הרצאה · 2008

הרצאת DuBridge המכובדת ב-Caltech (2008)

2008 שעה וידאו

מקור: YouTube · מוטמע מהמקור; איננו מארחים אותו.

Munger תמיד אמר שהיה רוצה שהיו מכשירים אותו כמהנדס, וב-Caltech בשנת 2008 הוא זכה להציג את הטיעון הזה בפני מהנדסים ממש. ההרצאה היא סיור באופן שבו הרגלי החשיבה של מדעי הטבע הקשים — יתירות ומערכות גיבוי, מרווח ביטחון, נקודות שבירה ופתרון בעיות לאחור — עוברים אל העסקים, ההשקעות והחיים, ומדוע היעדרם הופך את מדעי החברה לכה רגישים לטעות.

מדוע כדאי לצפות. זוהי הרצאה של Munger שזכתה לפחות תפוצה מנאומי USC, אך היא אחד החלונות הטובים ביותר אל שיטת פתרון הבעיות האמיתית שלו, שניתנה בפני קהל טכני שלא היה מניח לחשיבה רשלנית לעבור. מסגרת ההנדסה־כחוכמת־עולם כאן היא ההשלמה המעשית להרצאות ה'סבך' התיאורטיות יותר.

הווידאו המקושר הוא הרצאת Caltech ב-Beckman Auditorium. שלבו אותו עם שיחת Caltech משנת 2020, שהוקלטה שתים עשרה שנים מאוחר יותר, כדי לראות עד כמה נשארה חשיבתו עקבית לאורך המחצית השנייה של חייו.

