Rebecca Quick
Charlie, another question comes in from [ Chris Fried ] of Philadelphia, Pennsylvania. He says, "You've recommended the use of an index fund for the average investor. As these index funds continue to expand in size, their influence on corporate boards and ultimately management is ever increasing. This concentration of voting in the hands of a few index funds is alarming to me. Do you see this concentration as alarming as well? And what reforms would you suggest to address that issue?"
Charles Munger
Well, of course, it's a very serious issue because it's an enormous amount of power. And for a while, these index funds got the feeling they were suddenly made God-like to clean up the world. And -- but Vanguard has retreated from that policy and I think wisely so.
And I have some hope that Larry Fink will follow. I don't think it's smart for these index funds to try and influence the policy and politics of the country just because they're an index fund. I think they should be satisfied to eliminate some of the folly from investment management and do a better job for their clients, which I think they do very well.
And I think they should be pleased with that and not try and run the whole damn country as a matter of corporate governance. I have no feeling that anybody at Vanguard or Larry Fink's operation has any special genius at how American corporations ought to be run. And to the extent they ask Berkshire who is that, I wish they'd stop.
Rebecca Quick
Ask Berkshire to do what? Oh, to follow their guidance.
Charles Munger
I mean, I'm just not interested in their view as to how Berkshire should behave.
Rebecca Quick
All right. This next question comes from [ Carsten Fetteroff ], who is an equity analyst from Germany. And his question is stock-based compensation is a popular means of incentive compensation in many companies. In some cases, these take on alarming proportions. It feels like companies are competing to outbid each other. In some companies, 20% of sales are paid out in stock-based compensation. How do you perceive this development in recent years? And what's a heavy -- what's a healthy level of incentives?
Charles Munger
Well, I think you will find in American corporations very good incentive systems and others that are too liberal and others that are too niggardly. And what else would you expect in human nature with a certain amount of variety. And I agree that some of this -- in many a corporation, everybody would vote to being allowed to have stock-based compensation. You didn't count it in computing the earnings. They just want any damn way of making the earnings appear higher. It's just human nature.
Of course, they want their -- it's like little kid goes off to school. They want to bring him good grades, not bad grades. And so sure, there's a big problem of excess corporation paying in some places. Other places like Costco, I would say the compensation system is damn near perfect. It's -- and there's a fair amount of stock.
But we always buy in enough stock in Costco to pay for the stock we're issuing. A lot of people in high tech, they issue the stock and they don't buy it in, so it's a net dilution. I think there's a lot that's wrong in American compensation systems and -- but why wouldn't there be?
Rebecca Quick
Yes.
Charles Munger
By the way, when I was young, it wasn't so bad.
Rebecca Quick
Why?
Charles Munger
This is something that's happened in the last 50 years. I don't know. It's just the history of the way things came up and greater hardship in the pioneering ethos or whatever it was, when I was young, nobody complained about executive compensation.
Now frankly, everybody in the investment world thinks in many cases, executive compensation has gotten too high. Take General Electric in its heyday. Think of all the big compensation packages. They pay -- then think of how they were phoning up the earnings and so forth to pay for it. It was disgusting.
And of course, if that kind of c*** creeps in everywhere in our civilization, the civilization will perish. We need more honor, not less. And -- but I have no suggestion as to how to fix the places where it's excessive. It's a difficult issue, really difficult.
Rebecca Quick
[ Jeffrey Meloy ] writes in, and asks this question. He's from San Francisco. He says, "Do you think Elon Musk's ownership of Twitter, specifically his hands-off approach to content moderation is good or bad for American society?"
Charles Munger
Well, I don't use Twitter. So I'm not a good judge on that subject. And my policy and Elon Musk is -- he's a very talented man but also peculiar and so I. I don't buy them, and I don't sell them short. I just say, "well, he's a very usual person."
Rebecca Quick
You said some nice things about him in the last time I talked to you and what he's done with Tesla.
Charles Munger
Oh, it's unbelievable. Who else has done it except BYD? It just shows how tough capitalism is. Even if you're a genius like Musk is in some ways, there's always some little BYD that comes out and does better. Capitalism is not easy.
Rebecca Quick
All right. This question came in from [ Jeremy Saltzberg ] in Costa Mesa, California. He says, "Charlie, last year in 2022, a Missouri Court awarded a victim $5.2 million in compensation from Berkshire subsidiary, GEICO, after a woman was infected with an STD in a car that was insured by GEICO auto insurance. The claimant says that the man was negligent and didn't tell her about his health diagnosis. Your grandfather was a judge, and you have a background in law. Did the Missouri court get this verdict right?"
Charles Munger
Well, I wouldn't doubt it myself. But it's in the nature of things that not every court is going to be right in every verdict for every judgment. And I do think that allowing -- again, you raised a very tough subject.
You will get occasional verdicts that are just totally outrageous, and that's inevitable. And of course, that's what appellate courts are for, but sometimes the appellate courts are very sympathetic with crazy verdicts.
Again, I can't fix everything that's wrong with you in life, including a few crazy verdicts.
Rebecca Quick
You'd put that in the category of a crazy verdict, though?
Charles Munger
Yes, sure.
Rebecca Quick
This question comes from [ Stephane Armand ], who is writing in from Toronto. There was a lot of excitement about the relationship between Berkshire and 3G for the Kraft Heinz transaction. Has your perception of the private equity business changed on the back of that partnership?
Charles Munger
Well, like every other human being on earth, some deals work out better than others for 3G. Yes. They would love to have a way of going back and turning all their bad deals into good deals. Berkshire would like to have the same option. We don't get it either.
Average out, 3G did pretty well. But recently, they've had some -- their approach hasn't worked as well in recent years as would be ideal. Again, well coming to human life, it isn't so damn easy.
