why they fail. Just like are there too many. Deer on an island and no predators, I'm pretty sure there are too many deer in

26:18 So all dear sufferers are too many of them. But again to go back to this question, if I want to understand will a business be like an airline or like a serial Company, is it then the ongoing capital expenditure that's required for airlines fundamentally, they have lots of capex on an ongoing basis. It's like the original Berkshire textile mills. The airlines are like a guy who builds a big hotel. And it's just sitting there. And he makes some incremental profit from filling it. And if it's g up and staff, that's better than just leaving it sit there vacant. It almost forces irrational.

26:48 Intense competition. The same thing does not happen in cereals. B N S F was one of the biggest acquisitions you guys did. And my sense from the outside is that it's maybe even been more successful than You would have expected. Accurate? Or did you expect to be this successful?

27:04 The railroads were a lousy investment. There were a few people when they were first created that basically stole all the money by Building the government and bribing legislators and doing all kinds of terrible stuff. But By and large

27:18 Most railroads are lousy investors. Like the airlines for a long time. And finally it got down after years of Fighting unions and consolidation, so you get out of few big systems. Now they're just two big transcontinental systems and we've got one of them. Of course that's a less competitive market than was than existed earlier when there were Hundred different railroads.

27:39 But early the railroads when they were terribly competitive, they were terrible places to invest money. But again. Airlines. Bad business, not a good investment. Early railroads bad business.

27:51 Early railroads, yes. Railroads today still require a lot of ongoing capex. Yes, but they're so dominant. Once you have a railroad that can put shipping containers on it stack too high.

28:03 On tracks. It's one of the most efficient ways of transferring a lot of stuff over the country. It's way more efficient than trucking. So that they have a system that just accidentally happened. Nobody anticipated you'd be able to

28:15 Double the capacity of the railroad just two shoving containers one on top of the other. So they got very efficient finally. And now they're so efficient they're more efficient than anything else, and of course they do well. Okay, so nothing can compete with railroads in terms of efficiency Cost to actually move stuff, energy required to move stuff. And so with an airline, you might have three airlines competing on a route, whereas the railroad may have a route to itself. Were you ever tempted to invest in other forms of transit infrastructure?

28:41 Shipping. We've looked at things like that. But I can't remember a single And what we once

28:49 Bought a big position on a bridge. A literal toll bridge business. Little toll bridge and then we decided that we didn't want to look like Goddamn monopolies and Besides we just sold and m moved on to something less monopolist.

29:03 Or at least it looked less monopolistic. Has investing gotten Harder. Of course it's gotten harder. Way harder. It's gotten so hard that most of the people who are in wealth management

29:15 have an almost zero chance of outperforming an unmanaged index like the S P. How has it gotten harder? What's gotten? A There's so much more of this.

29:25 Well then that's the insecurities. And so it will get the a whole lot of Big sums to manage. Yeah, of course. It's a long time to buy in, a long time to sell out.

29:35 Costs are higher and so it's way harder to manage a large sum of money to make a lot of money. High return though. Managed a small sum of money. And then there way more brains came into the business. So it's gotten Brutally competitive. And then we have these.

29:50 May is that When things are hot and they'll start running the behavior gets Almost. Crazy. It's almost like a delusion. Of course it's harder. And

30:00 In my lifetime A guy who just bought a The best common stocks and sat on his ass. Would have made about ten percent per am. Before inflation, maybe eight percent.

30:10 After inflation. That is not the standard return that mankind can expect from investment. That was a very unusual period. In a very unusual place. Yeah. I do not anticipate that the average result is gonna be nearly that good over the next hundred years. Why was the result so good?

30:27 Why was it ten percent per annum? It's called eight percent after inflation. The Great Depression so demoralized everybody. They were utterly despised. And then The economic system.

30:38 Improved a lot. And the combination Of the Investment climate and the economic Situation together evolving.

30:47 Just made it unusually good. If you go back Two What the rich people of England did back saying Nineteen hundred.

30:55 They bought consoles, two and a half percent. No inflation. Two and a half percent return was considered. That was You wanna stay safe and be satisfied with that. No rich people thought there was any safe way of getting eight percent. If you go back to eighteen eighty among the rich people of England.

31:10 Yeah. So this is an unusual period. And now everybody who's in investment management Teaches everybody. You'll get eight percent after inflation by dealing with us. Because that's the way it worked for the last hundred years.

31:23 This gonna work for the last hundred years does not mean it's gonna work for the next hundred years. So it's been a period of significant economic growth. I think there's also maybe the US stock market has that before. Country proceed that caused that very good result. It's not always gonna work that way. Okay, so say we have a twenty five year old investor who's thinking about investing over the next fifty years. If you take the lessons from poor child is almanac about

31:49 Avoiding the relatively simple mistakes that can be avoided. Thinking about investment as The underlying business and the quality and sustainability of the business. Taking the punch card investing approach of making a small number of investments rather than trying to Player time the markers. Do you think that approach Is still a recipe for success over the next fifty years?

32:08 Yes, but it requires Considerable self discipline. And considerable skill. And most people Well lack the discipline skill.

32:18 What discipline will they lack? What will they screw up? Well, I get carried along too much by what other people believe at the time. They're all Respond too much to Improper incentives.

32:29 In other words, They'll start buying stuff that's solely to buy to get the fees that they can scrape off the top. And they'll do a lot of things that are wrong. Not written in the stars that everybody has an automatic way of making eight percent after taxes. That's quite an achievement, yeah.

32:44 It's a huge achievement. A real return of eight percent. And by the way, the ordinary customer or the ordinary stockbrother probably earns two percent or something instead of eight. So the ordinary stockbroker is just an absolute menace to humanity.

32:57 Not that there aren't some honorable good stockbrokers on earth,'cause there are some. But there are a lot of people who are responding to the incentives they're under to in a way that their investors Who trusts them are not gonna get a good return at all. You've been famous for

33:13 Criticising gold earlier on. And now cryptocurrency. I like gold a lot better than I like cryptocurrency. You've criticized both. Before there was cryptocurrency, I never bought gold.

33:26 So I didn't like gold. But I don't hate gold as an investment as much as I hate cryptocurrency. I think cryptocurrency ought to have been driven out as illegal. At the risk of maybe getting ejected from the premises, if I can try to defend cryptocurrency, isn't The perspective you have where I think you would say invest in a productive business.

33:47 Isn't that a reasonably US centric perspective where absolutely we have a great currency here, we have a great respect for property rights here if you're in Turkey And They're property rights aren't as strong, the currency is inflating eighty percent a year as it has this year, then the ability to move your wealth

34:05 Oh, if I lived in Tursey I might do something uh buy gold if I were in Turkey, but I would never buy Cryptocurrency. Even in Turkey. No. I don't think that's a good thing.

34:15 Buy a percentage of nothing is a good investment. Even though it's hard to create more nothing. But isn't gold functionally. An investment in a percentage of nothing? It is similar, except it's been established so long.

34:28 As a An agreed upon store of wealth. With the history we have and with the need for a currency and a currency that And gold is hard enough to mine and so forth.

34:39 Gold is a perfectly reasonable thing to use as a currency. And the evolution of use of gold as a currency was a very good thing for civilization. I don't have the feeling that gold is evil. Gold helps civilization develop. But I think cryptocurrency is a scumball activity and I think by and large the people who promote it are scumballs are delusionary. And uh I don't know which is worse, being a scumball or a delusionary. But I think they're both pretty bad. Some people can manage to be both. There's plenty of scams in crypto. That's absolutely not up for debate. But are we talking about questions of degree here between gold and cryptocurrency, where they are Society agreed upon stores of

35:16 value which trade above Well let's put it this way, if we didn't have gold, we might have invented something like cryptocurrency as a substitute. But once we have gold. And fight currencies that are now long established. We don't need the goddamn cryptocurrency. But I think cryptocurrency handier you can work with it in just software. You don't need to actually go get some physical gold.

