Daily Journal · 2017

Assemblée annuelle du Daily Journal 2017

15 févr. 2017 2 h vidéo

Source : Daily Journal / CNBC · intégrée depuis l’original ; nous ne l’hébergeons pas.

En 2017, l’assemblée du Daily Journal avait largement dépassé ses origines de réunion d’actionnaires confidentielle pour un petit éditeur juridique californien. Munger, alors âgé de 93 ans, a répondu aux questions pendant environ deux heures, le public la traitant comme une cousine plus intime et plus franche de l’assemblée de Berkshire — moins de monde, davantage de latitude pour le pousser sur sa véritable façon de penser.

Pourquoi la regarder. Voici Munger expliquant de l’intérieur une vraie entreprise qu’il préside : le grand écart inconfortable du Daily Journal entre une activité de presse moribonde et une activité logicielle en croissance, qui vend des systèmes de gestion de dossiers aux tribunaux. Il est sans détour sur la lenteur et l’incertitude de cette transition, ce qui en fait un correctif utile pour quiconque s’imagine que les redressements sont des opérations nettes. La discussion sur Valeant est du pur Munger — il la cite comme le contraire de la conduite du Daily Journal, une entreprise qui a confondu agressivité financière et talent.

Fils marquants : l’économie des médias traditionnels en déclin ; sa théorie de la rémunération des dirigeants (la retenue comme signe de caractère, et non de faiblesse) ; la patience nécessaire pour saisir vite une position quand les probabilités finissent par basculer — le même instinct qui a guidé son gros achat de Bank of America.