Rebecca Quick
[ Art Presser ] writes in and says, "The Florida governor and legislative body has recently taken a stand to try and control Disney's exclusive self-governing authority previously set up in Florida under the founder, Walt Disney. As your organization, and I guess, by this I mean, DJCO still owns Disney shares, you think Disney shares are still a good investment given this backdrop?
Charles Munger
We've never owned Disney shares.
Rebecca Quick
That's my mistake then.
Charles Munger
Your own, no. But Disney is an interesting case. Practically every business that Disney has, has gotten tougher than it used to be. Again, welcome to human life. Think about Disney once owned the world. Lion King was running a long run on the Theater District of New York. They went from triumph to triumph, marching, marching, marching.
All of a sudden, practically every front, it's more difficult. This is what happened. Imagine Kodak, which totally dominated photography in the world, and they invented this new technology, Kodak wiped out its common shareholders.
Rebecca Quick
Do you think Disney is headed down the same path? Or do you think that they'll be able to pivot? I mean, I know you followed the company closely.
Charles Munger
No, no. I think Disney has a lot of assets in it. But it's unpleasant to have something -- how would you like running the sports, ESPN now at Disney compared to its heyday? It's going to be way harder for them.
Rebecca Quick
The stock is up this year.
Charles Munger
Movies look to me like it's going to be a blood bath, too. So it's not a bed easy. It was easy in the heyday of ESPN, Disney made nothing but money out of ESPN. It was a total gold mine.
Rebecca Quick
What about other movie businesses? I'm thinking of Paramount, which is a huge holding that Berkshire now owns recent?
Charles Munger
I live within a few blocks of Paramount Studios. And I don't even know anybody at Paramount. I have avoided the movies like the plague as an investor all my life. I've never made an investment in the movie business in any way, shape, manner or form.
I don't like the unions. I don't like the crazy agents. I don't like the crazy lawyers. I don't like the crazy movie stars. I don't like the people who sell dope to the musicians. Everything about it is not my culture.
I like those old English actors who became old. I grew up with them. And -- but basically, movies is not my scene. So I avoided it. It's always been very hard for the people to put up the money. It may be a very good place to make a living as an actor or a writer or something or a musician. But it's a hard place to make money if you're an investor.
Rebecca Quick
This one is an interesting question. It came in from [ Eric Howe ] in Milwaukee, who says, "The population of the world is thought to have increased by more than fourfold time since you were born. Mind you, I'm not holding you personally responsible, but there has been that magnitude of growth. Is there a point where the biggest existential threat to humanity is the growth of the population and humanity? If so, how do we discern when that point has arrived?"
Charles Munger
Well, that's an interesting subject. If you'd look at the way things have happened in the past, you would have concluded like [ Paul Herrick] did that the world is headed for an absolute population disaster. But what actually has happened is quite different.
What's happened is that as the world has gotten more and more prosperous, including in places like China, the birth rate has gone down, down, down. And so there's actually sort of a population shortage in a place like Japan.
So the prediction of all the great experts based on extrapolating the past graphs, they turn out to be totally wrong. It now looks all the world's population in the advanced countries will sort of self-limit.
Rebecca Quick
I mean, that kind of puts you in the same camp with Elon Musk. He has made some of the same arguments that it's really shrinking population that's a bigger threat to humanity.
Charles Munger
As I said, he's a smart man sometimes. Sometimes, like all the rest of us.
Rebecca Quick
[ Denny Poland ] writes in and says, "When assessing the character and competence of a business' management, have you ever made a mistake? If so, when did this occur? And what did you learn from the experience?"
Charles Munger
Well, everybody makes mistakes. And one of the -- actually one of the most interesting things that happened in my lifetime. It was the rise of IBM and the fall of IBM. IBM was the most admired company in America for most of my young life. They just marched from triumph to triumph to triumph. And in the last 10 or 15 years, they've slipped. They're falling back in relation to other people in their field.
It's the Apples and the Googles and so forth came ahead, IBM just -- they kind of missed the boat. I think that's almost inevitable. Kodak missed the boat of change to digital photography, too. And I've heard Bill Gates (Trades, Portfolio) say that it's almost a rule of a really disruptive technology comes along, the incumbent screw up their reaction to it. It's hard to change your ways when they've been successful for a long time and go into a totally different way of behaving and thinking.
Rebecca Quick
Right. This question...
Charles Munger
Where we're sitting with Daily Journal Corporation, we're adapting to the new world -- think how different it is publishing in newspaper and being a -- inventing software records to automate. These are 2 radically different businesses.
Rebecca Quick
This question comes in from someone named [ Gene ], who says, "Mr. Munger, do you think that currently in the United States, we have systemic racism?"
Charles Munger
We have what?
Rebecca Quick
Systemic racism.
Charles Munger
Well, I suppose we've got some, sure. Of course, you're going to have a certain amount of animosity one group towards another. In the whole history of the human race, we've had a certain amount of that. I think it's gotten way better in my lifetime, however. I would argue that racism has gone down a lot.
Rebecca Quick
Charlie, this question comes in from [ Neil Das ], who says, "What, if any, impact do you think the insurance industry will see because of climate change over the next 25 years?"
Charles Munger
Well, I'm not sure I am any good answering that kind of a question.
Rebecca Quick
Are you raising rates in any of the Berkshire insurance?
Charles Munger
I don't think I know particularly how well. I think there's a good chance that climate change will be less important than all the people think. That doesn't mean it will be unimportant, but I think it won't be an absolute full-blown horror capacity with no possibility to adjust.
Rebecca Quick
I wait because sometimes when I wait, you say more on things. But I'll give you time to...
Charles Munger
No, that's all right.