35:38 Trade it, melt it down. It's much harder to seize cryptocurrency than it is to seize gold in an autocratic regime. You don't have to bother with any physical inventories or anything has any intrinsic value. You can create system for efficiently dealing in it. I don't want to officially deal in nothing in craziness. I want to make it illegal. All nations have had anti counterfeiting law. And I think the anti counterfeiting laws ought to have been used to

36:01 Totally bar. Cryptocurrency. But nothing can counterfeit here. But if I'm a nation and I have a Currency. I don't want a new currency established.

36:11 But it's not really a new currency, it's a new store of wealth. You can call it a star of wealth, I call it a star of delusion. I don't think it's good to participate in a delusion even when it gets quite common. A second medium of exchange. Widely used.

36:25 It's ideal for drug dealers, dope dealers. Scam artists of various kinds. Every kind of criminal you can imagine. Very good in extortion, kidnapping. Why would we want a wonderful crime facilitating New medium of exchange. Why wouldn't we just say this is like counterfeiting. You're coming into the government's business and you're trying to create a fiat currency and you can't do that.

36:47 It's a feel I don't You don't like it. Alrighty, well I will agree to Disagree on crypto, but You don't have to agree.

36:54 I can handle it if you like, Crisco. I don't like it, but I think I can handle it. We're staring into a recession, potential stagflation. What advice do you have for people? Thinking about how to Work the way through the

37:07 I have one standard. Set of advice for all difficulties. Suck it in and cope. Yeah. That's all any human being can do is suck it in and cope. Partly you have to be shrewd.

37:19 That's one way of coping is to be As shrewd as you can possibly be. But that's my recipe. I must say it's worked pretty well for me. It'll work pretty well for Any

37:29 Other person who uses my methods. Birkshire made a lot of money in Oase. With opportunities that might not have existed. Some of the bank deals say the preferred stock deals. Are there different

37:40 Ways investors should act. At these discontinuous lows. We got some opportunities. Which other people wouldn't have gotten because We were admired by

37:52 A small minority of people. Who could be helped if we helped them. But that isn't our main way of getting ahead of Berkshire Hathaway. That amount of money we've made in those deals is pretty minor compared to the amount of money we've made elsewhere.

38:04 We get occasional opportunities other people don't get. I don't think it's at all easy to get the kind of opportunities that we got and we don't get that many ourselves. But there's maybe a lesson there in being a preferred counterparty. Berkshire was known to have lots of cash, be extremely trustworthy, and be quick to deal with. Those are good reputations. Who wouldn't

38:22 Like an opportunity of being very trustworthy and easy to deal with. Always having a lot of money available. Is there anybody who would be hurt by Course people would like that. How do you feel about American society?

38:34 Over the coming decades. Old men have always tended to think the New generation is going to hell. O tempores ores.

38:45 Goes back to the earliest civilizations we had. The old guys were saying, My God, the world is going to hell. And it really wasn't going to hell net. By and large. But I do not like the way politics is morphed in my lifetime in the United States.

38:59 I don't like democracy. The way it actually morphed into existence. With these Primaries. And the dominance of two parties where only the most extreme members of each party

39:11 Have a lot of polling power and therefore they control the nominees and so forth. I think our way of getting nominees is deeply flawed now. It may have worked pretty well up till now. It worked better when you have those old crooked bosses in the cities and it's working now with the primaries. I wish those old crooked buses would come back and replace the Present primaries wanted to control the patronage, so they actually nominated some pretty good people like Teddy Roosevelt. And these modern primary systems the worst people.

39:38 Oven when. Just'cause they move further left and further right. Yeah. How do you feel about declining birth rates? It creates a different kind of a world.

39:46 Well I don't see that mankind Would be at all smarter if everybody had six children. I think that just jams up. The population way too much, starting with seven billion for the whole world. So I think it's good that the population is growing more slowly.

40:00 But do I think it is good for people to be quite self centered until they're thirty five and then get married. Compared to marrying at twenty one or two and having a lot of children. No, I think the people who married twenty one or Night. grew up fast'cause they had to,'cause they got those young children.

40:15 In a sense I think they were A luckier generation than the people who came along with all these different options. And who delay marriage until late age. And have one or two children, uh what I'm not at all sure it's good for

40:29 the people who having these new options, but it is good for the population. Why do you think the people who had kids at twenty one were happier? It's very constructive to Help other people and everybody feels Pretty good about his own.

40:43 Children to have a lot of responsibility and Barrett Will. I think helps people. If you Take the phyllo progenity, people. Say the Mormon Church. But they still have the big families.

40:55 If you measured human felicity Measuring time spent smiling versus time spent frowning. The Mormons would average out way h happier than the general population. So early marriage and big families and

41:08 Believing a religion that is somewhat hard to believe in its technical theology. is very good for the occupants in terms of their personal happiness. I'm not interested in believing something I don't believe in. Just to be happier, I'm a peculiar person that way. I have no doubt in my mind at all that that the Mormons are every child happier than the rest of us.

41:28 Does that make you worry? Because No, it doesn't make me worry, I just But people are being less religious and having fewer kids. I'm used to things not working perfectly. And so why should I expect my society is always gonna be marching upwards because it has for a long time. I believe he just adjust to whatever society

41:46 Turns out to be. And you do the best you can, and uh that's all any human being can do and that's all I'm gonna do. How concerned should we be about institutional sclerosis? And the rise of it, where you were just talking about this Waterfront.

42:00 Property that's You've been working on developing for the University of Santa Barbara, but it's property on the water that you just can't develop now in a way that you could forty years ago. And as you look across All sorts of different domains in the United States. It feels like

42:13 The institutions are becoming more sclerotic and it's harder to do things. Of course. In our political system, the people with political power in these states and cities Don't want to I'll know the one.

42:25 And they have the legal power to prohibit it, and they do. And that's causing way less opportunity to have good housing for Young people coming up than was common in When I was young.

42:37 And in a sense that's sad. But it probably does make the existing communities a little better off. They already have enough traffic, they don't want any more. They just Well make it very hard to get new building permits. You can understand why the city thinks it's better off.

42:51 Not accepting the girls. It's a very serious problem. Not at all clear that the cities are wrong in doing it's in their self interest, many of them not to grow. And s so they use their legal powers to prevent it. That makes it hard for young people coming up. I think the young people coming up now.

43:09 are gonna find it a lot harder to get what more or less automatically came to my generation at modest cost. We got a house and a good school district. A growing pleasant civilization. And it was pretty widely available. And now in the big cities I think it's gonna be very hard to get a But isn't that very bad.

43:27 It's sad, but it's sad to get old and die too. Maybe. Civilizations have some sadness. They have to Adapt to just as human beings do. It's not automatic.

43:37 Everything in your life is gonna be better. Than it was for your parents or your grandparents. Perfectly possible for a world to develop. Where it's a little worse in some ways. Where do you think the world is getting worse?

43:48 I think we have a political gang problem that's probably as bad as we've ever had. We have some. Crazy Dictators on the verge of creating a nuclear war. We got lots to worry about.

44:00 The world has never been a perfectly safe place and it isn't now. Kind of a societal version of your avoiding mistakes framework. From poor Charlie's almanac, where Societies need to avoid the major mistakes just like individuals do, avoiding nuclear war. We're lucky to have done it so far, but

44:17 If enough crazy people Have enough Hydrogen bombs. There will eventually be enough hatred. We'll have an atomic war of some kind some day. You can almost count on it.