China banking value investing Daily Journal incentives

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we're going to follow the procedures of the birkshire annual meeting where we're going to go through all this prefunc stuff very rapidly and then because you many of you come from great distances and so on and you're not really interested in Daily Journal company you're cult members that will stay a long time because some of you have come a long way I call a meeting to order the meeting will I'm Charlie Munger chairman of the board and here we have the other members of our board Rick Garren raise your hands you go Jerry solsman Peter Kaufman and Gary Wilcox then we have uh oh Jerry has so many titles you know he prob this is like a oneman show around here Ellen Ireland the inspector of Elections uh we have Ernst Miranda Chris Crow Michael kooken and squat Milner squat that's a good name and uh and they're from our um accountants I must say this right now we like our present accountants a lot better than we liked our old ones who made us late and then came up with excuses that's not our system we'll now go forward with the annual meeting Jerry salsman assistant well I won't go through all his titles he's been appointed Secretary of the meeting and Ellen Ireland is the inspector of Elections all P if you haven't given your proxies please give them to somebody I can Ellen will you please report the uh number of shares present and so on I'm Ellen Ireland 1, 38746 all right and somebody is going to give a report that it's all been mailed out as it should be oh yes all right and how many Shar chairs are here or at least do we have a majority yes we have a majority okay we'll go on to the next one I instruct Mr solsman to attach the affidavit showing that everything's been properly done to the minutes of the meeting and we have enough shares here and has everybody been elected as the uh the pro in the proxy uh statement Ellen has everybody been elected yes you ready for the vote yeah okay 7,564 69721 752 75212 well that's you can see why that comes out everybody likes everybody else other than me better I must say we've improved this place enormously because the average age used to be about 90 and now it's down to about 88 we're really renewing ourselves wonderfully well all right proposal true that we vote on that all in favor if they opposed waren used to say please leave the next is the U ratification of uh the selection of our accountants in favor 1, 26546 against one abstaining 75 all right that's done the next item is uh that's all advisor vote to approve the company's executive compensation for 73773 against 1,246 14,226 well that's done too then thank you that was the advisory with wasn't it which is it advisory vot oh all right the advisory wrote on the on the conversation which number is it number four all right that's that one on executive compensation okay one year 1,542 2 years 7,392 3 years 39728 abstaining yeah we a lot of these reforms coration America goes through that go stuff I can never see it has any effect at all everybody just does what they please they just go through these votes all right infectors of election have done that I all right now we're now we're through and into but I usually talk a little bit before we take the questions and the essence of what's going on here of course is that we have a corporation that was in a branch of the newspaper business and our branch of the newspaper business like most newspaper businesses has gone to gone to Hell compared to what it was in its peak years and almost every other newspaper business is going to hell with no Parton no they're just disappearing and what we have is this computer software business where we serving the same customers to some extent except now they're all over the country and even some of them outside the country with this we were selling software to all these courts in public agencies whereas before we were giving information to lawyers and other people and Publishing Public Notices and our software business is of a type where it's a long tough slog but we're slogging very well and we really love the people who were doing it for us we just we've got a lot of wonderful people in our software business the implementers and the computer programmers and the people that deal with the public agencies and the EOS of the place is very admirable everybody's trying to get ahead here by doing the work right and serving the customers right and having a lot of financial where money is never a problem in doing what we're supposed to do and it's a pleasure to people like Rick gar and myself to watch all these young people doing this and of course we're very glad to be able to do it when we should be dead and it's we're a lot of you people came into this because burer was successful and Garen was successful and for various odd reasons of history and most of you are accidentally in the software business and I am too because Karen did it when I wasn't paying much attention I don't do this kind of venture capital stuff and he doesn't either but he did it here and so if there's anything wrong with what happens in our software business you're looking at a man who caused all over here I'll take credit for any successes but if there's failure you're looking at the man here who gots into this and it is amazing to me some of the things that are happening in our software business we just are getting a contract from South Australia now anybody told me when I was young the little Daily Journal company would be automating the courts of South Australia I mean our hardly know where it is anyway it's it's amazing what's happening and it's a fair amount of fun to watch probably because we're doing more winning than losing I've never been able to enjoy losses the way some people do I would much rather win and I really like to work with good people instead of the opposite and we've got a lot of good employees in our software business we got a bunch of implementers in Utah who are really good at it whom we really trust and whom the customers like and we got all these computer programmers and so forth around here and a game of service like that when it's complicated what you have to do is minimize your glitches and crawl out of them very rapidly in a way where the customers trust you and our people are good at that and they get better and better and they're trying to get ahead by being good at the service not by hiring some politician as a consultant yeah some of our competitors do that kind of stuff but we're trying to slug our way up by doing the work right when I was a lawyer it was a saying I always used the best business getter any lawyer ever has is the work that's already on his desk and that's the basic ethos of our software business if we just keep doing it right I don't think we have to worry about the future not that we won't have our down drafts and our failures but we are actually grinding ahead slowly in that software business and it's very interesting because Garen I know practicly nothing about it and Jerry didn't come up with a software engineer so we're basically doing something that's quite difficult we're judging people because we don't understand what the people do we doesn't like we have and that's that's what Andrew Carnegie did of course he didn't know anything about making steel but he knew a lot about judging whether the people he was trusting were good at making steel and of course that's what berer has done if you stop to think of with we have a lot of businesses in Berkshire that neither Warren or I could contribute much to but we've been pretty good at judging which people are capable of running those businesses and but this is pretty extreme here little Bailey Journal company going to the computer software business and it's a long slow kind of business rfps the first time we contact a customer until we start making money maybe 5 years so it's like deciding you'll start prospecting for oil in Boro or something and you just keep doing that over and over again of course the money goes out and effort goes out it starts coming in 5 years from now I love that kind of stuff not when I think we're taking territory it doesn't look good when we write it off and we don't report wonderful numbers or anything but if make sense in the long term we just don't give a damn what it looks like over the short term and we know we've collected a bunch of shareholders that share our ideas after all we're running a cult not a normal company and I think most of you feel you're willing to wait I live all my life with people who are into deferred gratification in fact most of them will never have any fun they just they'll just prer gratification all the way to the end that's what we do and it does cause you to get what Rich so we're going to have a lot of Rich dead people but you know we can excite a lot of Envy a lot of you and the people walk by your grave and they'll be this nice grave with this nice vum up they'll say God what a great grave I wish I were hungry but at any rate theer gratification really does work if what you're interested in doing is running a business that gets better or better or getting wealthy yourself so that your grave can look nice to Outsiders and you know I don't know gett and I have never taken any money out of this company in all these years we don't take salaries we don't take direct fees we're A peculiar example I wish our example spread more because I think if you're wealthy and on a big sh share of a company and you get to decide what it does and whether it liquidates or whether it keeps going that's a nice position to be in and maybe you shouldn't and grab all the money in addition and that's my theory of executive compensation I think and some of the oldfashioned guys like Carnegie never took any salary to speak of Cornelio Vander didn't any he crous value of course he owned the whole place practically and he would have considered beneath him he lived on the dividends like the shers did and so there's a lot of that oldfashioned those oldfashioned ideas here in the in the Daily Journal company I'll first take a bunch of questions about the J Daily Journal question and after that we'll take questions on anything you want to talk about questions question I don't see it very well so Jerry or somebody why don't you hi Brad gpie from Chicago at last year's meeting you talked about the Milestone of getting the LA court system um here at Journal Technologies and I was wondering in the last year as it's gone by what good Milestones have happened and what bad things have happened with Jerry you take that one I'll answer short we're it's going fine closer to your mouth closer to your mouth it's Hightech there son we have three case types for Los Angeles and one case type went uh live last uh April another case type will go live this coming uh July and a third case type us about uh 10 to 12 months later after that we have to work with the Los Angeles schedule uh after all they have a lot of people to train and that becomes a very important factor uh training is critical uh because if the end users aren't trained properly virtually everything falls apart and so that's that's the schedule we discussed it this morning and uh we meet with the uh Court uh about three miles from here virtually every day and uh we have the good team uh from the court and uh I think they're very excited about uh what they're doing and that's critical to us that the court feels good about the system one good thing about what we're doing is it's slow and it's Agony in the delays between the first customer contact and finally getting into a decent Revenue stream but once you succeed it's very sticky business very sticky business so and the fact that it's difficult to do means it's difficult for people to change much and so if you if you go slog through all this stuff territory we're slugging through there's a reward out there somewhere and we're not in a small business as it's so has way more potential than the original print business we had giving information about Pell cases to lawyers it's a big market and the people have no option but to charge ahead these courts and District Attorneys public defenders all these people were serving they're they're overwhelmed blw out better system some more software so it's a huge market and the fact that it's so awful to grind through means that the people who want easy gratification don't come in so if it seems slow and painful to you we kind of like it that way hello another uh Daily Journal question I'd be curious on your thoughts about uh you're slowly grinding through but uh it seems like Tyler Technologies is uh grinding through a lot quicker they just won Maine they're in 24 States and uh so I was just wondering how you think your competitive position versus uh Tyler is doing well Tyler is an extremely aggressive company and they were bigger faster and so on but I like our ethos of operation better than I like theirs and if I were buying software I'd rather buy ours than theirs so our system is to keep fighting the game and I wish all the customers I had in life were like Tyler hi Max FL from Marina del re thanks for your answer so far I'm a little nervous about the U rate of Revenue growth going down a little bit the expenses going up I appreciate what you're saying about deferred uh gratification any major milestones in the next 3 to 5 years that you think you'd like to hit uh or any major customers that you'd like to get that would really help things a lot well take your first question it looks like we're proceeding slowly but we bought a bunch of contracts in effect for money and we knew that they were going to end and so we're amortising the cost of those contracts uh but it's really it was an anticipated decline that we got big revenues up front for taking so we're not declining as much as we're we're getting ahead that was there's a little blip in the figures now the second half of the question was uh any major jumps or uh Acquisitions You' like make or customers youd like toire there aren't any every contract that's significant is a major jump and this the business is so big their whole states I mean this is a huge business and everybody is just scrabbling in the first parts of something it's going to grow bigger and bigger and last and last and as long as we're doing the work right and so on why it's it's likely to work out right Daily Journal owns a lot of Wells Fargo in com well of course Wells Fargo had a glitch the truth of the matter is they made a business judgment that was wrong they got so caught up and cross and so forth and having tough incentive systems they got the incentive systems so aggressive that they some people reacted badly and did things they shouldn't and then they used some misjudgment in reacting to the trouble they got in I don't think anything's fundamentally wrong for the long pole with W Fargo they made a mistake and I it was an easy mistake to make and the smartest man I ever knew made a similar mistake Henry Singleton was the smartest single human being I've known in my whole life and Henry single tell also had very aggressive incentive systems like Well Fargo and his customer in many of the subsidiaries was the government and of course it's not that hard to keep the government and with his very aggressive incentive systems