Rebecca Quick
Okay. Let me get to this question from [ Taehee Hwang ]. He says that he's teaching the introduction of personal finance and the introduction of corporate finance to undergraduates at Indiana University in Bloomington. Most of the students are nonfinance majors, and this will likely be the only finance class that they take in college. What should he teach them, incorporating as many writings and speeches that you've given over the years so that they have the foundations and common sense to effectively deal with their personal or corporate finance problems later in life?
Charles Munger
Well, that's a good question because it's a big question. And if you have good judgment, your life will work a lot better than if you have bad judgment. And you get good judgment gradually over time, partly by making bad judgments and having them work out poorly.
So my counsel has always been to start trying to be better and keep doing -- keep trying to improve all your life, and you got about half a chance. If you don't do that, you got like no chance.
And so it's -- I used to say I could only teach what the other person almost knows. Then I can just throw him over of the brink when he's hanging on the edge. But if the guy is not within miles of even starting, I never make any public. I never succeed. So in removing idiocy, I have a 100% [indiscernible]. I've never succeeded.
Rebecca Quick
What would you push in that direction? If you've got a class full of finance students in college, maybe what are the -- a few lessons...
Charles Munger
I would teach the people who can learn, and the others who couldn't keep up [indiscernible] It can't be just -- I don't believe in butting my head against the wall.
And that, by the way, that's the way most education works. They just throw out those who can't keep up. That's the way I can name you it works. That's the reason it gets so good at the top.
I talked yesterday on Zoom with a law professor at a great place. My God, this is an admirable guy, and he's just so God damn smart, balances are incredible. But he's a very senior law teacher at one of the great law schools of the world. So I would expect him to be pretty good, but he was more than pretty good. He was awesome, and I thought, my God, academia is quite competitive.
By the time you get to the top, the professors at a good place, you find some very remarkable people. And -- but what -- but they can't -- there's a limit to what they can accomplish. One of the reasons that they turn out such good people is they take in such good people. That's their secret. They can't fix the [indiscernible]. Nobody can.
Rebecca Quick
Tough love.
Charles Munger
There's an old saying, dumb is forever.
Rebecca Quick
Dumb and diamonds. [ Alejandro Salcedo ] writes in, he says, "Reading many entrepreneurs and famous people, they always say that you have to dream really big. Instead, you say, Charlie, that the secret to a happy life is having low expectations. Could you please expand on that?"
Charles Munger
Well, yes, you climb as hard as you can by just advancing 1 inch at a time. That's the secret of life. And now there's always somebody who's a little nuts and succeeds. But that's -- but for every guy who succeeds, there's 1,000 failures.
Rebecca Quick
This is an underpromise, overdeliver situation, too?
Charles Munger
Well, of course. Who in the hell in his right mind would like going around making a lot of commitments and failing time after time after time of doing what you promised to do? Everybody would hate you, right?
There's no more guaranteed way to maybe we'll hate you than the fail in their reasonable expectations. So of course, you want to live a life where, by and large, you're meeting reasonable expectations of other people. That's what civilization requires of all of us.
Rebecca Quick
Charlie, someone named [ Joe Roden ] from China, and he says he's an investor from China. He's sorry that he can't see you face to face this year. He wants to ask you a question about life during the pandemic. He says, "I always give bits of advice to the elders in my family like avoiding high temperatures and falling down at home. But during the pandemic, especially since China reopened, I can seldom give them any advice except stay at home and get vaccinated. So as a wise elder yourself, did you get COVID during the pandemic? And how do you stay healthy? What's your advice to these elders?
Charles Munger
I did get COVID, but I got it after I was vaccinated, and I had like a tiny sniffle for about 10 minutes. And that was my COVID, but I tested positive during that time.
And in terms of the general idea of cautious adjustment, I had a lot of elderly friends who either died or had terrible injuries from falls. And so I got old myself. And it got time to use something to avoid falling down.
People tried to sell me on the cane. But I noticed that my friends who use canes would fall down occasionally. So I never used the God damn cane. Instead, I bought one of these modern walkers. And wherever I was worried about falling down, I pushed my walker. I did that for 6.5 years. I never fell down once in 6.5 years just because I was more cautious.
That is my advice to all people, just to be a little more cautious. Now I've gone to the wheelchair. And I've got another 6.5 years probably. But some of it I've already used up. And I'm just as cautious with my wheelchair. What is the harm of having a little extra caution?
Rebecca Quick
Makes sense. I want to pivot a question from [ Frank Wang ] in Houston, Texas. This question about Berkshire. He said Berkshire previously took a position in Exxon and then exited fairly quickly. If I recall correctly, he says, I believe you had stated that Berkshire thought it was a good alternative to cash at that time. Is the same type of thinking with Berkshire's new position in Occidental and Chevron? Is it the same type of thinking? Or is it likely to be more of a long-term type of holding for Berkshire going forward?
Charles Munger
Well, that is a very good question. And I think having a big position in the Permian Basin through those 2 companies, it's likely to be a pretty good long-term hold. So I like that aspect of that position.
And Ben Graham used to say, "If it's a good investment, it may be a good speculation." And I think that's generally true. But I don't do those short-term speculations, at least not very often. And -- but I like the big position that Berkshire has in the Permian through those 2.
I kind of admire both places a lot. Both Occidental and Chevron are very admirable places. And by the way, Oxy didn't start like that. If you go back 30, 40 years, Oxy was owned by a crook. And now it's evolved in a wonderful place, but it started as a sleazebag.
Rebecca Quick
Who was running it 30 or 40 years ago?
Charles Munger
A man named Armand Hammer. Before your time, Becky. You're too young.
Rebecca Quick
I know Armie Hammer, the younger one.
Charles Munger
Yes. Yes. Anyway.