44:27 So you can say that our generation it was quite unlikely. But I think it's getting more likely, not less. I'd love to ask about your Architecture interest. So again you designed this house. Sixty one years ago, and of late you've been designing many more

44:41 projects like the some of the buildings for the UC Santa Barbara where you donated the funds but also designed the buildings. Why do you think architects get it so wrong? They don't get it, Sorrow. I think architecture Is the queen of the art. In other words, I like it better than

44:57 Painting or sculptor. So on the No, I don't know. Maybe music. also deserves to be Queen of the Arts too.

45:05 But anyway, I regard is a very important thing. And so I think hardly Anything in the arts is more important than architecture. But just as I think money management makes a lot of common mistakes. I think architects make a lot of common mistakes.

45:19 Too many of them want to. Create something different just'cause they're bored with the conventional forms. And so they compete in making it archie crafty. Crazy. dorms at MIT where people actually go into the dorm and they get seasick because all the walls are slanted.

45:35 And Massively stupid. MIT has a school of architecture. Imagine having a school of architecture. In a place that's so still with the Bill of Dormitory, well all the walls are slanted so much everybody gets seasick. That really happened at MIT.

45:49 So uh I think schools of architecture they have a lot of folly to regret. It's not necessary for architecture to be as stupid as some of its dead denizens. R Okay, so architecture mistake number one is architects wanting to get creative or make their mark. By being peculiar.

46:06 Peculiarity by itself is not art, in my opinion. What are the other architecture mistakes? You gotta understand the customer's business. And the customer's real needs. In a way that's a

46:18 It's automatic with people. Like me. And I want to identify what the real needs of my customer is and really satisfy it intelligently. And

46:28 I don't have some crazy Artistic preference of my own that I want to Just see the three dimensions. Well somebody else pays me to create it. And of course you can serve your people better if you understand their business better.

46:40 The architects aren't multidisciplinary enough, that's what I'm telling you. Practically no progression is multi disciplinary enough. And what's an example of where you are more multidisciplinary than the architects in some of the buildings you've designed? If you take the building. the graduate residence at the University of Michigan.

46:57 They had a magnificent sight. It's a park. They had no other site. They'd used up all that. And then our second campus, but on our main campus they used up all sides. It has one little parking lot left.

47:10 Yeah. I realize that If they Use their power in a domain and double the size of that parking lot, they could put a big square building on the site that would hold a lot of graduates, uh students.

47:22 But there was no way to do that without creating a window shortage. In some of the bedrooms. And I also knew that It didn't matter that there was a window shortage in the bedrooms. Because I went around that arbor and saw

47:35 The private Builders and out created Apartments with no bedrooms. Rooms with no windows. And relying on artificial light.

47:45 And I walk side by side in the exactly identical bedroom. One with a rear window and one just a blank wall. And the one with just a blank wall rent for ten percent less. So I re wasn't much of a problem. I looked for the evidence and then I once I realized that

48:00 I could do all kinds of wonderful things. In that building, once I got over this Prejudice that was absolutely required under any and all circumstances that every bedroom have a window. So it was just an example of just the most elementary common sense. I looked at the evidence in an arbor.

48:17 I understood geometry well enough to know. And then too, I was well aware that every ship has exactly the same problem. Every ship has a window shortage automatically, every cruise ship. Yeah, they pay twenty thousand dollars a week to be on the ship and so forth. And if they don't want a little light, they walk out of the ship and go to one of the common rooms. And of course that's what I arrange they do in the dorm. So I was following correct precedents from marine architecture. But show me an architect that's learned anything from a marine architect.

48:46 I think you could go into any school or church in the country and You won't find anybody studying marine architecture. They think it has nothing to do with has it? It has a lot to do with what they're doing. If you don't look you won't find. I feel like another example of understanding the customer is

49:00 Giving the students in the dorm a single room is where most people design homes for it. No, I have sent a lot of children through a lot of graduate education. And I've never had a child that like Being uh

49:14 Room with one or two. other unrelated people sleeping in the same room. the age of twenty or twenty five. Or eighteen or sixteen. Of course they'd rather have a room of their own. And I just figured out how much the incremental cost would be of giving them an extra room. Compared to the value, and I finally realized that what everybody was doing was dead wrong.

49:33 U CLA b brand new housing when the last two or three years. They put three people in a little room to sleep, three unrelated strangers. Nobody likes it. It's crazy, and this stuff I've designed now is grinding slowly through the Coastal Commission. Every single student gets his own sleeping area private to himself. Why did this shared delusion persist for so long? What happened was

49:56 that the fire codes they worry that The the fireman would Need a ladder. To go up. And look through the window.

50:05 And crawl in through the window and haul somebody who'd Passed out from smoke. So they require that they Every sleeping space have a window so the fireman can crawl up on a ladder. There were two things wrong with that.

50:18 Well never happened. Nobody could find a case where a fireman had ever crawled up a high ladder and looked through a window and found somebody lying in bed. Passed out with smoke. And Two, of course.

50:28 A modern Building. With automatic sprinklers. That's where it'd be zero. And that's why the fire codes change. And when the fire codes change it because

50:38 But the people used to doing it a certain way. Of course they keep doing it the same way they've always done. Doesn't it? The Mayo Clinic is one of the best places on earth in terms of an adverbal culture. They kept doing Hip replacements.

50:52 By a procedure that their doctors knew how to do. Because the new one that was better for the patient. It was very hard for the doctor to learn. And so they just kept doing it the old way. Architects are no different.

51:03 They do what they're used to. Again, for say someone who's twenty five or thirty, is the lesson that There are a lot of twenty dollar bills lying on the sidewalk. There's a lot of Inefficiency in the world to be rectified. That people should not assume the world works efficiently.

51:17 Well of course There's always a lot of Things that can be improved. Always a lot of people who were getting ahead by Doing something new. And that's one of the pleasures of Modern civilization.

51:31 And Imagine A postal clerk. In the United States. Can go to Hawaii on a two week vacation on a superjet.

51:40 And have a nice time. Postal Order could do that in the world I grew up in. You can learn a whole new profession just punching buttons on the internet and so forth. So Possibilities of self education are superly enormous.

51:53 So all kinds of things have been greatly improved. Yeah, of course. causes new opportunities for some people. And it causes absolute economic destruction from certain people who get obsoleted. Imagine the Kodak Company.

52:08 Which hired all the PhD chemists. Totally dominated the chemistry of Film and so forth. And had one of the most reliable trademarks in the whole world. Go through Africa when I was young.

52:20 There are two things you always saw, Coca-Cola. And That was the brands all over Africa. Poorest villages. And of course Kodak went totally broke because somebody invented a new way of taking photographs.

52:32 And developing photographs. And It just obsoleted their whole damn business. And Kodak wiped out its common shareholders. That happens all the time, that kind of thing.

52:42 And you can't blame the management for it. And It's own destruction. That's hard to do, I mean for human nature. Got a business as big as Kodak everybody's lived over for years.

52:55 They're like the Surgeons didn't want to learn a new technique that was a lot harder to learn when they were old. You're not welcome having the Learn something new. It's really hard to learn. Everybody would rather g get ahead using what he already knows.

53:08 What are the bits of advice you emphasising the book is Which again maybe sounds flippant, but Do you give the example of some of the people you knew growing up whose lives were totally of course. In the circles in which I was raised.

53:22 Nobody smoked even marijuana. But everybody drank, of course. And I would say that something like five percent. All the people I Was raised amid got hooked on alcohol and Became alcoholic.

53:35 I think half of them just drank themselves to death and died. And the other half. Like it got over it became Abstemious alcoholics. But

53:44 That's a lot of people, five percent. They were not. Horrible people, or weak people or something. We spent a lot of

53:53 businesses that are win win for both sides and the importance of this for their long term. Okay, anything much more important. It isn't just that it works better. In terms of creating plenty for all. It's better morality. Course.