two or three out of 20 subsidiaries cheated the government so all of a sudden he's got three scandals at once wasn't that Henry was trying to cheat the government it's just that he just got a little aggressive in applying the incentives and he got blindsided that can happen to anybody and uh I don't regard getting the incentives a little aggressive at well as far goes the mistake I think the mistake there was that when the bad news came they didn't they didn't recognize it rightly they made a mistake but you know what happens in a tough system like capitalism you make a mistake like that and pretty soon you're G this Randy Vine from Phoenix Arizona I'm the Daily Journal shareholder this is for Jerry or Charlie um congratulations for inverting and not doing things wrong in regard to daily journal what about uh do you have any insight into the Alam court system and the problems that um uh Tyler is having over there well no but I'm not dissatisfied but I don't think I want to criticize Tyler anymore than I have so I think one of our customers you'll be sad to know is having some problems with the pleasing a customer okay got it I you see the salt tears running down my cheeks got a quick question on the um on your software fees in terms of your Revenue line what portion of that is recurring versus one time fees that is so complicated that I'm not even going to try to answer it I will just answer in substance there's a lot that's recurring if we stay in there you can't look at our financial statements and make very good judgments about what's going to happen it's the nature of our game that it's confusing confuses us a little bit and uh so we're we're not holding back on purpose it's a very complex confusing system when you got all these rfps and it's very complicated any other questions about the business so you purchased the building uh in Logan um but um which I believe is used exclusively in the journal Technologies but in the accounting it's under the traditional business I'm wondering why in the segment Jerry I gave you that one he says why is Logan somehow in the traditional business it shouldn't be I he has the theory The Daily Journal purchased the building and they own the building and journal Technologies pays rent to the parent company for that and the amount of rent is not what we would consider material from that perspective and because it's owned by The Daily Journal that's how we originally classified it no real significant reasons all the expenses are on the daily journals are on General technology books that's some Quirk of accounting I it doesn't really matter all right next questions question you had about question on incentives you were explaining at Fargo that they might have been a little too aggressive but you don't have problem aggressive incentives stand on well how do you know they're aggressive until you try and it's they didn't react enough to the bad news fast enough and of course that's a very dangerous thing to do I don't think it impaires the future of Wells Fargo as a matter of fact they'll be better for it well one nice thing about doing something dumb is you probably won't do it again so this isn't a Daily Journal question but my question comes from the perspective of someone early in their career who is trying to figure out which of several paths to pursue two thoughts that seem helpful for this purpose are one figuring out what work you have the possibility of becoming the best at and two ascertaining what kind of work would most help Society do you think these ideas are the right ones to focus on and if so how would you go about answering them well in terms of picking what to do I want to report to all of you that in my whole life I've never succeeded much in something I wasn't interested in so I don't think you're going to succeed if what you're doing all day doesn't interest you got to find something you're interested in because it's just too much to expect of human nature that you're going to be very good at something you deeply dislike doing and so that's that's one big issue and of course you have to play game where you've got some unusual talents you do not want to play if you're 5 foot one you don't want to play basketball against a guy that's 8 F3 it's just too hard and so you got to figure out a game where you have an advantage and it has to be something you're deeply interested in now you get into the ethical side of life of course you want to be ethical on the other hand you can't be just dreaming how you think the world should be run and that it's too dirty for you to get near it you know like you can get so consumed by some kind of ideological notion particularly in a leftwing university that it's like you think you're handling ethics and what you're doing is not working and watching the world go by maybe smoking a little pot to boot this is not the Munger system my hero is my Mones and all that philosophy all that writing he did after working 10 or 12 hours a day as a practicing physician all his life he believed in the engaged life and so I recommend the inv engaged life he spent all your time thinking about you know some politician wants to this way or that way and you're sure you know right you're on the wrong track you want to you want to do something every day where you're you're coping with the reality you want to be more like my man of andless like Bernie Sanders so I have I have a question on American Express oh I have a question on American uh what the increasing the fluidity of payments weaken is uh whereing streaks in his uh value proposition in the long run as in like is American Express value proposition more in terms of payment or is it more important in terms of service and rewards and the last one well I'm going to give you an answer that'll be very helpful to you because you're somewhat confused about what the exact future of Wells Fargo will be American Express American Express American Express and I want to say I'm confused too I think that if you think you understand exactly what's going to happen to Payment Systems 10 years out you're probably under some state of delusion it's very hard to know so if you're confused all I can say is welcome to the club they're doing the best they can they've got some huge advantages that they're it's a reasonable it's a reasonable bet but nobody knows I don't know if IBM is going to sell that much of Watson I always say I'm agnostic on the subject and you're talking about that payment system 10 years out I'm agnostic on that too I think if you keep trying do the right thing and you play the game hard uh your chances are better but I don't think those things are knowable think of how fast they change hi Miss Munger um do you think domestic natural gas exploration and production is a good business despite the capital intensity thank you well that's a different subject I have a different feeling about the energy business than frankly anybody else in America I wish we weren't producing all this natural gas I would be delighted to have the condens it that's coming out of our Shale deposits of natural gas just lie there un tapped for decades in the future and pay extra to on you Arabs to use up their oil so but that's nobody else in America seems to feel my way but I'm into deferred gratification the oil and gas is not going away and I think it's just as important as the top soil of Iowa and if some you any of you said oh goody I found a way to make money we'll ship all our top soil from Iowa to Greenland I wouldn't think that was a very good idea and so I don't think hastening to use up all our oil and gas is a good idea but I'm the practically the only one in the country that feels that way there's not enough deferred gratification in it to please me but I don't see any advantage I regard our o and gas reserves just as chemical feed stocks they're essential in Civilization leave aside their energy content I'd be delighted to use them up more slowly by the way I'm sure I'm right the other 99% the people were wrong but no I don't know the oil and gas business is very peculiar the people who succeed in most other businesses are doing way more physical volume than they did in the past but a place like Exxon you know the physical volume goes by 2/3 it's just that the price of oil goes up faster than the physical volume goes down that is a very peculiar way to make money and it may well continue but it's it's confusing we're not used to it Mr M yeah uh as an 18-year-old interested in many disciplines I was wondering how you can Thrive as a polymath in a world that celebrates specialization well that's a good question I don't think operating over many disciplines as I do is a good idea for most people I think it's fun that's why I've done it and I'm better at it than most people would be and I don't think I'm good at being the very best at handling differential equations so it's it's been a wonderful path for me but I think the quick path for everybody else is to specialize and get very good at something that Society rewards and think get very efficient at doing but even if you do that I think you should spend 10 or 20% your time into trying to know all the big ideas and all the other disciplines otherwise I use the same phrase over and over again otherwise you're like a oneel leg man in an ass kicking contest this is not going to work very well you have to know the big ideas and all the disciplines to be safe if you have a life lived outside a cave but no I think you don't you don't want to your business as a dentist to think great thoughts about PR Mr M question for you on La of paloa effects what are you observing now in your study of current events that's causing you concern and how can one use that interdisciplinary approach to spot them in advance thank you well I coined that term the L of paloa effect because when I realized I didn't know any psychology and that was a mistake on my part I bought the three main textbooks for introductory psychology and I read through them and of course being Charlie merer I decided that the psychologists were doing it all wrong and I could do it better and one of the ideas I came up with which wasn't in any of the books was that the laap paloo effects came when three or four of the Tendencies were operating at once in the same situation I could see that the that the ex it wasn't linear you got laalo effects but the psychology people couldn't do experiments there were four or five things were happening at once because it got too complicated for them and they couldn't publish so they were ignoring the most important thing in their own profession and of course the other thing that was important was to synthesize psychology with all else the trouble with the psychology professional is they don't know anything about all else and you can't syn synthesize one thing you know with something you don't if you don't know the other thing so that's why I came up with that L paloa stuff and by the way I've been lonely ever since I'm not getting any ground I'm not taking any ground there and by the way I'm totally right Charlie um I'm Paul Smith from Los ales California my question relates to a comment you made some years ago about Warren Buffett I think you said that he uh has become a significantly better investor since he turned 65 which I found a remarkable comment I was wondering if you could share information about that maybe we haven't heard before I know youve commented that he's a he's a learning machine and we all know that the uh aversion to retail that came out of the Diversified episode and so on um just to be interested if is there something that's Chang about his risk assessment or his Horizons or any color there would be fantastic to thank you well if you're in a game and you're passionate about learning more all the time and getting better and honing your old skills a little more etc uh of course you do better over time and some people are better at that than others and it's amazing what Warren has done we never Berkshire would be a very modest company now if waren never leared anything he never would have given anything back I mean any territory he took was going to he was going to keep he was going to hold it but what really happened was we went out into the new Fields like buying whole businesses and we bought them things like iscar war never would have bought when was young Ben Graham would never bought his car we paid it you know five times a book or something for his car and it wasn't in the gram play and Warren who learned under Graham just he learned better over time and I've learned better we the nice thing about the game we're in is that you can keep learning and we're still doing it imagine we're in the Press this CM DC uh for all of a sudden BR Airline stocks what have we said about the airline business we thought it was a joke it was such a terrible business and now if you put all those stocks together we owned one minor Airline well it's a total catechism we did the same thing on railroads you know we said the railroads are no damn good you know too many of them truck competition and we you were right it was a terrible business for about 80 years but finally they got on of four big railroads and it was a better business and something similar is happening in the airline business on the other hand this very morning I sat down in my library with my daughter-in-law and she Pi a roundtrip ticket to Europe including taxes it was like $4 or $500 and we're buying into the airline business now it may were got to be a good idea for the same reason that our railroad business turned out to be a good idea but there's some chance that it might not in the old days I frequently talked to Warren about the old days and for years and years and years what we did was shoot fish in a barrel but it was so easy that we didn't re want to shoot at the fish while they were moving so we waited until they slowed down and then we shot at on a shotgun and it was just that easy and it's gotten harder and harder and harder and now we get little edges when before we had total centes and it isn't any less interesting and we do not make the same returns we made when we could run around pick this low hanging fruit over off trees that offered a lot of it so now we go into things we bought the Exxon position you know Wen bought Exxon as a cash substitute he would never have done that in the old days we had a lot of cash and we thought Exon was better than cash over the short term that's a different kind of thinking from the way Warren came up he's changed and I think he's changed when he buys Airlines and he's he's changed when he buys Apple think of the hooting we've done over the years about Hightech we just don't understand it not competency the worst business in the world is Airlines and what do we appear in the Press Hood apple and a bunch of Airlines I don't think we've got we've gone crazy I think the answer is we're adapting reasonably to a business that's gotten no very much more difficult and I don't think we have a cinch in either of those positions I think we have the odds a little bit in our favor and if that's the best Advantage we can get we'll just have to live on the advantage we can get I used to say you have to marry the best person that will have you and I said I'm afraid that's a rule of life and you have to get byy in life with