Rebecca Quick
All right. [ Paul D ] writes in, and I believe it's Paul [indiscernible] he says, "Charlie, you're largely credited with Warren Buffett (Trades, Portfolio)'s evolution to buying great businesses at a reasonable price or in simple terms, a willingness to pay up for a great business. Given Ben Graham's exceptional insights and understanding of investing, how or why did he himself not evolve to foresee the inability to scale his Net-Net Cigar Butt approach? What do you attribute your early willingness to pay up stems from?
Charles Munger
Remember, a lot of Ben Graham's rise in life was during a period when there was plenty of low-hanging fruit among mediocre businesses that are way too cheap. And he was relatively rare in doing his hunting in that garden. And so he made a pretty good living for himself buying these.
What happened is that low-hanging fruit eventually went away as the aftermath of The Great Depression got away. And then Graham actually made more than half of all the money he made in his life out of one stock, and that stock was GEICO, which was a great business.
So if you actually look at the great man's own life, you see that what he taught wasn't the way he got rich himself. And by the way, he told that story on himself late in life. He carefully computed how much he made in GEICO compared to everything he had ever done in his previous life. And so you can argue Ben Graham himself woke up once.
Rebecca Quick
What -- why do you think that you so early on were willing to come up with this idea of paying up for great businesses?
Charles Munger
Well, because it's so obvious, and I'm going to -- doing things that are obvious. Of course, it was obvious if you wanted to have good result, you got to do a great company. I recognize that greatness was good. Big deal. Charlie Munger (Trades, Portfolio), genius, recognizes greatness is good. Of course, greatness is good.
Rebecca Quick
Paul from Toronto, Canada writes in and he says, "When you're evaluating a company for potential investment, what do you place the most emphasis on, the business or the management? And do you differ with Warren when it comes to what you place first?"
Charles Munger
No, I don't think we're the same. I think we like the business great first. And then second, we want great manager. But we have not made a huge success by investing in great managers to take over lousy businesses. That is not the way we rose.
Rebecca Quick
Matt McAllister writes...
Charles Munger
If you're a lousy manager, you really, really need a great business.
Rebecca Quick
And can a great business be run by a lousy manager, the inverse?
Charles Munger
Sometimes. Coca-Cola was run for years by a man with a very severe mental impairment. And the director says that somebody was drunk [indiscernible] year after year. Now that's my idea of a wonderful business that you can be mentally defective and run it pretty well. That was Coca-Cola in its heyday.
Rebecca Quick
How far back are we talking?
Charles Munger
Well, 25 years.
Rebecca Quick
I'll let somebody else do the math on that, figure out the timing. Matt McAllister writes in and says, "Charlie, you've described too much diversification as [ diversification ] being at best an average return producing strategy. In light of that thought, if one was allowed only one stock to hold for a very long time, and it would be the most important asset to him and his family and their future well-being, please describe what you would look for in that stock or company and also talk about the features that you would consider most important when you're trying to figure that out?
Charles Munger
Well, it helps to have somebody that says, "Look into a good position." So a great business that would be what you'd like and of course, you'd like a great management, too. And occasionally, we've had both the ride together for a long, long period. And -- but of course, everybody is looking for the same thing.
And the trouble with it is you will find when you get into those good businesses, places picked over and analyzed as American stocks are. And you can imagine the amount of time spent thinking about American stocks.
And you will find by and large in America, but it's really a great business. It's at least 25x earnings, and maybe 30 or 35 or something. So that makes it much harder, of course, because if something goes wrong, you can lose a lot of your investment.
And of course, that's what makes investment so difficult is the fact that the good businesses don't stay cheap. You have got to somehow recognize a good business before it's recognizable as a good business. That's very hard to do.
Some people get good at it, but not many. I don't think I would want 95% of the people who are America's professional asset managers, I wouldn't want working for me.
Rebecca Quick
Really?
Charles Munger
I think it's that hard. I think you need to be in the top 5% to have a reasonable chance. It's very difficult. Now it's not difficult as by an index and selling your asset. That's the great default position.
Rebecca Quick
Your assets?
Charles Munger
And by the way, that's -- if you said -- look at the Daily Journal Corporation. We just put in a 401(k) plan. What are the investment options for the people at work? 0. It's all index funds.
Rebecca Quick
And if you were...
Charles Munger
What percentage of American 401(k)s have our plan, index funds required? About 0. Am I right or am I wrong? Of course, I'm right. It's a logical thing to do.
Rebecca Quick
Okay so percent worth [ 2 and 20 ].
Charles Munger
Sometimes, sometimes. Being worth [ 2 and 20 ], I would say that is way less than 5%. Demand is worth [ 2 and 20 ]. That is really -- that's getting very rare indeed, particularly under modern conditions where every niche is occupied. It's -- you really -- if you take early-stage venture capital like Sequoia does, how many people have a Sequoia-like record? I don't think there's 1 in 100 that has a Sequoia-type record.
Rebecca Quick
[ Chris Reed ] from Philadelphia, Pennsylvania writes in and says, You've said previously that...
Charles Munger
And by the way, even Sequoia makes an occasional mistake. Everybody does.
Rebecca Quick
But overall, you still think it's worth it?
Charles Munger
Go ahead.
Rebecca Quick
Yes. Okay. So [ Chris Reed ] writes in from Philadelphia and says, "You've previously -- You've said previously that you should destroy at least one good idea that you have each year. What good idea did you destroy in 2022? And anything in 2023 so far?"
Charles Munger
Well, the idea that I destroyed that it wasn't a good idea. It was a bad idea. When the Internet came in, I got overcharmed by the people who are leading in the online retailing. And I didn't realize it's still retailing. It may be online retailing, but -- it's also still retailing. And I just -- I got a little out of focus and that let me overestimate the future returns from Alibaba. And so I have never gotten [indiscernible] mistakes.
Rebecca Quick
I think I just lost Charlie's audio, I'm not sure if you guys can hear it.
Charles Munger
My own knows and my own mistakes, I say I'm doing now because I think it's good for myself.