54:06 Yeah, both sides want Both sides to win, that's more moral than trying to take advantage of other people. When it's so obviously the right way to live and it's the right way to do business. Who's fallen afoul of that? All kinds of people if you're

54:20 A carney operator, you're trying to cheat people on the little gambling games. And they do it all day or If you're selling drugs. That's another way of cheating. Um

54:30 Your whole life you want to be on a win win basis. Because it builds them. It's like capitalism, it gas these Effects that multiply. And there's so much of it we have that's why civilization works as well as it does, and so much of it is win win.

54:45 But there are all kinds of people. Looking for ways to cheat people. We had a guy. With us. When I was in the military.

54:52 Everybody call him honest John. Of course they called him that'cause he was totally crooked. And if it wasn't Dishonorable and crooked, he didn't think it was sound. He wouldn't consider any proposition that wasn't. Sleazy and

55:04 He was trying to Screw people out of money. But how much better if you have a voluntary transaction where Both sides are happy on a win win basis. That's perfect. And capitalism

55:17 And such a system causes us Flourishing civilization. Of course that's the way to go. Which Berkshire businesses do you think are most emblematic or Everything is win win. Take Dairy Queen.

55:30 We have all these little shacks. Particularly out north where they're just open in the summertime. 'Cause you don't have so much ice cream in the winter. All the parents come and get their cheap hot dogs and Ice cream cones and so forth and uh

55:44 People will run the little shack, make pretty good money in the summertime and it's win win. Customers are getting something we may want, the people who are Manning the store get something they want, of course the Berkshire shareholders get some capital returns if they like. It's all win win. Of course I'd rather do business that way. Who wouldn't prefer to do that to trying to sell

56:02 Think of all these people that sold Drugs. The actually can't blame. It was just disgusting, purely disgusting way to make money. And so the businesses you'd exclude are tobacco,

56:14 Drugs. What else? I don't think you want mass mania either. Very uneasy by the Grateful Dead's popularity with everybody in the audience using drugs and so forth. There the music was contributing to the decay of civilization.

56:28 So you wouldn't invest in drugs? Tobacco or the Grateful Dead? No, that's correct. That would not. When I sell you a town Town's record for a hundred dollars Once I get a tennis record, they'd rather have them a hundred dollars they're partying with and the other guy.

56:40 He likes what he's getting too. It's when when it's. That's the beauty of capitalism. It makes win win transactions very easy and almost automatic. Such a hugely important idea.

56:52 And people like Bernie Sanders and Elizabeth Warren. Both of whom I regard as quite talented in some ways. But they just don't get it. But I think you mean that as a backhanded compliment. It's both a compliment and a criticism.

57:04 Is the fundamental thing they don't get. That's a lot of the win win businesses. Are And they're not going to be able to do

57:15 And that's one side is making a big mistake. And most people are pretty good at not making mistakes over and over again with their own money. It's not fully automatic, right? No, it's not. But a lot of good happens automatically. Do you worry about the rise of this?

57:29 faction of the political spectrum who don't really believe in capitalism? Of course. Look at the misery. This happened to the Russian. They didn't like their old system with a bunch of serfs serving a bunch of landlords and so forth. Corruption and so forth, so they went to something worse. They were rebelling against something that was awful, so they substituted something that turned out to be actually worse. It's hard to create a new form of government works worse than Russians served them.

57:57 But Russia has managed to do it. And not only that, they're proud of having done it. You should never be proud of your defects. Pott of Berkshire's defect. We haven't eliminated. All mistakes of morality. So nobody gets anywhere near perfect ever in human affairs.

58:13 It's not necessarily a defect. A lot of what worked for us in the early days we can't do anymore because the world is more competitive. The low hanging fruit has all been picked. And we can't get fruit out of barren branches where the fruit has gone away. And so we have to go to something else. And of course that's harder.

58:29 A lot of people have that problem and y they go to the new systems and new ways. I've always liked the quote, Capitalism is how we take care of people we don't know. It's totally remarkable how it works. I like a social safety net. But I'm different from other people. If I were running the government on a modern civilization.

58:47 I would be quite liberal. And rewarding everything that can't be faked. Like being blind or not blind or something. I just give a very blind person A lifetime pension which went up with inflation and see Life is tough enough for you, we can afford to do it and and you and your handlers can figure out how to use the money. So I would be very liberal.

59:06 I would give anybody any education. Right through college. courtesy of the government, but it'll be merocratic. You have to be able to do the work. Or you don't qualify for the benefit. So I wouldn't let people Pretend to be learning things.

59:19 In some half as institution. And send the bills to the government. But places like Caltech or MIT, anybody could get in. And do the work. If I were the government I'd pay for it all the way through college and graduate school. Which they do in places like New Zealand and Australia and so on.

59:34 Again, everything in medicine. That is almost automatic. I would Pay for that too. But would I pay for Fardian analysis? No. Stuff that can be game and it was crazy.

59:45 I would not pay for. And I wouldn't allow the people to get Rewards for low back pain even though they have real low back pain. Anything that's easily faked I wouldn't pay. It just causes too much cheating and the cheating gets away with you all and so forth. I would just say we can't do that. But w we can't give lifetime

1:00:05 Pay just because you say my low back hurts or my life adjustment is imperfect. That's the way I would organize the government. Nobody thinks the way I do. I feel lonely. I would be quite generous, but I would be quite Tough on people with low back pain or

1:00:18 Psychological problems. How did poor Charlie Zomini come to be? I went around and made a few talks because Oh, I did kinda like I kinda admired Ben Graham the way he also invested money, but he also tried to be an educator. And so I made a few talks. I say matter of civic duties. Enjoyed doing it too.

1:00:36 That's how it happened. But I never would have circulated it. Peter Causman came by and asked for permission to Ravel through my files and I said, as long as I don't ever do anything, you can just go into my office. I don't have any dirty secrets in my office. I'm not worried. And so Kidders will ribble through my office and credit for Charlie's almanac.

1:00:55 It's his creation, not mine in a very real sense. What's the legacy of it been? What's happened is it's spread all over the world. And that I'm way more popular in India and China I am in my own country. And

1:01:09 I don't mind that either. It's I think it's peculiar that these high IQ nerds in China and India love me and in my own country people think pompous old bastard. Why India and China in particular? I didn't set out to do it. It just happened. But why do you think it's really resonated in those countries? It is a little confusing.

1:01:27 Elderly male. Of wealth. Lots of experience sharing with th doesn't that sound a lot like Confucius? And the Indians. I don't know, but all I know is that

1:01:38 In India and China people really like it. There are people in the United States too. But I've gone with Peter to technical places. Yeah. I just see a C Of Chinese and Indian. Faces.

1:01:49 We go to Google or somewhere, that's what I see. Those two groups have been very successful in the high tech world. Is there also something about the cultural import of striving and getting ahead. They like that too.

1:02:03 Can hardly find any two groups on it. earth that are more interested in getting ahead than the people in India and China. And inasmuch as the book is a manual for that. Yes, D's a manual for going there. And it's a manual it's work for the guy who's talking. That gets people attention too. Yes, it's mildly ridiculous.

1:02:23 There is no other big conglomerate that succeeded as much as Mercury did. Not in the whole world so far as I know. And that is a very unusual thing to have happened. If you could

1:02:35 Snap your fingers and transform Berkshire's corporate form. Would you? No, I like it the way it is. It wouldn't be better as uh partnership or

1:02:45 As a private company or Well, it could have evolved there are private places that make a lot of money and stay private. But I think both Warren and I have actually Enjoyed as much of the

1:02:58 public life as we have in terms of the annual meetings and the poor Charlie's almanac stuff and Movement gives all these Seminar talks and so forth. I think we've all enjoyed as much of this What do you call educational?