the best Advantage you can get and things have gotten so difficult in the investment world that we have to be satisfied with the type of advantage that we didn't used to yet on the other hand the thing that caused it to be so difficult was we got so enormously rich and that's not a bad tradeoff Mr Munger at last year's meeting you said Donald Trump was not morally qualified to be president and now that he is President do you still agree with that or do you think he's qualified in any capacity well I've gotten more mellow I always try and think about the good as long with what's not good and I think some of this stuff where they're reexamining options about the whole tax system of the country I think that's a very constructive thing and when Donald Trump says he wouldn't touch Social Security when a lot of holtin uh Republicans have all kinds of schemes for Rising Social Security I'm with Donald Trump if I if I were running the world I'd have his exact attitude about social security I wouldn't touch it so he's he's not wrong on everything and just because he isn't like us roll with it's a little danger what the hell you're not going to live forever any anyway uh hi Charlie I was wondering what was the most meaningful thing that you did with your life well I think the family and children is the most meable thing that most people do with life and I would I've been reasonably fortunate for I don't think I am a perfect husband and I'm lucky to have as much Felicity as I got and I always needed a certain amount of Toleration from the fair SE I started wrong and I never completely fixed myself I should tell this group about you come here as a cult to talk to a cult leader I want to take you back in history you'll see what an inferior person you were you're you're now trusting when I was in a freshman in Omaha Central High there was a family of a family dur my age and she had done off to summer camp in the year before and she met a brown a blonde goddess a voluptuous 13-year-old and I was a skinny underdeveloped whatever and so forth you got to take my blonde god goddess to this dance and so I wanted to impress this blonde goddess and so I pretended to smoke which I didn't and she was wearing a net dress and I set her on fire and I was quick wited and I threw Coca-Cola all over at a due time the fire was out and that's the last I saw the blonde goddess and then I said well I got to make more time with the girls and I wanted to get a letter in know Central h of course I was no good at any sport so I went down to the rifle range and learned they gave letters in rifle shooting and I was so skinny that I could shoot a 100 every time in the city position but sitting position by putting sitting cross-legged and putting one elbow on each foot try it you'll break your neck and but I guess 100 every time so I was a good rifle shooter and they gave me a letter but I was so skinny and short and underdeveloped that it went from one armpit to the other and I walked down the hallway trying to impress the girls and they would turn their head but what they said was how did a little skinny on attract a little run like that get a letter and then I had another experience there was a girl who had a name I still remember zby Brewington she was a senior and a very popular senior and I was a nerd software and somehow she agreed to go with me to a party in one of the out buildings of the Omaha Country Club perhaps because she liked one of my friends who was a big strapping fellow and so I took zeby for his party in my 1934 Ford it's sleeted and got rainy and so for I managed to stick the Ford in the mud I couldn't get out of it zby and I had to walk for several miles for sleep that was the last I ever saw zby brother and then my car stayed in the mud and I neglected to put in an antifreeze and the temperature went way down suddenly and the block broke and of course it was it was too expensive in fact gu I lost my car and my father wouldn't buy a new one cuz he said why should I buy new car for a guy who's dumb enough not to put any fre in this is the person you're coming for miles to see and so I didn't get a new car and my life was just one long Litany of mistakes and failure and it went on and on and on and politics I ran to be the president of the dsic and Greg School the dundy school Improvement Association I had the most popular boy in the school is my campaign manager I came in second by Miles I was a total failure in politics there's hardly anything I succeeded that now I tell you all this because there I know a nerd when I see one and there are a lot of nerds here you can tell stories like mine and I want you to feel it's not hopeless just keep trying well Mr M oh yeah Garen wants me to repeat the story of Max Plank and according to this story Max plank when he won the Nobel Prize was invited run around Germany giving lectures and a chauffeur drove in and after given the lecture about 20 times the chauffeur memorized it and he said you know says Professor plank is so boring why don't you just sit in the audience and I the chauffer will give your talk and so the chauffer got up and gave Max plank talk on physics and some professors have asked some terrible questions and the chauffer said well he says I'm surprised that an advanced City like Munich people are asking Elementary questions like that he says I'm going to ask my SCH to answer that one well I'm telling jokes I might tell one of my favorite stories about a plane that's flying over the Mediterranean the Pilot's voice comes on he says a terrible thing has happened we're losing both engines we're going to have to land in the Mediterranean and he says the plane will stay afloat for a very short time and we'll be able to open the door just long enough so that everybody can get out and we have to do this in an orderly fashion he says everybody who can swim go to the right wing and just stand there and everybody who can't swim go to the left wing and just stand there and he says those of you on the right wing you'll find a little island in the direction of the sun it's 2 miles off and as the plane goes under just swim over to the island you'll be fine and for those of you on the left wing he say I want thank you for flying Air Attack hello Mr Munger uh William Andrian student at USC wonderful stories um with regard to the proliferation of index funds do you think that there may be issues of liquidity anytime we go through another large crisis and then do you think that will create large discrepancies between the price of the index fund and the values of the Securities um underneath well the index funds of the S&P is like 75% of the market so I don't think the exact problem you're talking about is going to be a big problem you're talking about the SCP index but is there a point where index funds theoretically can't work of course if everybody bought nothing but index funds the whole world wouldn't work as people expect there's also the problem one of the reasons you buy a big index like the S&P is because if you buy a small index and it gets popular you have a it's a self-defeating situation when the nifty50 were the rage JP Morgan talked to everybody in buying just 50 stocks and they didn't care what the price was they just bought those 50 stocks and of course in due time their own buying forced those 50 stocks up to 60 times earnings whereupon it broke and everything went down by about 2/3 quite fast in other words you can't if you get too much fishness in one sector or in one narrow index of course you can get catastrophic changes like they had with the nifty50 in that former era I don't see that happening when the index is 3/4 of the whole Market the problem is the whole thing can't work perfectly forever and but it'll work for a long time the indexes have caused just absolute agony among intelligent investment professionals because basically 95% of the people have almost no chance of beating it over time and it's and yet lot of the people expect if they have some money they can hire somebody who will let them beat the indexes and of course the honest sensible people know they're selling something they can't quite deliver and that has to be Agony most you will handle that with denial they think it be better next year they just don't want to think about it and I understand I don't think about my own death either but it's a terrible problem beting those indexes and it's a problem that investment professionals didn't happen in the past and what's happening of course is that the prices for managing really big sums of money are going down 20 basis points and so on uh the people who Rose in Investment Management didn't do it by getting paid 20 basis points but that's where we're going I think in terms of people who manage big portfolios of say American equities in the equivalent of the S&P so it's a huge problem and it makes your generation of money managers have way more difficulties than and causes a lot of worry and fretfulness and I think the people who are worried and fretful are absolutely right I would hate to manage a trillion dollars in the big stocks and try and beat the indexes I don't think I could do it in fact if you look at birkshire you take out 100 decisions which is like two a year the success of Bircher came from two decisions a year over 50 years we're hardly great if we may have beaten the indexes but we didn't do it by having big portfolios of Securities and having subdivisions managing the drugs and subdivisions and so no the indexes are a hell of a problem for you people but you know why should look shouldn't life be hard I it's it's what had to happen What H what's happened now if you take these people doing some of those early trading by computer algorithms that worked then somebody else would come into the same thing with the same algorithm and play the same game and of course the returns went down well that's what's happening in the whole field is if the returns you're really going to get being pushed down by the progress of Sons thank you m thank you Mr uh Munger my name is Nick Henderson I'm from California I have two questions for you my first question is what books or experience were the most formative to you in your early career and the second question is where and how do you tell your most ambitious grandchildren to look for business opportunities look for what business opportunities get the last word business opportunities well I don't spend any time telling my grandchildren what business opportunities to look for you know I don't have that much hope I'm going to have trouble getting my grandchildren to work at all anyway the uh I don't think there is an easy way to handle a problem of doing better and better with finances obviously if you're glued together and honorable and get up every morning and keep doing it and keep learning every day and you are willing to go in for a lot of defer gratification all your life you're going to succeed it may not be as much as you want but it you're going to succeed and so the main thing is to just keep in there and be glued together and get rid of your stupid I ities as fast as you can avoid the bad people as much as you can and you'll do reasonably well but try teaching that to your grandchildren I think the only way you got a chance is sort of by example so if you want to improve your grandchildren the best way is to fix yourself oh I books I you C to send me so many books but I can scarcely walk into my own library and so I'm reading so many now because I never throw one away I at least SC and so I've gotten some I'm like a kaleidoscope with rest of the books I just read this new book by Thorp the guy who beat the dealer in Las Vegas and then he did computer algorithm trading and I really like the book for one thing the guy had a very good marriage and he seemed grateful for it and it was touching for another he's a very smart man he was a mathematician using a high IQ to a beat the dealer in Las Vegas and so forth and then B use these computer algorithms to do this massive trading and I found it very interesting and since some of you people are nerds and maybe like may like a buried love story I recommend Thor's Thor's notbook it's an interesting thing to do to beat the dealer in Las Vegas you know they were wearing disguises and so on and Peter coffin told me a story about somebody he knows did the same thing as Thorp did he said he did it more extreme he wore disguises and so forth he won4 million do I think in the casinos you know and that was hard to do because casinos don't like playing against people who might win and then he maybe it was 40 million whatever it was then he went to the stock market where he made $4 billion again clever algorithms and you know these people are mathematically gifted and they shifted so it's still going on and it I don't think many of you are going to do it there can't be many people who are mathematically gifted enough and manipulate statistics and everything else so well but they find little algorithms that will make them $4 billion but there are a few and some of them started just like Thorp so thorp's book is interesting and I recommend it to you hello Mr mang my name is mun I am a student at the University of Pennsylvania in Philadelphia thank you for being such a great teacher uh you have expressed your appreciation for the idea of filial py the confusion idea in this generation how can we fulfill our filial duties I didn't quite catch uh how can we so in my generation I at least will be staying far away from my parents so how can I fulfill my filial duties the best way as you see it oh theop sorry well of course that's what that's a that's I like quiet you know they worship old man Rich old man and that is my kind of a system and but I think the idea of carrying about your ancestors and caring about the Traditions I think all that stuff is a big part of what's desirable and I really admire the confusions for that notion that it's not a it's not a game that's played just in one life it's a game where you're handing the Baton off and you're accepting the Baton for your predecessor so if fop is your game why I think it's a very good thing think of how rootless we'd all be if we had no families at all no predecessors no descendants it would be a very different life and think what we owe to the people that figured out things in past in the past that make our civilization work so I'm all for theal py and his close cousins good morning Mr M Jesse colus from New York uh you said that any year in which you don't destroy one of your best loved ideas is a wasted year uh it's well known that you helped COA Warren towards quality which was a difficult transition for him I was wondering if you could speak to the hardest idea that you've ever destroyed well I've done so many dumb things that I think I'm very busy destroying bad ideas because I keep having them and so it's hard for me to just single out one from such a multitude but I actually like it when I destroy a bad idea because I think I'm on the right I think it's my duty to destroy old IDE I know so many people whose main problem of life is that the old ideas displace the entry of new ideas that are better that is the absolute standard outcome in life there's an old German folk saying that describes that he says we're too soon old and we're too late smart that's everybody's