Rebecca Quick
You can hear me, but I can't hear you. You dropped out during that last question. Can you do me a favor, just raise your hand if you can hear me? Charlie can hear me. I'm not hearing him. So if you guys can call and I'm hooked in directly to the line. Now I'm hearing program, not this program, I'm hearing live on air program coming from your music that's coming in.
Charlie, I'm going to ask you another question just so that everybody else doesn't have to listen to me talking this through. We're going to try and get this fixed here in the control room.
But this question comes in from -- let's see, let's go to this one. Chris Benassi who asked the question about he says, "Hi, Charlie, a notable theme during the last Daily Journal conversation revolved around positive and negative trade-offs between different systems frameworks and choices. Can you discuss your views on the health care industry, specifically the trade-offs between capitalist systems like the United States and single-payer systems like Canada and the U.K., and I'm asking this single-payer health care question because for those who don't know, you serve for a long time as Chairman at a hospital in Los Angeles, so you do have some insights into what the situation is." And feel free to talk a long time while they're fixing this.
Charles Munger
Yes. When somebody asked for and what happened their experiment with JPMorgan Chase and Amazon and so forth. And they were going to change. They improve the -- what was wrong with the American medicine and its cost. And when they gave that up as a total failure, Warren just said the tapeworm won, and that's what happens. I think the American system is cost way too much.
Can you hear me?
Rebecca Quick
Charlie, I see your lips have stopped moving. So I'm going to ask another question. I'm hearing power lunch in my ear right now. If anybody is paying attention in the control room.
But this question comes in from Brad Heck. Brad Heck is in South St. Paul, Minnesota and says, Charlie, I'm a big fan of your disciplined approach to life. Do you get up at the same time every day and go to the bed at the same time? And finally, what's the first thing you focus on each day?
Charles Munger
Well, I vary a little in my time, but I'm pretty regular. And I'm a pretty good sleeper in my old age. So I'm very lucky in that respect. And...
Rebecca Quick
See your lips have stopped moving. So I'm -- got you. I got you. Finally, I hear you. Okay, Charlie, let me ask you this question.
Charles Munger
You got sound again.
Rebecca Quick
Yes, I've got you.
Charles Munger
Modern technology.
Rebecca Quick
I think we'd be a little better if this -- sometimes it works. If you could inaugurate anyone for President in 2024, who would you choose?
Charles Munger
Well, I think I'll duck that one. I don't want to get into the presidential politics.
Rebecca Quick
Okay. I hear that. I can understand that. Charles writes in and says, first of all, he wants to thank you, Charlie, for gifting some DJ Co shares to establish that newly -- that new Daily Journal management equity incentive plan. You talked about that earlier on. He said, additionally, he's excited about the rumored new addition of Poor Charlie's Almanack. First of all, is that true? But the real question he has for you, he said, you said that you admire Benjamin Franklin, can you please elaborate on this subject and highlight the qualities that you admire in Ben Franklin?
Charles Munger
Well, Ben Franklin was a genius. It was a small country, but remember, he started in absolute poverty. His father made soap out of the carcasses of dead animals that stank. Now that is a very low place to start from. And he was almost entirely self educated 2 or 3 years of primary school and after that, he had to learn all himself.
Well, the rise from that kind of a starting position and become -- the time he died, he was the best inventor in his country, the best scientists in this country, the best writer in his country, the best [indiscernible] in this country. Thing after, thing after, thing, he was the best there was in the whole United States. He was a very unusual person. And you just got an extremely high IQ and a very kind of pithy way of talking that made him very useful to his fellow citizens.
And he kept inventing all these things. Imagine inventing the Franklin stove oven, bifocal glasses and all these things that we use all the time. I'm wearing bifocal glasses as I'm looking at you. These are Ben Franklin glasses. What the hell kind of a man that just goes through life and the [indiscernible] gets a little perfect. He invented the god damn bifocals. It was just one of his many inventions.
So he was a very, very remarkable person. And of course, I admire somebody like that. We don't get very many people like Ben Franklin.
Rebecca Quick
I'm thinking the library system, I think he invented...
Charles Munger
He was the best writer -- and he was the best writer in his nation and also the best scientist and also the best inventor. that ever happen again. Yes, always other things, yes.
Rebecca Quick
So is there a new addition of Poor Charlie's Almanack.
Charles Munger
And he played 4 different musical instruments. If there is anything else.
Rebecca Quick
That part I didn't know. Yes, that part I did not know.
Charles Munger
One of which he invented. One of which he invented. The glass thing that -- they still play it occasionally.
Rebecca Quick
Yes. With like different layers of water...
Charles Munger
But he actually played on 4 different instruments.
Rebecca Quick
Yes. And he was a diplomat and -- write the rules of the country and compound interest with the -- the trust that he set up for both Philadelphia and for Boston and still hundreds of years later are paying out.
Charles Munger
No, he was a very amazing person. Of course, the country was glad. We were lucky to have him.
Rebecca Quick
Is it true? Is there a new Poor Charlie's Almanack coming out?
Charles Munger
Well, they're creating an online edition.
Rebecca Quick
Okay. You've talked about some.
Charles Munger
By the way, the Chinese edition sold way more than the one in the United States.
Rebecca Quick
Well, there's more people there.
Charles Munger
That's not the sole reason.
Rebecca Quick
What else?
Charles Munger
Well, a rich old man looks like Confucius. In their system, there's nothing better than a rich old man.
Rebecca Quick
Yes. Charlie, someone writes in a question, and this is about delayed gratification taken to the extreme, how rational is it for a person of your age and wealth to practice delayed gratification? If it's not rational at your age, how is it rational to delay gratification for the average adult? So what's the rational point in life to live with no delayed gratification to.