engineering problem-solving Caltech mental models

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good evening um Jean L Shamu the president of Caltech it is my pleasure to welome to welcome all of you tonight for the Lee dubridge distinguished lecture which by the way is not really a lecture no data slides no PowerPoint presentations no jargon rather the format for the evening and really for all of the dubridge lectures is a conversation between a distinguished lecturer and his or her interviewer of choice Dr dubridge was the second president of Caltech and he held a position for some 22 years he was a very successful president that most University presidents would aspire to be he was especially effective at communicating with everyone students ulty trustees large donors small donors the chairman of General Motors and even the president of the country I think his talent was linked to the fact that he enjoyed talking to people about science and technology to talk about the value of basic research and our scientific solution can help address society's problems as well as the impact of Science and Tech technology on everyday life he believed in getting a diverse group of people together to discuss those issues tonight's presentation is a good is a good example of what he would have enjoyed seeing on the stage of bman Auditorium before I introduce our two guests I would like to thank the person who made this event possible Mr Peter Koffman Peter is a CEO of Glen a and he edited the book for Charlie almanak he's a good fan of Charlie monger and it is Peter who suggested to him that it would be a good idea for Charlie to give a dubridge lecture then Peter took a very active role in the organization of the lecture and the activities surrounding it Peter thank you we are fortunate to have as a 2008 dubridge lecturer what I would call a rock star of the financial World Mr Charlie Monger for years Charlie has been half of a financial partnership that is apparently a force which cannot be stopped in a world of Investments he and his good friend waren Buffett have always met quite the team but as you will find out and many of you know they also handle solo acts extremely well witnessing Charlie on stage at the annual shareholders meeting of Wesco Financial last year was for me a truly energizing and exciting experience and one I would recommend to all of you it's an event not to be missed Charlie is like waren Buffett an Oma boy born and bred he attended the University of Michigan and yes Caltech because before serving in the US Air Force as a meteorologist he then entered Harvard Law School graduating in 1948 with a jurist doctor mukum he went on to found a Los Angeles for monger tles and alls son in 1962 but left the law practice three years later to concentrate on managing Investments something that clearly he has done amazingly well ever since he's known for his opinions his philosophy and his wit uh in fact the Caltech book bookstore is outdoors selling several books about those topics that and I hope you will uh take the time to purchase a number of those given the scope of his keen and Broad interest in almost everything we knew that whoever interviewed him would have to be intellectually quick and quick enough to keep up with his unusual his unusual ability at storytelling fortunately Charlie chose caltech's own outspoken division chairman and physicist Tom tombrello Tom who heads up our division of physics mathematics and astronomy is the William Kenan Jr professor of physics as well as calex technology assessment officer a member of our faculty since 1961 Tom not only knows his way on Caltech but also knows very well how to handle his division a freethinking physicist mathematicians astronomers and astrophysicist he is known at Caltech for His Brilliant mind is wi and let's say strong opinions we will see tonight whether Tom has met his match Tom please join us and now it is my great pleasure and honor to welcome our 2008 du Bridge distinguished lecture Mr Charlie thank you thank you should I go first Charlie sure well I hate to add to my president's uh introduction but he left out some very important things about tonight's lecture as you might know Charlie Munger was born on January 1st 1924 and any of you who are familiar with the Asian calendar meant that was right at the tail end of the year of the pig now it's well known that people born in the Europe the pig are characterized by uh virility and fertility well uh eight children I guess they got that right uh but I decided I needed uh more information so this being a modern world I went to the web and found the world's expert on pigs her name is Charlotte and she had two things to say about Charlie one was terrific and the other was humble now what is this humble thing I remember reading Jim Collins bestseller on business stressing that leaders in business should have humility uh that uh Frank Wells had Disney always said humility is the essence of life uh even president suaro among his three maxims one was don't be arrogant but if two people have a right to a call on infallibility it's Charlie and Warren so I guess the first question is do you two manage to keep each other from becoming infallible well we have a lot of fun together and our work is not really work for that reason and yes we take each other down a little bit and promptly but we do it in uh collegial in a collegial fashion we've never had a serious argument in all these years and uh and of course it's like an old married couple after a while you know one Grunt and two twitches and you've conveyed your whole conclusion on the subject and that's the way it works and in terms of uh humility I've frequently said that when they pass that out I didn't get my full share and that was a serious problem when I was young and I've only cured it partly by becoming very rich and generous it takes both to overcome a defect like that so the young people in the room don't copy this if you're not willing to pay the price well I and I don't but that if humility means that you know the edge of your own competency yes and you aren't arrogantly stepping over the boundary I'm very good at that but within my area of Competency my best friend would not adore me for my humility yeah well I'd redefine humility as knowing what you don't know yes well both Warren and I are very good at that one of these guys at the Burkshire meeting from one of the foreign Publications said why do a couple of guys in a little place in Omaha do so much better than all these powerful minds and great institutions and I said well I think Warren and I know the edge of our competency better than other people do and that's humility in the umbrell sense and that is a very important thing to know I say over and over again it's not a competency if you don't know the edge of it you are a disaster if you don't know the edge of your own competency Warren frequently says I'd rather deal with a guy with an IQ of 130 who thinks it's 125 then a guy with an IQ of 180 that thinks it's 200 that second guy will kill you and so it is very important to know the edge of your own competency I thought I would speak tonight a little bit on my favorite subject just as a talk and after that just take questions