1:03:13 Sideshow that we do. We've actually enjoyed it and we actually think it's constructive. As far as I'm concerned, what we're doing in the educational side, that's when win too. If people will listen to what we have to say, they'll be better for it. At least more successful.

1:03:27 Is Coke Industries maybe the closest business analogue to Berkshire? Where it's a very large diversified conglomerate. Probably In the ones. know anything about coke sees other than they've gotten ahead mightily.

1:03:40 And But I would not want to be as active politically as they are. I just don't enjoy it that much. But coke industries has been quite successful. Yes, you're absolutely right about that.

1:03:51 On the book, you got a note from a reader just this week. Hi, Charlie, I wouldn't expect you to remember, but I visited with you in a group of Stanford Graduate School of Business students in twenty eighteen at your office before having dinner at your house. I read through poor Charlie's Almanac at least once each year and just finished my twenty twenty two read. I want to thank you for all your enthusiasm and worldly wisdom. How often do you get notes like this and A lot. Really a huge amount. It's so much so that I I can't really handle I don't want to spend my time answering notes from strangers.

1:04:19 A lot of people are genuinely grateful for the book. That's amazing. The accidental book. She made a lot of people grateful. And what do you charge that book now, Peter? Sixty dollars. It's selling faster now than when it came out. There is no book. I don't think the Bible was selling more than it did, though. It keeps selling and selling. This is like when John Lennon said he was bigger than Jesus. Let's be careful.

1:04:41 You and Warren have been working together for Decades. Patrick and I have been working together for decades. Singular. We plan to work together for many decades to come. What advice do you have for us in Constructing a constructive partnership. You're very lucky to have a good

1:04:56 Life partner. Yeah, I'm sure you're also very skillful and talented. But it's a blessing to do it with a good partner than be all on doing it. And of course it's better. Of course it's a blessing.

1:05:08 Warren and I have not just succeeded in Making money or something. We have had a lot of fun. Actual fun. We enjoy doing what we've done mostly.

1:05:19 Associated with a perfectly marvelous group of human beings. It's almost unfair. The people that Warren and I associate with all day long are such high grade people. Of course it's a pleasure to Associate with high grade people all day long. Tell the people too.

1:05:34 When you're saying it's fun for you and Warren together just the relationship is fun outside of the results. What does that look like? Is it staying up late watching funny YouTube videos? No, no, no, no, no. We get fun doing. Doing an understanding. We both like learning something No, pretty something useful to know. And we both like accomplishing a certain amount and the fact that it's difficult and you're still able to do it. Course it's a pleasure.

1:05:57 How do you and war in debate? What's an ongoing topic of debate between the other. There's some things that I'm willing to do that Warren isn't. And of course I just adapt. The quad.

1:06:08 Uh if he doesn't want to do' we don't do them. That's very simple. Just as a matter of time budgeting. Now he will do some things. 'Cause he likes doing them that that aren't necessarily the best use of his time. And so will I. But we do a lot of stuff where we we like doing it then.

1:06:23 Where we associate with good people and You ought to Share to some extent. Some of your success you should share by giving it away to others. Yeah, if you give away money and time and advice and so forth.

1:06:40 Almost all the world's religions. The Christian religion requires it. The Jewish religion requires it. So We enjoy the Mix we have of Education on philanthropy and operating business. No, we wouldn't want to make any one of it.

1:06:54 Much bigger than it is. I'm not looking for well a new opportunity. My life is pretty full the way it is now. But what do you and More disagree on? Or what have you disagreed on? We don't disagree.

1:07:06 Oh you must. I called him and I said something. And he said, Charlie I don't want to think about new faces anything small. So he's budgeting his time.

1:07:16 Warren doesn't wanna do anything. It's small. He wants to do big bites. He's he's disciplined that way. Mm-hmm. No, something small he enjoys doing, he damn well does it, don't he? But He doesn't want to

1:07:27 Look for new small business opportunities. Doesn't want to devote the thinking time to them. Yeah, that's one example of a disagreement. What else? Well that's not a a disagreement. It's just Course he's entitled to spend his time the way he wants to in his

1:07:40 Ninety second year of life. Ninety thirty is now ninety two. But we've had a lot of fun and of course it's been very effective. way to m do pretty well w in a worldly sense. We've enjoyed that. To crawl from absolutely nothing.

1:07:53 As far as Berkshire, of course that's a pleasure. Why did you guys essentially merge you were doing your own things with Wesco and Bluechip and Berkshire, and then at a certain point you emerge the efforts. We didn't really mind it being all mixed up like that. But since so many financial operators are kind of manipulated and dishonorable. Th if we had all the different entities always buying st

1:08:16 Stalking one another. It looked a little like m mischief or something. And so we just Put them all together so we wouldn't look like we were manipulating. So no one could have any claims of conflict of interest type things. And so many people who do have a lot of different hands, they do manipulate.

1:08:32 Behaving properly. What do you think of the SEC? We're a lot better with an S C the tendency to prosper through financial chicanery. In all forms of wealth management is Perfectly enormous. So of course you need something.

1:08:46 Two. throttle it back and control it. So I'm glad we have an SEC. It would be crazy not to have one. By the way, that came in as part of the Roosevelt And

1:08:55 I would argue that it's main trouble is it isn't tough enough. Tough enough on Washington. Miss Grancy. If I run the SEC And had the power to do it.

1:09:05 I wouldn't allow people to publish a record Saying here's what I did over the last twenty years when I started with two dollars and went up to Two hundred million. Because it misleads people. And of course we will create mutual funds, create little ones to get a phony big record.

1:09:21 I would forbid that kind of stuff. I would force everybody who is a big time money manager To report his investment record. per dollar year instead of historical. And that would take the miscreant out of it. And it would be so simple. And it would radically change the whole industry. And how many people

1:09:38 Have you ever heard C S o mandatory that all wealth management ought to report its results? Per dollar a year. Which would be easy to do mathematically. And it would totally change the way everybody is promoting their service. In a way that foster truth and excellence and a lot of things.

1:09:55 Are you aware of this movement where people can if they don't publish the ones that don't do anything and they do publish the ones and that generate results, you can get biased. Towards non-replicable results being published. And so the idea that you need to pre-register the clinical trials you're going to run in advance. It sort of reminds me of that. I am not an expert on pharmacology and how it's done, but I am in favor what I just suggested. It's so goddamn simple. And so obviously required in terms of honorable disclosure.

1:10:26 That ought to be automatic. Yeah. Who has ever suggested Why does little Charlie Munger Ninety eight years old. Think the SEC or the government ought to require that all investment?

1:10:38 Professionals report results per dollar a year. Instead of for historical. Nobody suggested. But to me it's obvious it ought to be required. And when you say per dollar year, you mean dollar weighted results, basically. How much return for every dollar a year, what was your return? And of course

1:10:55 That's a very different figure. I know of a case of a hedge fund. Where the proprietor made a lot of money. But per dollar a year the net return was zero. 'Cause when he got a lot of money he really made a lot of dumb mistakes.

1:11:08 He made a lot of money when he was young, didn't matter much. Yeah, it looked like a wonderful record. But in fact it was terrible. And why wouldn't Yeah, that'd be a fair thing to require. Why aren't Bernie Sanders and Elizabeth Warren that's low hanging fruit. They don't like the miscarriages of calc capitalism.