problem and the reason we're too late smart is the stupid ideas we always have we already have we can't get rid of now it's a good thing that we have that problem in marriage that may be good for the stability of marriage that we stick with our old ideas but in most Fields you want to get rid of your old ideas and it's it's a good habit and it gives you a big advantage in the competitive game of life since other people are so very bad at it what happens is as you spout ideas out what you're doing is you're pounding them in and so you get these ideas and then you start agitating and saying them and so forth and of course the person you're really convincing is the is you already have the ideas you're just pounding them in harder and harder one of the reasons I don't spend much time telling the world what I think about how the Federal Reserve System should behave and so forth is I know that I'm just pounding the ideas into my own head when I think I'm telling other people how to run things so I think you have to have mental habits that I don't like it when the young people get violently ad uh get violently convinced on every damn cause or something I think they know everything some 17y old must to tell a whole world what to be done about abortion or foreign policy in the Middle East or something all he's doing when he or she spouts about what he deeply believes is pounding the ideas he already has in which is a very dumb idea when you're just starting and have a lot to learn so it's very important that haveit of getting rid of the dumb ideas and one of the things I do is Pat myself on the back every time I get rid of a dumb idea and you say what can you really reinforce your own good behavior yeah you can if other people won't praise you can praise yourself I have a big system of patting myself on the back every time I get rid of a good much beloved idea I Pat myself on the back sometimes several times and I recommend this same mental Habit to all of you the price we pay for being able to accept a new idea is just awesomely large indeed a lot of people die because they get a no idea through hello Charlie my name is Donovan schaer I'm over here to your right in the pink all right um I used to work as a petroleum engineer and from my experience of that and I was kind of in it through a lot of the whole Shale stuff that's happened um and my perception is that as a industry itself it just continuously has gotten more and more complex and more Technical and that as the economy in general expands and you have more uh division of labor and specialization um it seems to me that it'll be very hard like it could be a challenge for investors unless there is some more specialization or something I guess my question is As It Gets more do you think that Capital allocators are going to need to become more specialized uh going forward well you petroleum people of course have to get more specialized because the oil is harder to get and you have to learn new tricks to get it and so you're totally right generally specialization is the way to go for those people it's just I'm an example of something different it's awkward for me because but I don't think I don't want to encourage people to try to do it the way I did CU I don't think it'll work for the most people I think it'll the basic ideas of being rational and disciplined and deferring gratification those will work but if you want to get rich the way I did by learning a little bit about a hell of a lot I don't recommend it to others now I've got a story there that I tell a young man comes to see Mozart he says I want to compose Symphonies and Mozart says you're too young to commit to compose Symphonies and they says he's 20 years old he says but you were composing syy who you were 10 years old and M says yeah he says well I wasn't running around asking other people how to do it and I think there's some of that in I don't think I'm a good example to the um to I don't want to encourage people to follow my particular path I like all the general precepts but I would not if you're a proctologist and I want a prologist I do not want a prologist that owns that knows shopen or astrophysics you know I want a man who's specialized that's where the market is and you should never forget that on the other hand I don't think we much of a life of all you did was prology hi Bill CH from New York City um this question is for Charlie um Warren and you are known for saying that if you work with a small sum of capital namely I think being $10 million Warren probably said that he could guarantee that he compound thata 50% the year so my question is can you provide some examples and I would ask kindly ask you to buy as many examples as possible and be as specific as possible thank you well man I hear somebody that really wants to get rich at a rapid rate with specifics that is not what we try and do here we want to leave some mystery so that you can use yourself finding your own way you know the good ideas that I have had in my life or quite few but the lesson I can give you is a few is all you need and don't be disappointed and when you find the few of course you've got to act aggressively that's the wonderer system and I learned that indirectly from a man I never met which was my mother's maternal grandfather he was a Pioneer and he came out to Iowa and fought in the Black Hawk Wars and so on and eventually after enormous hardship he was the richest man in town and he owned the bank and uh so on and as he sat there in his old age my mother knew him cuz you go to his go to Iowa where he lived and had the big house in the middle of the Town iron fence capacious Lawns big barns oh yeah and what Grandpa inam used to tell her is there's just a few opportunities you get in a whole lot this guy took over Iowa in the land was the black top soilo Iowa was cheap but he didn't get that many opportunities it was just a few that enabled him to become Pro prosperous he bought a few Farms every time there was a Panic you know and you lease them to Thrifty Germans you couldn't lose money leasing a farm to a German in IA and but he only did a few things and I'm afraid that's like you're not going to find a million wonderful ideas I think these people with the computer algorithms do it but they have a computer sifting the whole world it's like plaster Mining and of course every Niche they're in if somebody else comes in the niche starts leeching away and I don't think it's that honorable a way to make a living by the way I would rather make my money in some other way than outsmarting the trading system so I have a little computer algorithm and just leeches a little lot of everybody's trade I always say that those people have all the social utility of a bunch of rats and a granery it's not that great a way to make money I would say that if you make your money that way you should be very charitable with it because you got a lot to home for and so I don't think it's an ambition we should encourag and the rest of us who aren't just leeching a little off the top because we're great at computer science and that's what this room is full of and if you're not finding it harder now you don't understand it that's that's my lesson yeah what hi Mr manger my name is Camden sh I like to know what's your favorite industry and why's your favorite industry I didn't quite follow that oh I would like to know what's your favorite industry and why it's your favorite industry my favorite industry well my favorite industry is taking care of my own Affairs and it's fun it's creative and it's the job that life has given me and I think you should do the job well that life G gives you and uh I a lot of the places where the industry is doing a great job for the world it's very hard to make money out of it because these wild enthusiasms come into it so I don't have a favorite industry Charlie a few years ago you were banging on in identifying the monkey business at alion is there any current Monkey Business in Corporate America that worries you well the answer is yes but not as Extreme as Valiant that was really something that was really something I probably shouldn't have done that but you people come so far and you and since you're cult members you like being here and I feel an obligation to tell you something sort of interesting and I just straight into vant that year and it was really pretty disgusting in the interesting thing is how many high-grade people that took in it really and it was too good to be true it was it was a lot wrong valant and it was that it was so aggressive and it was drugs people needed it was it was just take the difference between badle and the daily Drome company and the for clusion boom came we had 80% of the for closure business in our area that's a big area Southern California and Northern California too would have been very easy for us to raise the prices and make I don't know 50 million more or something like all these people are losing their houses a lot of them perfectly decent people just never the idea that right in the middle of that we' just make all the money we could which some of our competitors did by the way we just didn't do it I don't think capitalism requires that you make all the money that you can I think there are times when you should be satisfied with less based on just ideas of decency and it valant they just looked at a game like chess they didn't think about any human consequence they didn't think about anything but getting what they wanted which was money and glory and they just stepped way over the line and of course in the end they were cheating but I don't have a new one I don't know the business I got a lot of publicity out of that belly I'm not looking for I don't want this room to have twice as many people next year and I don't want me not to be here either uh Mr M I'm Tim midley thank you for your advice over the past 30 years my question relates to a talk you gave to Foundation Financial officers in 1998 here in California and in that talk you were critical of the complexity and the expense of many Foundation portfolios we said specifically an institution with almost all wealth invested longterm in just three fine domestic corporations is securely Rich you gave as an example the wooder foundation in Coca-Cola so if you had a foundation today with let's say a billion dollars would you be comfortable with it being invested in just three stocks well let's take the foundation I'll change your question around so I want to answer it am I comfortable with a non-diversified portfolio of course I'm if you say the mongers I care about the mongers the mongers have three stocks we got a block of burshire we got a block of Costco we have a blockly lose fund and the rest is dribs and grabs so am I comfortable am I securely Rich you're damn right I am and could other people be just as comfortable as I am if didn't have a pass portfolio with a lot of names in it many of whom neither they know their understand or their advisers understand of course they'd be better off if they did what I did but and is three stocks enough what are the chances that Costco is going fail what are the chances that burer haway is going to fail what are the chances that leelu's portfolio in China is going to fail Chan of any one of those things happening are almost zero the chance that all three of them are going to fail of course it's kind that's one of the good ideas I had when I was young when I started investing my little piddly savings as a lawyer I tried to figure out how much diversification I would need if I had a 10% Advantage every year who was stocks generally I just worked it out I didn't have any formula I just worked it out of my high school algebra and I realized that if I was going to be there for 30 or 40 years I'd be about 99% sure to do just fine if I never own more than three stocks and then my average holding period was three or four years and once i' done that with my little pencil I just I never I moment believe this baller Dash they teach about wide diversification if you're diversification is for people who don't know anything Warren calls them no nothing investors if you're a no nothing investor of course use it on the average but if you're not a no if you're actually capable of figuring out something that'll work better you're just hurting yourselves for looking for 50 when three will suffice hell one will suffice if you do it right one if you have one CCH what else do you need in life and so the whole idea of that the know something investor needs a lot of diversification to think we're paying these professors to teach this crap to our young and that people think they should be paid by telling us to diversify where it's right it's an idiot decision and where it's wrong you shouldn't be teaching what's wrong so it's what's going on in corporate finance teaching is that people are getting paid for dispensing Baler Dash and since I never believed it was a great help to me it helps if you're out in the market and the other people are believing boulder dash and you know what the hell is going on it's a big help but so of course you don't mind a lot if your uncle Horus who has no children has a men business which is immensely secure and powerful and he's going to leave it all to you if you come to work in the business you don't need any diversification you don't need any Corporate Finance professors you should go to work for Ultra horse it's a CCH you only need one CCH and sometimes the market gives you the equivalent of an uncle horse and when it does step up to the pie cart with pie cart with a big pan P Hearts like that don't come very often when they do you have to have the gumption and the determination to seize the opportunity shly I was lucky imagine learning that from your dead great-grandfather at a very young age but you know I spent my whole life with dead people I really like there's so they're so much better than many of the people I'm with here on Earth all the dead people in the world you can learn a lot from them and they're very convenient to reach Out book Away know those problems of transportation and so I really recommend making friends among the eminent dead which of course I did very early that's been enormously helpful some of you wouldn't have helped me but Adam Smith really did uh good morning M Mr M back here yeah uh my question is about the Irish economy and Irish banking I know that Berkshire hathway was a shareholder in Irish Banks uh pre2 2008 and I'm wondering if you could comment on uh How the Irish economy and Irish banking system proceeds with the UK not being part of the European Union going forward well that of course was a mistake and it was a mistake that we shouldn't have made because both bar and I know that you can't really trust the figures put out by the banking industry and the people who run banks are subject to enormous temptations that lead them astray because it's easy to make a bank report more earnings but a thing that any OT could do which just make it a little more gy and of course that's dangerous and yet The Temptations are very great so we shouldn't have made that mistake but we did and that's a good lesson too that even if you're really good at something you will occasionally drift into a dumb mistake and now that's the question about the bank the they went crazy in Ireland the bankers and we