Wednesday, April 15, 2015

Excerpts from Munger's Recent DJCO Meeting

The following are my main takeaways. Comments are welcomed as to whether there are further important lessons to be learned, and as to how these learnings could be applied in a real life investment setting.

Investment Philosophy- Find Your Own Way

I don’t think all you have to do is read Charlie Munger and you’ll get rich. If it were that easy, this place would be a football stadium.

Reduce Unforced Errors

Do not focus on being smart. Focus on being non-idiotic on a consistent basis. It is not easy at all.

If the incentives are wrong, the behavior will be wrong. I guarantee it. Not by everybody, but by enough of a percentage so that you won’t like the system.

Focus Your Efforts

I think people who multitask pay a huge price. They think they’re being extra productive, and I think when you multitask so much you don’t have time to think about anything deeply, you are giving the world an advantage you shouldn’t do, and practically everybody is drifting into that mistake.
Concentrating hard on something, that’s important, I can’t succeed at all without doing it. I did not succeed in life by intelligence. I succeeded because I have a long attention span.
Commoditization- In The End, Everything Becomes a Toaster
It is hard and dangerous to make money in commoditized business. Even businesses with huge advantages can become commoditized. In other words, everything eventually becomes a toaster and some will be toast.

Genius versus Tough Business

The auto business is very difficult, very competitive, and everybody is going to make wonderful cars. Everybody already has enormous size and wealth. So, I regarded it as a tough business. Elon Musk is a genius, and so if anybody has a chance to do it, he probably is the man.
But we have a saying at Berkshire that when a man with a reputation for genius takes on a business with a reputation for tough operating conditions, it’s the reputation of the business that’s likely to prevail. Without government help, getting electric cars off the ground is really hard. In China, it works a lot better than it does here, because their air is worse.
What Elon Musk really needs is for the whole country to have a disastrous smog attack that kills a lot of people. Short of something terrible like that, I think it’s going to be difficult. He’s a genius, but is going to have to be.

Assess the Downside First
If you’re unhappy with what you’ve had over the last 50 years, you have an unfortunate misappraisal of life. It’s as good as it gets, and it’s very likely to get worse. It’s always wise to be prepared for it getting worse. Favorable surprises are easy to handle. It’s the unfavorable surprises that cause the trouble.

In terms of monetary authorities, you can count on the purchasing power of money to go down over time. You can almost count on the fact that you’ll have way more trouble in the next 50 years than we had in the last. The technology is changing, so that a few nutcases could make the World Trade Center look like a picnic. We should all be prepared to adjust to a world that is harder.

Enjoy and Prosper
Yours One Legged