1:11:24 There's one that could be easily fixed. Instead they want to change the whole system so it looks more like Russia's. It's crazy. Some people zero in on very odd things like the current war on share buybacks is very odd. It's just terrible. I course I'm against that. 'Cause I don't like

1:11:38 Left wing woke and I don't like right wing nut case either. I'm a Equal opportunity. Hater of political orthodoxy. Uh war on share buyback seem is very

1:11:49 Misguided and dangerous. Share buybacks are the way that we return money from less productive companies to more productive enterprises. And so we're kind of encouraging institutional Sclerosis and ossification through large companies have to just get large and stay large and reinvest internally. That seems really bad. Look at it differently. Look at it in terms of opportunity cost. If your stock is showing up.

1:12:11 For half of what it's worth. And the external world you have to pay And the county's managed by others you don't like as well. Of course you want the ability of But but when your shareholders are better off buying their own stock than than they are.

1:12:26 doing something else, of course you ought to do it. And A corporate manager Should be a good fiduciary for the shareholders. I mean you got excess cash. And your own stock is selling for cheaper than it's worth.

1:12:38 Course you should buy your own stock. It's the right way to behave. And so I'm against all these crazies who think it ought to be made illegal. Other people do it just to pump it up. So they can use it as currency or something.

1:12:50 And that of course. Is this review? We never do that. We buy it when it's too cheap. If Patri and I came and pitched you on stripe Well, would you want to

1:12:59 Understand about the business. What would your concerns be? That's an interesting question. Considering how much Berkshire Hathaway has made out of payment systems, including American Express. We recognize

1:13:11 the power of having a dominant position. And payments. In a way that's very Efficient. Of course.

1:13:19 Anything in modern payments that enables all this internet stuff. Is very useful. So you come into a field and made a contribution and made yourself very useful. I'm for all these payment systems that get better and better. So uh I think you've made your money honorably and you've made a lot of it and good for you.

1:13:38 I admire what you people have done. Why wouldn't I? What regard everything that you're doing is A little bit threatening to American Express, but American Express actually has a position where

1:13:49 It's like Hermes or something. And so And Won't necessarily be run by stripe. In evaluating a business like Stripe, what questions would you want to answer for yourself? Is it likely to remain forever as a money generator? And that's a more complicated subject.

1:14:05 It's hard to know how the world is gonna evolve. If Kodak can suddenly be obsolete away, maybe it's not utterly unthinkable that Stripe could. The company that dominates Software for architects, terribly prosperous company. But some other companies come up in that field a lot.

1:14:21 And it no longer dominates as much as it did. So not everything in software always wins. So I do not have the feeling. The venture capitalists tend to think everything in software is always gonna win. I don't believe that for a minute. There does seem to be a remarkable aspect of Berkshire is just the duration of the investments. Where it's very hard.

1:14:39 To pick out companies in the Berkshire portfolio that you don't feel good about fifty years from now. It's even worse than that because the ones we were obvious mistakes. There were way too many jewelry stores. And w we had low returns on capital. So it looked as bad as airlines. And of course recently the code uh jewelry stores have been coining money.

1:15:00 And we closed about seventy five of the stores and more coming. It no longer look so bad. We have trouble losing even when we try to. It's like warning about some baseball team to help his town because somebody asked him to do it. And the goddamn thing started making money immediately. Oh. Well that's the way I feel about some of our investments. We don't deserve a lot of credit. We just stumbled into Why has NetChat's done so well?

1:15:22 It's better in its niche than anybody else. And net jets the whole culture. Safety is first. Customer service is second. And after that we'll start worrying about the

1:15:34 capitalists who own that jets. And of course with enough fanaticism of that kind of a culture. We create a hell of a product for the person who can afford anything. And ours is better than anybody else in the world. Country. And so now big.

1:15:47 It's a big business. And we have yet to kill our first passenger. All these many years we've never killed a fest. I didn't know that's trash. Oh no, you do.

1:15:56 And we're proud of that. We're afraid it might change. We're too bold in telling God we're so I can picture the magazine adjust no one has died yet. Yeah. You're very bullish on China. Why? Well

1:16:14 First reason. Is that Their economy. was growing faster than ours. That's not necessarily true, as we said this exact minute, but for a long time that economy grew a lot faster than ours.

1:16:27 Number two, we could get way better and stronger companies. at a much lower price in China than we could get in the United States. Now on the other side we had to take the political risk of buying into a peculiar system of government that's not different from ours. As long as we were getting enough bargains, I was willing to run the

1:16:44 That's with part of our assets is we would never invest all of our money in China, for God's sake. But we were certainly willing to invest part of it. That's perfectly logical. And of course we were investing through Li Louis very exceptional money manager. And you put the all those four things together at once, of course it made sense.

1:17:03 Did you meet Lily Lou through the book or separately? That was an interesting story. Lily was coming to visit. Because he was a hero of Tellman Square. A friend's wife Who was very leftist and loved him.

1:17:14 Being a Town Square thing. Course I'm not the least interested in loss. Revolutionary career. And so

1:17:21 I'm interested only in his adapting to modern capitalism. So he came up to me, me my house was Yards away from Else he was visiting.

1:17:31 And we talked for three hours. At the end of three hours I did something I'd never done before. I said, I'll give you some Munger money to manage. If you will stop doing what you're doing now and invest only in Asia. He did. Just on the spot.

1:17:44 So it took us exactly three hours to find one another from Meeting to financial commitment of three hours. How does the current Geopolit hawkishness change your view on investing in China, if at all? Obviously I'm more uncomfortable now than I was

1:18:00 The guy Who changed the whole system and said the I don't care if the cat is black or white, as long as it catches mice. He wanted the goddamn

1:18:09 Economy of China to work like Singapore's. Of course we love that guy and The new guy isn't quite as much like that guy as we would consider ideal. We think the political risks in China should be run and I think We should go out of our way to have s lot of friendly relations with big atomic powers. Both China and the United States ought to get along with one another.

1:18:31 As a matter of holy duty, because they're two big atomic powers. And the Eurated Get along best is We should carefully work out a bunch of win win transactions between us and China. And actually work.

1:18:43 To make them work even better. That is the right policy of the United States. We should not be trying to discipline China by telling them like a Nattering Nanny how China ought to behave and say we know better we're a democracy and you're not. We have a lot to be ashamed of in our own form of government. We shouldn't be going around lecturing everybody else. And we should organize one transactions with China. Anything else is madness.

1:19:06 And for a long time we had that. You can argue that China came to modernity primarily in win win transactions with the United States. Because we We're so open to their imports. That's what enabled them to get ahead so fast.

1:19:19 And I'm proud of that and I'm glad we helped them. And I wanna do more of it. I don't want this hostility on both sides. Tom Wolf wrote a short story about Bad noise. I'm a huge Tom of

1:19:31 But it is great. Short story about bad noise. And You can read the short story as That's really about Grinnell, Iowa.

1:19:40 And The effect of midwestern culture. In Cali. It was a huge success, of course. And the success is interesting.

1:19:48 But I would argue that the failure of Ntell It's just as interesting a story. Intel was on the ground floor of modern chip making. Absolutely ground zero. They were. Yeah.

1:20:01 The Absolute best place. And they just Grow and grow and so forth. And they eventually lost.

1:20:07 All their leadership completely. And they're just a little pissant company compared to the big guys now. Why did that happen? first place some of that's inevitable in competition, some people are gonna lose It's partly it demonstrates the inevitable even if you're successful, so

1:20:22 Little guy that really scrambles. Beat you're some acts on that. Well partly. They were so interested in always reporting more earnings. Didn't go to the whip enough. Just stay on top.