went crazy when we trusted their damn statements and it was a mistake now what Ireland has done was very smart in reducing all these taxes now they have english- speaking people with practically no taxes and there a fair amount out of charm and so forth in Ireland it's not like it's a terrible place to be and they just sucked in half the world into Ireland where they got these Gates went there very early with Microsoft and so on and they took a place that was really a backward place that had sort of an internal Civil War for 60 or 70 years and bad opportunities and they really brought in a lot of prosperity and they did that by this competitive lowering of taxes so on so it worked for Ireland so I think Ireland deserves a lot of credit for the way they Advanced their country and of course are we going to have a thing where all the countries keep trying to reduce the taxes to suck in the for it because it won't work for everybody but it did work for Ireland so I think Ireland deserves a lot of credit and of course they've recovered pretty well from a really major collapse the Irish are like the Scottish I always think that the those Gaelic are pretty unusual people and I'm very glad that I had a Scotch Irish great grandmother uh Charlie on your right uh my name is spot chre I'm from India uh I just want to thank you first and foremost for being such an amazing teacher to me and uh all the investors around the world uh my question is in regards to lean you and you've on several occasions spoken about the economic miracle that is Singapore and then how it was transferred on by D Xiao ping to China what are your thoughts about India that's going through a similar change with the Prime Minister who also um idolizes these people and wants to create a similar sort of situation I'd like to like your thoughts on that's a very intelligent question and I'm not saying all the other questions weren't and I regard Le lewanuu may have been the best Nation Builder that ever lived he took over an aial swamp with no assets no natural resources no nothing surrounded by a bunch of Muslims who hated it hated it in fact he was being spat out by the Muslim country they didn't want a bunch of damn Chinese in their country that's how that's how Singapore was formed as a country the Muslims spattered out and so he here he is no assets no money no nothing people are dying of malaria lots of corruption and he creates in a very short time by historical standards modern Singapore it was huge success was such a success there's no other president in the history of the world that is any stronger now China is more important because they're more Chinese but you can give lean you a lot of the credit for creating modern China because those pragmatic communist leaders they saw a bunch of Chinese that were Rich when they were poor and they said the hell was this remember the old communist said I don't care whether the cat is Black or White I care whether the catch is mice and he wanted some of the success that Singapore got and he copied the Playbook so I think I think the Communist leadership the cab Leu was right I think lewu was right and of course I have two busts of somebody else in my house one is Benjamin Franklin and the other is B you so that's what I think of him so I think now you turn to India and I would say I'd rather work with a bunch of Chinese than I would Indian civilization mired down case system overpopulation assimilating the worst stupidities of the democratic system which by the way leew you and boy it's hard to get anything done in India and the Brads are just awful so all I can say is it's not going to be easy for India to follow the example of lean you I think India will move ahead but it is so defective as a get ahead in place the Indians I know are fabulous people they're just as talented as the Chinese I about the Indian populace but the system and the poverty and the corruption and the crazy Democratic thing where you let anybody who screams stop all progress it itmes India with problems lean you didn't have and I don't think those Indian problems are all easy to fix let me give you an example the Korean Steel company PCO invented a new way of creating steel out of lousy iron or and lousy coal there's some province in India that has lots of lousy iron ore and lots of lousy coal which there's not much use for and this one process would take their lousy iron or in the coal and make a lot of Steel and they got a lot of cheap labor so Pasco and India were made for each other and they made a deal with this province to get together and use the Pasco knowhow and the Indian Lai iron or and lousy coal and eight or N9 or 10 years later with everybody screaming and objecting and Farmers lying down on the road or whatever was going on they canceled the whole thing in China they just would have done it lean you would have done it in Malaysia India is grossly defective because they've taken the worst aspects of our culture allowing a bunch of idiots to scream and stop everything and theyve copied it and so it they have they've taken the worst aspects of democracy and then they forged their own chains and put them on themselves so no I don't like I do not like the prospects of India compared to the prospects of and I don't think that IND is going to do as well as Le on you hi my name is St and I like to ask the question about the for word l um in 73 your investment firm with Mr Wheeler lost over 30% and again 74 so that's over half in two years so what happened and were you have you been doing differently since then well somebody restate that for me cuz I don't carear as well as I used to so what happened in 73 and before when you when your investment firm lost over half oh that's very simple that is very easy and that's that's a good lesson that's a good question what happened is the value of my partnership where I was running went down by 50% in one year and now the market went down 40% or something it was a it was a once and 30-year recession I mean Monopoly newspapers were selling at three four times earnings at the bottom tick I was down from the peak 50% you're right about that and that has happened to me three times in my birkshire stop so I regard it as a part of manhood that you're going to be in this game for the long poll which is the way to do it you better be able to handle a 50% decline without fussing too much about it and so my lesson to all of you is conduct your life so that you can handle a 50% decline with a plum and Grace don't try to avoid it will come in fact I would say if it doesn't come you're not being aggressive enough good morning Mr merer thank you for having all us and thank you for your office employees for tolerating many more people in here than normal my question relates to your think it's their last chance we hope not my question relates to your paper on the biases of psychology of human misjudgment um you spoke about choosing great people earlier and I'm curious how do you evaluate handle and manage people knowing they might exhibit or suffer from biases you are not and how have you and Mr Buffett become such fine judges of character not just someone's skills and abilities well I think partly we look smart because we picked such wonderful people to be our partners and our Associates even our employees and that's going on right here Jerry solman is not normal he looks normal but he's a damn freak Jerry does things across two or three disciplines that are almost Beyond human and he's always been that way but he's another midwesterner he has come out of the soil back there and so we've been very lucky to have these wonderful people and I wish I'm not quite sure I think one thing we've done that's helped us to get wonderful people I always say the best way to get a good spouse is to deserve one and the best way to get a good partner is to be a good partner of yourself and I think that Warren and I have both been good with that and but whatever the reason we had these Marvels partners and they make us look a lot better than we are you wouldn't even be here if Jerry zman weren't here we did not have a number two choice to run the Daily Journal and by the way that happens to me all the time we have an executive Search or something and differ number one and number two is like going off a cliff and we really and we need one but there aren't three good ones to pick whether all good On's a little better every executive Search I have seems to me there's one guy that's fine and everybody else's the Pigg me and I think that's kind of a way I think good people are hard to find and people like Warren and I have had wonderful people to work with all our lives and time after time that's one of the reason Warren says he tap down to you tap two of you interface with people worn faces you all day they're wonderful people and they win all the time instead of losing who doesn't like winning in good company so if you can duplicate that way I had you've got a great future I think we were a little lucky and I don't I can't I can't give you any look M Mr M I'm in the back here um I we write a um we have a Chinese platform that uh focuses on uh writing content on people trying to invest out of China and China will become the largest pool of investable capital in the world just by Nature it's the will be the largest economy in the world with 30% savings rate so they haven't been able to invest because of capital controls but that day will come and since they're at least half a century behind in understanding about investing what would be the sort of first thing that you would tell a Chinese person who wants to invest in the US um what should they do with their money when they're making their initial investment outside well you've made an assumption I don't follow if I were a Chinese person of vast intellect and talent discipline all the good qualities I would invest in China not the United States I think the fruit is hanging lower there and some of the companies are more in Tren so I don't agree with your proposition I think they have a tendency to think we're we were backward therefore we should when we get rich we should go and invest in America I think it's always a mistake to look for a pie in the sky when you got a big piece of pie right in your lap and so I if I were at current prices I think an intelligent person would do better investing in China yes Mr manger right here first of all thank you for being a great teacher um I have two questions earlier you said everyone should spend 10 to 20% um on some big Ideas uh what are one or two big ideas that you are talking about and then second question is you have ad I'm not going to tell you what to invest in no I'm not saying the Big Ideas I don't mean investment you said specialize but then spend time working on some big Ideas well the Big Ideas I think you should be intelligent in improving yourself and you're way better to take on a really big important idea that comes up all the time than some little tiny idea you may not face so I always tried to grab the Big Ideas in every discipline and because I P around with the little ones and ignore the big ones so just all the big ideas in every discipline are just very useful and frequently the problem in front of you is solvable if you reach outside the discipline you're in and the idea is just over the fence but if you're trained to stay within the fence you won't find it and I've done that so much in my life it's almost embarrassing and it makes me seem arrogant because I will frequently reach into the other Fell's discipline and come with an idea that he missed he misses and when I was young that caused me terrible problems people hated me and I probably shouldn't have been as Brash as I was and I probably shouldn't be as Brash as I am now you I haven't I haven't completed myself in gring process but it's so much fun F to get the right idea a little outside your own provision and so if you're capable of doing it by all means learn to do it even if you want to just learn it defensively I do not observe professional boundaries my doctor constantly writes PSA test prostate specific antigen I just cross it out and what the hell are you doing why are you doing this and I said well I don't want to give you an opportunity to do something dumb says if I've got an unfixable cancer that's going fast in my prostate I'd like to find out three months in the future not right now and if I've got one that's growing slowly I don't want to encourage some doctor to do something dumb and intervene with it so I said I just cross it out now most people are not Crossing out their doctor's prescriptions but I think I know better I don't know better about the complex treatments and so forth but I know it's unwise for me to have a PSA test so I just I cross it out I'm always doing that kind of thing and I recommend it to you when you get my age just don't cross out that PSA test other women I can't help thank you for sharing your time with us and uh thanks for indulging our question questions I want you to imagine you have the opportunity to invest with a couple money managers that you really like and they offer you a couple different ways to invest in their strategy so one way is through a un partnership that would flow through the taxes and the other way is through a corporation that would pay tax on the gains and the dividends um so basically uh the corporation would serve no other function though other than paying taxes so I think you'd be crazy to say that those two ways of investing are equally design my question you're certainly right about that it's plum crazy and it's exactly the way people who buy bercher are investing question both are correct it's PL crazy to have a big common stock portfolio in a corporation and pay taxes compared to investing in a partnership that doesn't and that's just the way the burcher Charlottes have invested and they have made whatever it is 25% a year since we were there and but you're right it's not the it's not the right it's not the logical way to do it so my question is if you had to decide uh to invest in Pool A or pool B how would you decide on what method would you use to figure out what discount would make you indifferent to whether you invest through the corporate tax paying structure I think totally asinine to invest in a portfolio of Common Stocks through a corporation taxed under the Internal Revenue code under aary sub chapter C or something totally asinine and at burshire the public Securities keep going down and down as a percentage of the total value so it doesn't matter we're getting to be sort of a normal Corporation but I don't think anybody in his right mind should invest through a corporation and a puddle of Securities the tax disadvantage is so horrible so I wouldn't even consider it in other words and I regard it as a minor miracle that we were able to get where we did anyone so of course You' invest in the partnership so but anyone who invest in has to decide what discount to put on a pool of Securities that has a future tax lean on the gains so just do you have any mental model for yeah my model is to avoid it we don't want toest in a PO security to somebody else's Corporation you're totally right but you already knew by the way Mr Monger are right uh is Stander from China and I wonder what's your new findings of uh China uh would you