Charles Munger
I'm still doing the -- now that I'm old, I buy these apartment houses, it gives me something to do. And everybody else runs them. Everybody else is trying to show high income, so they can have high distributions. We're trying to find ways to intelligently spend money to make them better. And of course, our apartments do better than other people do because the man who runs them does it so well for me. The man, there are 2 young men that do it with me.
And -- but it's all deferred gratification. We're looking for opportunities to defer other people are looking for ways to enjoy. It's a different way of going at life.
Rebecca Quick
Did you start out that way?
Charles Munger
You get more enjoyment in life doing it my way than theirs?
Rebecca Quick
Did you start out having to work at delayed gratification or is that just how you were born?
Charles Munger
No, I learned this trick early. And we've done that experiment with 2 marshmallows with little kids. [indiscernible] And they've done watch them how they work out in life by now. And the delayed -- the little kids were good at deferring the marshmallow, also the people that succeed in life. It's kind of sad that so much is inborn, so to speak. But you can learn to some extent, too.
Rebecca Quick
I'll go home and test that out on my kids.
Charles Munger
I was very lucky, I just naturally took the deferred gratification very early in life. And of course, it's helped me ever since.
Rebecca Quick
[ Matt McAllister ] writes in and says, first, thank you for sharing your wisdom. Those of us fortunate enough to listen have benefited significantly. We've come to know that Warren Buffett (Trades, Portfolio) -- we've come to know Warren Buffett (Trades, Portfolio) as a learning machine because of your candid descriptions, aside from this quality, what others would you credit to Warren that has helped make him one of the greatest investors and compounders that the world's ever seen?
Charles Munger
Well, Warren is not only a very good thinker and a good learner, which is important, but Warren has a big strong fiduciary gene. He cares about what happens to the shareholders. Warren and I were lucky in that the early shareholders that really trusted us, we were young and didn't have a reputations and so on.
And naturally, we feel an exceptional loyalty to those people. And of course, naturally, they're all dead now. We're still loyal to them. Warren and I still care what happens to the Berkshire shareholders, a lot. And I think that helps us. I think that it helps if you're good at loyalty. Go ahead Becky.
Rebecca Quick
Okay. So someone writes in and says that many large companies, including Meta, which owns Facebook and various insurances, are choosing to self-insure against liability either for directors or for the business risks. If it's carried to extremes, it would not -- as it no doubt will be over time, this could cause potential systemic issues. Would you share your thoughts on this, please? He says he's been a shareholder of Berkshire Hathaway for 16 years, and thanks you for your stewardship and sharing your thoughts generously with the younger generations.
Charles Munger
In my own life, I'm a big self-insured and so is Warren. It's ridiculous for me to carry fire insurance on my house because I could easily rebuild a house if burned down. So why would I want to bother fooling around with the claims process and all kinds of things.
So if insurance -- you should insure against things you can't afford to pay for yourself. But if you can afford to take the bumps, so unusual expense coming along doesn't really hurt you that much. Why would you want to fool around with some insurance company. If your house burned down, I would just write a check and rebuild it. And all intelligent people do that way. I don't say all, but -- maybe I should say, all intelligent people should do it my way.
There should be way more self-insurance in life. There's a lot of waste. You're paying when you buy insurance for the other fellows frauds, and there's a lot of fraud in life. And you can afford to take the risk yourself and not fool around with claims and this and that and commissions and time. Of course, you self insure, it's simpler and so forth.
Think of what I've saved in my life. I narrowed it. I don't care. I never carried - never. I think once -- but with one exception, I never carried collision insurance on a car. And once I got rich, I stopped carrying fire insurance on houses. I just self insure.
Rebecca Quick
That's a little bit of a surprising take for the guy who is Vice Chairman at a big insurance company.
Charles Munger
That is the right way to do it. What?
Rebecca Quick
That's a little bit of a surprising take from a guy who is a Vice Chairman at Berkshire, which has so many insurance companies.
Charles Munger
Well, but I'm not -- I'd rather tell the way it is. And tell it in a way that helps Berkshire. I'm not going to tell it differently than I think it really is just because it's better for Berkshire. Even though it's bad for Berkshire, I want to tell you if you can afford to self-insure, self-insure.
Rebecca Quick
Even on things like medical or I just think you might think you could afford these things?
Charles Munger
That is different -- your insurer pays the doctor in the hospital is a small fraction of what you pay. So that's a different kind of calculus. Everything in medicine is -- the cost of American medical care and the medical insurance, it's a disgrace.
If you go to Singapore, you will find that they do the whole thing better than we do, and it cost 20% of what we pay.
Rebecca Quick
And again, my audio was...
Charles Munger
And by the way, I have no idea of how they get from where we are to where it is because all the people are getting all that extra money, fight like fierce tigers to hold on to it. And they control boards and cities and states and every other -- so I don't know how to fix the cost in American health care. They're totally out of control and I weren't trying to fix it with Amazon, all that stuff. He failed too. Everybody's failed. Everybody in America has a marvelous record failing in handling our cost of medicines.
Rebecca Quick
Matt McAllister writes in, and I realized he's asked a couple of questions. I didn't realize this was a repeat sending, but I like the question. He said, what are some of the most important things that we need to know about Greg Abel? Have you experienced examples of him also being a learning machine. And if so, could you share one?
Charles Munger
Yes. Greg is just sensational at being a business leader, both as a thinker and as a doer. And he's also sensationally good at smoothly getting things done through other people. So he's a very remarkable human being, and Berkshire is very lucky to have him. And he's also a tremendous learning machine. You can argue that he's just as good as Warren in learning all kinds of things.
And one of the interesting things about Greg is there are some things he's better at than Warren is, and Warren knows that and he just keeps dumping on the Greg. Everything that Greg can do better, and it's a lot. And so the system at Berkshire is working pretty down well. We're very lucky to have a 92-year-old this good shape. And we're very lucky to have us a chief executive like Greg. Greg is very remarkable.