1:20:33 If you're surfing along the edge of a new development like that. You have to just absolutely go in flat out all the time and you have to be leading all the time. Is it Berkshire? We don't have to invent new things particularly. Compared to most places. They're in the business of any new things. And you have to be totally fanatic. And

1:20:50 The truth of the matter is that The people in China were way more fanatic than Intel. In China you had one old guy that controlled the place and he was a fanatic. And until an army of bureaucrats and they were interested in Their executive rewards and the way the price earnings ratio's and the approval of Wall Street. A whole lot of other things. And they were powerful enough, they could look good for a while just by

1:21:12 Using their power to make the earnings go up. But they should have been using the power to make sure their god M Chef stayed way ahead of everybody else. And they had to be a totally reliable supplier. Which they weren't. They disappointed a lot of customers. And you can't disappoint customers if you want to have a mail system of trust. That's the interesting part of the story. Not the noise story.

1:21:33 The story of the failure of Intel was the great story there. So you're talking about an obsession with reported earnings rather than the fundamental quality of the business. The book was published in two thousand five. Have you revised your view of Jack Welch, given the last Seventeen years of GE performance.

1:21:48 Of course I revised it. Of course I knew him personally. And he was a cocky conductor's son. Well, PhD in Engineering. Thermodynamics. And he was terribly competitive. He wanted to win. He'd been athlete, he was almost a scratch golfer.

1:22:04 But he got obsessed. We're getting ahead. And abuse the incentive system to force everybody else to get ran like an athletic team, saying everybody be more fanatic. And he wanted to be fanatic on abusing the spires and pushing people and Manipulate in the end. He thought it was his duty to make the

1:22:22 earnings you go up and they just kept compromising more and more and more in the way they showed the window. Course if he lived long enough he would have ruined his own reputation. After he was dead everybody knew he was a failure and I mean it wasn't

1:22:39 When say with the suppliers over squeezing them. No. May Win. Wen is one system and Mi Wen is another. Jag walls we had a Mi Win system.

1:22:50 It's very interesting reading the book. With the lens post the financial crisis. It's also interesting to see you railing against derivatives. In us a few years before the financial crisis. That derivative trading was so manipulative and they mark the books in it. Two guys would make a big trade, they'd both record a big profit to their accountants and the accountants would bless the profit on both sides of the same trade. One was reporting a prophet and the other is reporting a prophet.

1:23:14 It couldn't both be. If it gets too easy, yeah. And to manipulate uh. And End of that culture.

1:23:21 Stock brokerage, big banking. The guys who did the ordering. They take him to Las Vegas. They'd buy him a stack of chips, negotiable chips. We give it to them.

1:23:32 There was cocaine, there were prostitutes. It was about a Pretty culture. Yeah. Kind of tolerate it. What do you expect from a bunch of security traders?

1:23:41 Everybody knew that his traders were behaving that way. But it was a mistake till all that stuff to creep in. It got pretty extreme. And then the bankers dealt that deal that Goldman Sachs did with Malaysia. Ca sovereign we're the one M D B scandal, yeah. Absolutely. Yeah, that guy, the danger flags.

1:23:59 It was absolutely Obviously should have been avoided on moral grounds. And prudential grounds too. But they just get so intoxicated by the easy money. It feels like a lot of the

1:24:10 Objections you have to say professional money managers or Wall Street or whatever can be summed up by people should be more cognizant of principal agent problems. Is that fair? Can hardly imagine a field. More fuller principal agent but the money the wealth management. Of course the well managers take care of themselves. That includes the foundation manager. A foundation manager is basically

1:24:32 He wants to get four hundred thousand dollars a year when professor gets a hundred and ten thousand. He's got one way of doing it, picking money managers who get three percent off the top. And in various forms of private equity. That's the only way he's Justifies his big pay so

1:24:47 It's a principal agent problem. Of course you were gonna wanna invest a lot of money with private equity. And of course private equity is gonna do all kinds of Horrible things to try and get three points off the top. Imagine get three percentage points off the top of somebody else's money. It's a good business model. You can only do that.

1:25:05 If you have some miraculous way of making money. By the way, the guys in your field, uh Jim Simmons. Jim Suns is a world class mathematician. Here's what he did. He just used his damn computers.

1:25:18 Two Identify Trading patterns that had deep human psychological. Background.

1:25:25 One of them was very simple. Look is computer data. Yeah he found that. Patterns in the market as a whole. There are four different patterns. Win win.

1:25:35 Lose, lose. Win, lose, and lose, win. If it's just random, I'll all go. Four gonna be equal. Al accepted the data and when when

1:25:45 was more common than win lose or lose win. And lose lose was more common. So all we had to do was just program the computers to make these modest moderate size trades that could or big standards but moderate compared to the market. On that basis. It was just word and word and word and the money just poured out of the clear system. Billions poured out of the clearance system.

1:26:09 And it was so simple. And so Elementary. And The social utility of making money that way is about zero.

1:26:16 So if I'd done that, I suppose I would have been pleased that I was so clever. But I would have been a bit a ashamed of not delivering anything in to society in exchange for my big winnings. But luckily I I wasn't enough of computer science to even think about such things. And I don't like short term trading. And I don't wanna be.

1:26:35 Hanging over some training desk punching keys. Why do you think Sequoia has done so well? Soy Got early. End of the game.

1:26:45 And it's a phonatic meritocracy. So they work very hard, all of them. And the got big and successful way ahead of everybody else. And they kept writing it like

1:26:56 Some chip manufacturers each generation of chips they get. And In the end they have a file. We had Example. In our apartment houses we use some little computer program.

1:27:08 And adjusting the rants or something or other that somebody and one little guy. I had him check. Sequoia already had a file on its guy. So every little asshole will a little tiny computer program. They got an army of young guys out there finding every little guy in big files and so forth. So they See more.

1:27:27 They see better opportunities sooner and more than other people. And they've got the reputation for the people who are usually successful. They want to go with Sequoia, not some lesser firm. And the combination is just unbeatable. But lately Were they right to go into big Robin Hood, but no, they made a huge mistake for Sir Jueta. And they shouldn't have gone into the Morally or Morally and potentially. It's a big mistake. Really stupid. But it got so much we've got to be in every new thing that's hot. They got to thinking like investment bankers. But it was a huge mistake for Souway to get involved with Robin Hood and

1:28:02 Is your objection to Robin Hood that it encourages short term trading and trading options? Yeah, they lie and so forth. Do they? Oh my god. What do they lie about? Anything that works.

1:28:12 They transcelled this is a New fraternity of freedom or it's the whole thing is a lie. You don't like the movement aspect of it. Oh no no They're trying to create mass hysteria.

1:28:22 I don't like Luring people in and screwing them. Basically. And Bitcoin Why with your successful Sequoia and you're identified with

1:28:32 Financing people like Apple and so on. Why in the hell would you take Robin Hood and some goddamn crypto It's totally crazy. You don't want to do all the business that's legal for you to do. You want to exclude all kinds of things from this beneath you.

1:28:46 This shows that you work at these things intelligently. It gets hard, but it doesn't get impossible. But the other side of it is if you take the one I've been very well located in life. But with minor exceptions. What do I o have all investments in life?

1:29:02 I've got. Costco stock, Berkshire stock. Um Obvious apartments.

1:29:10 So I got four. Investments, basically. After sixty years or something of by the way, I feel perfectly adequately diversified. Nobody teaches that's adequate diversity, and they're dead wrong. Simple fact is that it's It's easier to find four things that are above average than it is to find forty. It's not that damned easy to fight.

1:29:30 You find something that's almost sure to work'cause you fear you're asking to find a gold mine in your back yard. When it works, it's that easy. How many gold miners are you gonna find in your back yard? You shouldn't expect to have All that many opportunities. That are clearly identifiable. It's gonna be very hard. And you're lucky if you get only a few in a lifetime and then you have to be

1:29:51 A combination of very patient and very aggressive. You have to sit patiently waiting, watching, surveying, hunting. And pounce very occasionally. You get four pounces in a lifetime that really worked big time. And that's a very successful lifetime. And other people will think

1:30:07 Yeah. That guy on T V he's an expert in every company every time. That's crazy. He's an expert in saying something that's mildly plausible. That's not being an expert investor.