see business opportunities or just think different CU I remember you once said like there was a Chinese woman post a video online and got 200 million viewers and you think it's a new power of a new media and also the second question is after um us election uh the H fund manager Reed Alo said the new Administration could unleash the animals Spirits which could lead to a better US economy do you buy the theory thank you well I'm not sure I understood that completely but I'll do my best what I'm comp what I like about China is they have some companies that are very strong and still selling it low prices and the Chinese are formidable workers and they make wonderful employ and there's a lot of strength in that system and the Chinese government he really tries to help its businesses it does not to behave like the government of India which I don't think runs this country right at all and so that's what I like about China and of course I have to admire taking a billion and a half people in the state of poverty up that fast that was never done in the history of the world and I admire go to China all those bullet trains and go right to the Heart of the City and all that what they've done is just an incredible achievement and they've done it not by borrowing money from Europe or the way we did when we came up they have taken a poor Nation with a lot of poverty and what they did is save half their income when they were poor and get and drive their Nation away up with l the first gratification so it was unbelievably admirable and unbelievably effective so I admire that part of the of the Chinese picture all the Chinese have one problem the problem with the Chinese f is they like to gamble and they actually believe in luck now that is stupid you don't want to believe in his luck you want to believe in odds and China that's some reason in the culture too many people believe in luck and Gamble and that's a that's a that's a national defect hi my name is Alex manful back here um I work with Johnny bin in uh in New York um I was curious uh if the world changes a lot during a lifetime um by the time I'm I'm closer to your age what do you think will not change about what makes a good successful business what will not change is it won't be that damn easy there'll be lots of people will die that you love you'll have close breaks where it goes against you uh there's a lot of trouble that's sure to come and at the end you'll know it's all over and that's the game it's a very funny game when you know when you start you have to lose see a dog doesn't have to do that we know from the start we can't win somebody wag said that the law of thermody Dynamics ought to be restated you can't win you must lose and you can't get out of the game and so we all face this all of difficulty but if you once youve accepted the limitations you got the problem how to get through you're allowed span reasonably well and I don't think that's that hard to figure out because if you do pretty well considering what you started with and so forth and you stand at the end and you've done creditably and you've helped other people and they needed help because you had the capacity and intelligence to do it and so on and so on set a reasonable example it's a it's a pretty good thing to do and it's quite interesting and the difficulties make it interesting and something else happens that is really weird we were talking about in our director's meeting preceded this meeting we you always get glitches to something as complicated as a new software program going into a big new area and you suddenly have reverses and troubles and you're scrambling and what I said is that I noticed in a long lifetime that the that the people who really love you are the people where you scramble together with difficulty and you jointly gotten through and at the end those people love you more than somebody who's just shared an uneven even Prosperity through the whole thing so this adversity that seems so awful when you're scrambling through it actually is the it's the it's the senu of your fre of your success your affection every other damn thing and if you didn't have the adversity you wouldn't have the bonds which are so useful in life that are going to come from handling the adversity well the idea that life is a series of adversities and each one is an opportunity to behave well instead of badly is a very good idea and I certainly recommend it everybody in the room and it works so well in old age because you get so many adversities you can't fix so you better have some technique for welcoming those adversities yeah hi char U my name is shé right over here you touched on how one should situate themselves in a way where they can deal with a 50% downturn in their portfolio for an investor forming a partnership in today's competitive market focus on concentrating in those few and rare wonderful opportunities do you believe that the 0625 Market sorry the 0625 high water mark fee structure that the Buffett partnership popularized is the fairest structure for both limited partners and the manager themselves and could you also touch upon what fee structure you employed during your partnership thank you well I did copy the buet formula more or less and I do think it's fair and I think it's still Fair now looking at monise she still uses it you know I think it is fair and I wish it was more common I basically don't like it the business of scraping it off the top if you're advising other people you ought to be pretty rich pretty soon why would I take a lot of advice for somebody who couldn't himself get pretty rich pretty soon and if you're pretty rich why shouldn't you put your money alongside your investors and go up and down with them and if it's a bad stretch why should just you scrap money off the top when they're going down and not so I like the buffet system and I think it's a but it's like so many things I like it's not spreading very much my net influence in the world even Warren has been pretty small imagine how much copying we have on Tech compensation methods it's about three examples yes I think it's a fine system hello um you spoke earlier about natural gas and the uh shipping of natural gas and uh that activity but um yeah I wouldn't do any if I were running the world as a but I'm desperate I wouldn't be shipping any natural gas out of the United States so to tab into that you've been active in two states that are big into uh agriculture Nebraska in California produce um what are your thoughts on the a industry specifically tied to subsidies allot that stuff I would think You' agree is outdated and maybe is uh threatening Water Resources maybe just inefficient and based on past models what's your thought on a and well the interesting thing about agriculture is what's happened in my lifetime which is the productivity of an acre of land has gone up about 300% and if it weren't for that there'd be a lot of starvation on Earth so the egg system is one of the most interesting things that has happened in the last 60 or 70 years and we literally tripled the yield from an acre of land and we did it all over the world you know and it was just a few people who did it the Rockefellers borlock and so forth and it was one of the most remarkable things in the history of in the whole history of the earth and we need another doubling and we're probably going to get it and it's absolutely incredible how what we've done and it's amazing how efficient our farmers are we don't have much socialization in farming we got a bunch of people who own the farms and manage them themselves there's not much waste in stupid stupidity in farming now people complain that we're using up the top soil which I think we are and I think that's way more of a mistake I would fix that if I were a benign desperate but leaving aside the using the top soil up too fast I think farming is one of the glories of civilization so I think it's been wonderful what's happened in farming now in terms of subsidies it matters to the farmers whether they get those subsidies and there's no question about the fact we protected our Farmers with subsidies and that the farmers we're protecting are getting richer and richer because the Farms are owned by fewer and fewer people own more and more acres per person so it's very peculiar that we're subsidizing a bunch of people are already Filthy Rich to use up our top cell a little faster and create stuff that we turn into ethanol which is one the stupidest ideas the world ever know I'm a specialist in stupid ideas but I would say turning corn into gasoline is about as stupid an idea I would almost rather jump out of a 20 story building and think I could fly turn ethanol turn G I mean corn into gas into motor fuel it's really stupid and yet that's what our politics does and I've got no cure for the stupidity of politics if I did the world would be quite different but I think that's pretty minor whether we have subsidies or not the main thing that's happening that has enabled the present population the world to stay alive is this Agricultural Revolution and this very good management of our farmlands and the improving agricultural standards in the rest of the world and it's gone on quietly haven't even noticed it hardly how many of you are just deeply aware of the fact that grain per acre is going by 400% that's a huge stunt and by the way if you take those marital seeds and don't use hydrocarbons the yields are lousy we feeding ourselves because we know how to turn oil into food that's one of the reasons I want to hold on to the oil something can be turned into food is quite basic and so I don't mind conserving it well instead of producing the every last drop as fast as one can and I it's odd that my idea hasn't spread to more other people I may have three or four people who agree with me in this room but you're a bunch of admirers in the rest of the world I'm all alone hello uh Charlie thank you for mentoring us uh my question is this um you talked about emotions you talked about discipline and you talk about um facing adversity uh can you flesh out more about the spiritual side of this uh we U about what do you deal with how do you deal with it to uh pass up adversity or deal with struggles and ultimately uh life yeah well you know just because you don't have a specific Theology and I don't you know when I was a little kid and I my grandfather sent me to Bible school and they told me there was a talking snake in the Garden of Eden I was very young but I didn't believe him and I haven't changed but that doesn't mean I am not spiritual I've just sort of I don't need a talking snake to make me behave well and I would say that the idea that came down to me and partly through my family was that rationality is a moral duty if you're capable of being reasonable it's a moral failure to be unreasonable when you have a capacity to be reasonable I think that's a hair shirt that we should all take on even if we're pretty stupid because it's good to be less stupid and so I think rationality is a moral duty and that we all have a duty to get better and of course we also have to adjust to the other people we're going through our journey with I think it would be crazy not to have a social safety net when you're rich and successful as we are now I don't think it has to be as dumb as the one we have but of course we need a solid social safety land and that's a moral idea so I'm all I'm all for Morality without the talking snakes yeah Mr M we're going to take uh two or three more questions and then we'll I think Charlie will be here immediately after um and we have copies of two of Charlie's writings I think we made four 400 copies and there will be available on the way out and also you probably by the way I was cleaning out my office cuz for movie and I just found these damn things my God all those people are coming in from India and China I'll give them my old things I hadn't even read them in years and years so I'm just visiting some of my past screeds Mr M yeah also you probably noticed uh this is being recorded by CNBC and uh I don't know when they plan on uh making it available um maybe the representative there can tell us yeah it'll there'll probably be welcome Mr M uh Brookshire is the largest shareholder of Philip 66 and Philip 66 owns uh General partner and limited partner stakes in two different MLPs I was wondering what your thoughts are on the master limited partnership structure and Industry and also I was wondering if you had any preliminary thoughts on the proposed border adjustment tax well we don't look let me take the last question first they do we do not know what the Border adjustment tax is I don't think the people who are proposing it know what it is and I don't think Trump and the republicans in Congress have agreed on anything so I think we're just talking about but do I think that some deep revision of the tax system might be a very good idea the answer is yes do I think we should rely on consumption tax more the answer is yes do I really care some somebody piles up a lot of money and leaves it to some Foundation that's not my idea of a big evil if people want to live high in their private airplanes and their $300 dinner checks I'm all for taing taxing the people who are living high but so I like the idea of Bor consumption tax taxes and uh and I think there is a lot to be said for different kind of attack structure hi Mr rer I had a you highlighted this idea of deferred gratification a lot today and I just wanted to get your thoughts on what areas and aspects of life is it most valuable and where should it not be applied where should you enjoy things now versus we you should s you know grind away and invest in the future thanks well I don't think you should use up your body by being stupid and handling it I only re stupid at handling your money either so and I think there are a lot of things where the only way to win is to work a long time toward a goal that doesn't come easily imagine becoming a doctor that is a long Bryant all those night shifts in the hospital and so on and so on it's deferred gratification but it's a very honorable activity being a doctor and by and large our doctors are very nice people and they've been through a lot so I tend to admire the life of a doctor more than I allow the admire the life of a derivative Traer and I hope all you do too and I think deferred gratification the way our doctors behave is a very good thing for all the rest of us hello Mr M this is Simon here uh thanks for your generosity um I had a very general question about uh C of competence and science of hitting how do you know its limit and does it get redrawn from time to time you think you know something and then you don't does it always expand or does IT contract well of course you know some things that aren't so and of course if you're dealing with a complex system the rules of thumb that worked in the complex system in Year One may not work in year 40 so in both cases it's hard the laws of physics you can count on but the rules of thumb and a complex civilization changes as the civilization changes and so you have to live with both kinds of uncertainty and you have to work along with it's not a bad thing it's it's it's interesting we're all the same who would want to live in a state of sameness you might as well be dead thanks for coming out