Greg is trusted by insurance -- by utility regulators and rightly so. He is trying to run all those utilities as if he were the regulator. How many people think that way? But it's a smart way to think.
Rebecca Quick
You mean, just from a show of good faith?
Charles Munger
Yes. Why not please -- why not do it the way that you want to do if you were on the other side of the transaction. How can you fail if you treat other people like you'd like to be treated yourself? It's the golden rule. Of course, it works.
Rebecca Quick
All right. Someone named Jim writes in and I asked this question because I got a lot of similar ones just in terms of investments, but this one is probably a question that a lot of people as they start to get up 65 and beyond start to wonder. He just says, "Would you recommend I take social security when I'm 67 or wait until I'm 70 when I'll receive more per month?"
Charles Munger
Well, I can't make that choice for you. It depends. You know you're going to be dead pretty soon, I go ahead and have more [Indiscernible]. You think you may live a long time, you may have a different calculus. And I would say that most -- most people who are healthy and so forth, and who have a pretty good life expectancy. Generally, there are ways to defer the social security taking and take more money later.
Rebecca Quick
I guess it's optimistic thinking too, if you're thinking that you're going to live a long time, that's a way to play it out.
Charles Munger
Well, what do you do, Becky?
Rebecca Quick
Well, I'm not 65 yet, so I haven't thought about it yet. I'm waiting. My guess is I would.
Charles Munger
I don't think you're going to need social security Becky. I'm not worried about you.
Rebecca Quick
I think I would work longer. I'm naturally conservative. So -- [indiscernible] writes in, you urged the U.S. government to ban cryptocurrencies as China has done. I have a more general question with boom and bust cycles in different countries in history, what should a good government do and not do for economic growth?
Charles Munger
Well, what you've got to do if you want growing GDP per capita, which is what everybody should want. You've got to have most of the property in private hands. So most of the people who are making decisions about our properties to be cared for own the property in question, that makes the whole system so efficient to GDP per capita grows in a system where you have easy exchanges due to a currency system and so on. And so -- that's the main way of civilization getting rich is having all these exchanges and having all the property in private hands.
If you like violin lessons, and I need your money, we make a transaction, we're gaining on both sides. So of course, GDP goes like crazy when you got a bunch of people who are spending their own money and wanting their own businesses and so on. And nobody in the history of the world that I'm aware of has ever gotten from gathering to modern civilization, except through a system where most of the property was privately owned.
A lot of freedom of exchange. And by the way, I've just add something that's perfectly obvious, but it hasn't really talked that way in most education. Even the -- you can take a course in economics in college and not know what I just said. They don't teach it exactly the same way, anyway.
Rebecca Quick
That would be your -- your best interest. Okay. This one comes in from Matt, and he says, throughout your experience with Berkshire Hathaway, what are a few of the things that have surprised you most based upon some of your previous rational thoughts and ideas? Also, how have you used some of those surprises in your quest to become a better learning machine?
Charles Munger
I would say the things -- some of the things that surprised me the most was how -- how much dies -- the business world is very much like the physical world where all the animals die in the course of improving all the species, so they can live in niches and so forth. All the animals die and eventually all the species die. That's the system.
And when I was young, I didn't realize that same system applied to what happens in capitalism to all of businesses. They're all on their way to dying is the answer. So other things can replace them and live. And causes some remarkable death. Imagine having Kodak die. It was one of the great trademarks of the world. There was nobody who didn't use film. They dominated film, they knew more about the camera film than anybody else on earth. And of course, the whole dam business went to zero and look at Xerox's the world, it's just a pale of shrink. It's nothing a bird that it once was.
So practically, everything dies, if you big enough time scale. When I was young enough, that was just as obvious then I didn't see it for a while. Things that looked to turn and have been around for a long time. I thought would likely be that way when I was old. But a lot of them have disappeared. Practically everything dies in business. None of the imminent last forever.
Think of all the great department stores. Think how long they were the most important thing in that little community? They are way ahead of everybody in furnishing credit, convenience at all seasons. Convenience back and forth, use the same banks of elevators and so forth, multiple floors. It looked like they were eternal. Basically all dying or dead.
And so once I understood that better. I think it made me a better investor, I think.
Rebecca Quick
I mean, the same can be said for managers. I've talked with Doug McMillon of Walmart, who carries around in his wallet, like on him, he carries around a list of the top retailers over the decades. Nobody is ever the same.
Charles Munger
Yes -- were gone. Yes, yes. Of course, retailers live in terror because you can die. So I guess a better way of doing it, you just die. Like those department stores did.
Rebecca Quick
The ones that you invested in early on, you mean, is it Baltimore?
Charles Munger
Well, no, most of the -- think of the department stores that are gone, just chain after chain after chain in big downtown. They're not weakened, they're gone dead. And to have IBM have the huge position it once had in terms of other dominance. And now it's just one that also [Indiscernible]. And it's still an admirable place, I'm sure they have a lot of talent left in IBM. Doesn't help. You die even though you're talented and hard working.
Rebecca Quick
[Arthur Kahn] writes in, and he's a Daily Journal shareholder who lives in Toronto, and he says, Mr. Munger, well, many of us admire you and look up to you, I want to ask, who were some of the people you most admired and looked up to? What was it about them that made them so special?
Charles Munger
Well, some of the best people, I would argue that Jim Sinegal at Costco was about as well adapted for the executive where he got -- and by the way, he didn't go to [Horton] and he didn't go to the Harvard Business School. He started working at age 18 in a store, and he rose to be CEO at Costco. And in fact, he was a founder under a man named Sol Price. And I would argue that what he accomplished in his own life, family is one of the most remarkable things in the whole history of business in the history of the world. Jim Sinegal in his life -- he's still very much alive, but he had one business throughout his whole life basically.