1:30:18 Doesn't it feel like The narrative on that is changing. Where I think people are coming to Understand the merits of concentration in

1:30:26 Positions that really work. I had dinner with a whole crowd of Vidalby. This very week. And They've got trillions under management. Yeah.

1:30:37 They scrape only a modest amount off the top. You got a wonderful business. But They have the moral problem that They have no possibility at all of exceeding but

1:30:48 And next one can do. With their common stock investments. No, maybe they have an occasional analyst that's a little better than average that works into the system. Basically what they do is they force everybody to be a closet indexer. Because nobody wants to be

1:31:02 A stream outlier. On the losing side. 'Cause that can destroy your investment management business. But I would argue that the Whole damn system is corrupt.

1:31:12 Yeah, investment management. It's corrupt illustrations. They take care of the Agents way better than they take care of the principals. And they lie to themselves and they lie to others.

1:31:23 And that's our system. And everybody that wants a fair amount of easy money pretty fast. And that requires a plausible narrative and a big fee. That's what's admired now. I regard

1:31:34 Modern venture capital. As investment banking in disguise. Just a little different form of investment banking. Same morality, same Obsession with a lot of quick wealth. There's nothing.

1:31:46 wrong with investment banking properly done. Things you're investing. Is the secret of Berkshire's culture? Just the anti bureaucracy bent. Could you sum it up and virtue's pretty extreme in culture. We are deeply aware of how бюрокрасії tend to create their own internal dynamics.

1:32:02 So that everybody Protects everybody else. And nobody changes anything, ruffles any feathers. And the the net result is that a lot of bureaucracies make some very stupid decisions. And we try and avoid that.

1:32:14 But the way we've done it. Mostly is by not having Anybody around you They can't be bureaucratic if they're not there. There is nobody in the head office. So we've avoided the bureaucracy, we just don't know the people to do it.

1:32:28 Nobody else is a extreme as we are on them. A huge advantage to us. And Nothing is we like very trustworthy people. I'd rather have a brief telephone Somebody I trust.

1:32:39 Then I what a forty page contract. Prepared by the finest law firm in the world with somebody I don't trust. And so we like to deal with trustworthy people and to be able to count on their oral. Almost says if you look to go in a mail operating room. is what I call a seamless web of deserved trust.

1:32:57 The surgeons trusting the anesthesia, the anesthesia trusting the surgeon, the nurses are trust everybody trusts everybody else. There's no bureaucracy at all. They don't have time for bureaucracy. The patient's entrance to get over as soon as possible. And so that seamless web of deserve trust can do these very complicated procedures. We like a business.

1:33:17 System that operates As much as possible like a Mayo operating room. That requires having very good people who Or experience enough of one another, to trust one another. And that trust is internally between the Berkshire folks or between the Berkshire folks and the managers? Well we want the internal all the Berkshire people to trust one another internally and we also want

1:33:37 The customers should trust us. We're all for trust. Trust is one of the greatest economic forces on earth. How frequently do you disagree with managers on How much cash to send up to the mothership versus how much to reinvest in the business. Of course some of our

1:33:53 Subsidiaries cord the cash. If we'd let them so forth. Not brutal. And the early conglomerates like Kelly, they just forced all the cash to headquarters. And if you want a new cash, you had to ask for it back. We never went to that. Everybody in the knows that we'd rather have the cash sent back. If it can be sent back, we'd rather have it back.

1:34:11 And is that one of Warren's skills is keeping those managers happy while he does not he's not brutal. But he tickles it out of them. Well, you don't need it it has a way of ending up back at headquarters without any big internal friction. That sounds like some tickling is happening, yeah. You can call it what you will. You're right, flows to headquarters. It's interesting how much cash Berkshire does accumulate. It's a wall of cash.

1:34:33 Five percent of Apple. Size amounts. Remember, I was there when it was nothing. And We have not issued many shares net since we started.

1:34:42 So mostly w what we have It's great out. Almost nothing. One famous example of share assurance was the general reacquisition in two thousand. Was that because you guys felt it was a market top?

1:34:55 It was true that our stock was thin. More highly value than it is now. And of course we value it General Reum. We gave it more value than it really had, too. So

1:35:06 But it all worked out everyone's. Well it was awful as we gave Berkshire shares for Dempster Shoe Company and the Chinese competition destroyed our business. The ink cried on the purchase I could. Two years later we could see we'd made a terrible mistake. No, it was only two percentage points of performance in one year. So as uh in the history of Berkshire.

1:35:29 It's not that maybe in the air. No, but it was a big negative. But not Very big and This is effective on Burks or history having Two percentage points go away for one year. It's not that bad.

1:35:42 Is that an example of the do as I say, not as I do, where you and Warren would say don't try to to time the market, but that was a very effective bit of market timing. Course we're more willing to buy heavily with a cash accumulation when when things got Go down, down, down. And of course we're less and less able to find things when things go crazy. But I like the way Berkshire has behave. I like the way its businesses have turned out. I like the people we deal with.

1:36:08 It's been a very satisfactory part of my life. I feel privileged to have been part of it. You stop to think about it. Per Charlie's almanac is a lot like the guy Who created modern Singapore.

1:36:19 And what he always said was Figure out what works. And then do it. Figure out what works and then do it. And he just did that r more relentlessly than anybody else and more intelligently.

1:36:31 And he was probably the greatest nation builder. Yeah. ever exist in terms of quality of leadership. He's probably the greatest nation builder that ever existed, including Pericles and everybody in all history. And

1:36:44 It's very much like poor Charlie's almanac. Figure out what works and do it. Figure out what doesn't work and avoid it. And he just was relentless. That's all he did. And he started as a left wing Labor lawyer.

1:36:57 And a start as a left wing Labor lawyer, end up creating modern Singapore. Just by figure out what works and do it and figure out what doesn't work and avoid it. Just Keep doing that. Over and over again. So as far as I'm concerned they

1:37:11 Looks the most like Poor Charlie's almanac is leak one you. He got ahead better than any other nation builder that ever lived.

1:37:22 That was all he did. It was pretty goddamn simple. Maybe a good example of that that I love from Liquen News life of find out what works and then do it. But the deliberous choice of English as the national language or Chinese.

1:37:39 Not everybody is a political leader. Tell the people to change their goddamn language. But when the logic require that he just figure out it would work better for three more than he did it. Of course that's admirable. Of course it works, and everybody ought to study Lako and you In this house I've got

1:37:55 Two bus of other people. One's a Benjamin Franklin, one of the Lequan U. That's Oh I have. I could have guessed Benjamin Franklin, I wouldn't have guessed Le Queen U.

1:38:05 You can see why I like him. Just time after time he was so smart. I think he's smart to have the death penalty for drug dealers. They do not have a big drug problem in Singapore. 'Cause he's very tough. They kill drug dealers.

1:38:18 By the way, that's the way the Chinese got when one man in six in China was addicted to opium. The way they fixed that was Definitely. For users, no exception. They'd not have to kill all that many people to

1:38:31 For the version problem. And I think more things ought to be dealt with in those We want you a share, sir. That's a very good set of lessons maybe to end on. Find out what works and then do it. Avoid the big mistakes.

1:38:43 Take a multidisciplinary approach. Thank you so much for this and we're very excited to be working with you on the project. It was a very meaningful book for me, and I'm excited to have lots more people read it. I'm glad to do it. Um

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