Dans ses mots — extrait de cette conversation

« Menez votre vie de façon à pouvoir encaisser une baisse de 50 % avec aplomb et grâce. N'essayez pas de l'éviter. Elle viendra. De fait, si elle ne vient pas, je dirais que vous ne vous montrez pas assez audacieux. »

Daily Journal Corporation annual meeting (February 15, 2017) · 2017 · as recalled

Sur la traversée des baisses de marché ; il qualifiait sa propre baisse d'environ 50 % de 1973-74 de 'part de la condition d'homme'.

« La rationalité est un devoir moral. C'est une faute morale que d'être déraisonnable quand on a la capacité d'être raisonnable. »

Daily Journal Corporation annual meeting (February 15, 2017) · 2017 · as recalled

« Une bonne chose, quand on fait une bêtise alors qu'on est intelligent, c'est qu'on ne la refera pas. »

Daily Journal Corporation annual meeting (February 15, 2017) · 2017 · as recalled

« Si vous voulez améliorer vos petits-enfants, le meilleur moyen est de vous améliorer vous-même. »

Daily Journal Corporation annual meeting (February 15, 2017) · 2017

« Je ne pense pas que le capitalisme exige que vous gagniez tout l'argent que vous pouvez. Je pense qu'il y a des moments où l'on devrait se contenter de moins, par simple souci de décence. »

Daily Journal Corporation annual meeting (2017) · 2017

« On vieillit trop tôt et on s'assagit trop tard. C'est le problème de tout le monde, et si l'on s'assagit trop tard, c'est que les idées stupides que nous avons déjà, nous n'arrivons pas à nous en débarrasser. »

Daily Journal Corporation annual meeting (2017) · 2017

Il attribue 'on vieillit trop tôt et on s'assagit trop tard' à un vieux dicton allemand ; la formule qui suit est de lui.

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