And he got so damn good at it, frankly nothing he didn't understand, large or small. And there aren't that many James Sinegal. I'll take somebody else for a job of the kind he has. Greg Abel in a way is just as good as James Sinegal was. He has a kind of genius for the way he handles people and so forth and problems.
And I can't tell you how I admire somebody that has enough sense to kind of [indiscernible] as utilities. And so he were the regulator, he's not trying to pass on the cost because he can do it. He's trying to -- he's trying to do it the way he wanted. I don't know if he were the regulator instead of the executive. Of course, that's the right way to run a utility. But how many are really run that way?
So there are some admirable business people out there, and I've been lucky to have quite a few of them involved in my life. The guy who ran TTI was a genius. TTI is a Berkshire subsidiary. You Daily Journal [indiscernible] lucky you'd be if we still had our monopoly on publishing our cases or something we'd be like TTI. Well, TTI has just marked some and it was run by a guy. He got fired and created the business.
Rebecca Quick
He got fired from where?
Charles Munger
He invented the whole -- general -- some defense contractor, I forget which one.
Rebecca Quick
General Dynamics, maybe?
Charles Munger
Yes. I can't remember exactly. But he was a terrific guy and he ran the business for us. He wouldn't let us raise his pay. How many people have the problem with their managers. They won't let them -- they won't allow you to raise their pay?
Rebecca Quick
It's pretty rare. Charlie, I spoke with a friend of yours yesterday and his question that he had for you is what quality has helped you the most in life?
Charles Munger
Well, that's easy, rationality. If you're just not crazy, you have a big advantage over 95% of the people because most people have all kinds of crazy patches. And if you just are consistently not crazy, you got a big advantage in life.
And here, patient and gratification deferred and vision to being not crazy. That's practically a sync. And then if you're exceptionally good at satisfying your commitments to other people, then you've got -- you just automatically improved your resources and your chances in life enormously. And it's so simple. And why don't more people do it? It's an interesting question.
I don't think you can educate your children to do it automatically. I think if you have 10 children, you'll have some that are a lot better than others in doing this.
Rebecca Quick
Is it harder with success, age, wealth to hold on to rationality?
Charles Munger
I think it's -- it's always hard when you get better other than if you get good at young and keep practicing. But it's never easy. If you had that question somebody asked, what one stock would you buy if you had to just rely on that one stock only? For your sole living expenses, you weren't allowed to have any income at all. You had to invest $1 million and live on that one stock. How many people would give an intelligent answer to that question in America? I don't think it's 1 in 100. They wouldn't even know how to begin.
Rebecca Quick
I think one of my favorite things that I've heard you say, and it's something I repeat often to a lot of people is whatever you are, age and wealth makes you more so. Came up with that a while ago. What led you to that -- and do you have any, I guess addendum to that?
Charles Munger
I think that's true that we are all tending. We all tend to get a little more so in every way. And I thought of that when I woke up this morning and put on my trousers. I really economize in buying those trousers. Why am I economizing in my trouser buying? But it's just -- so ingrained that I can't stop.
Rebecca Quick
And I'd like to circle back to a question on Daily Journal to wrap things up, Daily Journal and some of your holdings. This question comes in from [ Moshe Sable ], who says, in a previous shareholder meeting back around 2018, you spoke about BYD and said Journal Technologies is not quite BYD, but added that -- by the way, it might work out just like BYD. Now a few years on, do you still find Journal Technologies can turn out similar to BYD?
Charles Munger
Well, it won't be as fast as I guarantee you, and I won't be this great. I can also frankly guarantee you that. BYD is one of the most remarkable venture capital excesses in the history of the world. He was the eighth son of a peasant, had an older brother that recognizes a young kid was kind of a younger brother was a genius. And the older brothers sacrificed himself to get this peasant son into some good engineering school, and he became an engineering professor and then an entrepreneur.
And how many times you get a story like that? And imagine buying a little bankrupt auto company in China and turning it into something that this year, they're going to sell more electrical cars than anybody else in the world, at a time when electrical cars are hot. And -- it's a remarkable story, but again, a very unusual human being Wang Chuanfu.
And by the way, in his case, it wouldn't have happened if Wang Chuanfu hadn't been so unusual.
Rebecca Quick
Unusual how?
Charles Munger
He's -- he is a born genius and he's been thinking about the right things, 17 hours a day all his life. He's a workaholic and he can do things that ordinary human beings can't do.
Rebecca Quick
Is that the favorite stock you ever purchased? BYD or Costco?
Charles Munger
Well, I would say -- Yes. I have never helped do anything at Berkshire that was as good as BYD, and I only did it once. Our $270,000 investment there is worth about $8 billion now or maybe $9 billion. That's a pretty good rate of return.
Rebecca Quick
It's more than pretty good.
Charles Munger
Yes. We don't do it all the time. We do it once in a lifetime. Now we have had some others successors do, but -- but I don't think hardly anything like that.
I made one better investment. You know what it was? We paid an executive recruiter to get us an employee, he came out with [indiscernible]. The return that [indiscernible] has made us compared to the amount we paid the executive recruiter. That was our best investment at Berkshire [indiscernible] recruiting for him to get [indiscernible]. But again, only happened once.
Rebecca Quick
Now that's quite an investment too. Charlie, I just want to thank you for all your time today.
Charles Munger
All right. We're all through, I guess.
Rebecca Quick
And being so generous.
Charles Munger
I guess our meeting is over.
Rebecca Quick
And we'll turn it back over to Charlie and Steve.
Charles Munger
I'm still here to do one more with you people. We've been at this quite a few years. So my best to all of you. Bye.
Steven Myhill-Jones
Thanks. Thank you, Becky.
Rebecca Quick
Thank you, Steven. Thank you, Charlie.