from Tom of any kind he wants to answer what I'd like to talk about briefly is table you think I'm kiding and the uh the topic I'd like to talk about briefly is common sense which isn't common yes see and what people mean when they say a man has common sense is Uncommon Sense and usually they don't mean that the man has a narrow little activity he's good at like knitting sweaters and he sticks to that what they mean is a man that can operate over a pretty broad range of human territory without making any big boners and that is a very important thing to be good at and the question is how you get it I was very lucky in my own life because every place I looked at the pen there was a guy that was better than I was and my father one of my father's best friends was a great surgeon with a vast mechanical ability and I knew what this man did with his mechanical abilities and inventing all these spreaders and things he used to do his operation that I would never be as good as he was and everywhere I looked there was somebody like that and there was all this Folly out there and I suddenly realized like I just avoid all the Folly you know maybe I can get an advantage without having to be really good at anything and I get doing that all my life and it works so well that I enjoy sharing it with people like you it really works to tackle much of Life by inversion where you just twist the thing around backwards and answer it that way I have to give problems to my children and once when I had all of them together I said well there's an activity in America there's a one-on-one tournament and the national champion became the national champion on two separate occasions 65 years apart name the activity and seven of my children could not remotely do it the eighth is a PhD physicist and he did it very quickly and what he did was he just turned it around he says it can be athletic and he realized that no 85-year-old was ever going to win an athletic thing with the neurological other deteriorations that are so evident tonight on the stage and so I said well it couldn't be chess he's a chess player and he realized that no 85-year-old was ever going to be the US chess champion he knows what a chess tournament is like but that led him to Checkers a game that you could almost Master with enough experience and of course that was the correct answer it took him about 15 seconds all kinds of problems like that look so difficult if you turn them around they are quickly solved and so this process that I've gone through life doing of identifying Folly and trying to avoid it has worked wonderfully for me another trick that I got very early was that I led Big Ideas that had a lot of instructive power and I liked them so well that I didn't mind when they were in somebody else's territory I just went in and took the ideas so I paid no attention to the territorial boundaries of academic disciplines and I just grabbed all the big activity ideas that I could and then I used them in Daily activi to solve problems and amuse myself and do self-education and so forth well that makes me a collector I'm a collector of inanity and I've cataloged the inanities on structures in my head and it's been a wonderful thing to do if you stop to think about it how many unhappy collectors do you know whether they collect silver or Mistresses or you know by and large collectors are happy and collecting inanities is just wonderful if you collect stamps the way I once did I soon had a US stamp collection I couldn't afford to add a stamp to well what fun is collecting when you can't afford to the next stamp when you're collecting anties there's never a shortage and there's all this low hanging fruit we had one this morning with the from the governor of New York that was pretty expensive fruit well but and so when you this is just a wonderful activity and it's amused me and instructed me all my life and another thing that I got into when I did that was to be very interested in seeing how these ideas interplayed together there's not big academic reward or worldly reward for integrating one discipline for a strange discipline but a strange discipline that's not your own so if you do it in your head you're in a territory without much competition always says you should take the high road in life because it's less crowded and this is a less crowded Mental Road in life and it really works and of course when you do that you get into issues where ideas are in conflict and of course it demand synthesis well a lot of people when they see a demand for synthesis just synthesis immediately Retreat into whatever Orthodoxy they came from that's not theer if there's two big powerful ideas and there's a terrible tension between them and synthesis is demanded I look it up if I can and if I can't look it up I try and figure it out and if I have a poor approximation I use that for a few years until it gets better I got this I had another idea that was very useful I always liked aam's Razer now that is a wonderful way to think you can argue that Einstein's whole career was just a marvelous demonstration of aam's razor and E equals mc^ s is a pretty damn simple idea but think of the power of it and then Einstein developed some people say a corollary a counter corollary to aam's Razer this may be apocryphal because I've never seen it in any original Source I trusted but I've seen Einstein quoted with this observation over and over again everything should be made as simple as possible but no more simple well if Einstein didn't say it he should have said it because this is a very Sound Idea I later developed a supplement to that Corollary and my supplement to Einstein's corollary was that about aam's Razer was in messy social science if the result you're observing is a lapoa look for a Confluence of multiple causes multiple forces operating in the same direction I got to that idea when I was trying to explain to myself how the Moonies were able to get some student to come out for a weekend in the country and at the end of the weekend the guy was a brainwashed zombie who was the slave of some megalomaniac nutcase for the rest of his poultry life and this is obviously a laloa result and so I looked in Academia for an easy correct answer to this and of course I didn't find it I finally stumbled across a popular book done by some psychiatrist founded by The Rockefellers who had studied the last work of pavlof and pavlof had these dogs in these cages and when the lenrad flood came in 1920 it went right up to the dog's noses and they damn near drowned and died but didn't and the stress was perfectly horrible and they' all been conditioned to have these dog personalities and when the waters receded the personalities had reversed well Pavo being a great science spent the rest of his life giving nervous breakdowns to dogs and trying to reverse those breakdowns and this is not pretty reading but it was very instructive and I realized that the Mooney methods and the involvement of stress was clearly part of it I also realized that the psychiatrist did not have an adequate explanation well finally I stumbled into psychology in which I'd never taken a course and so I just bought the three main textbooks in Psych 101 in the country and I Ripple through them quickly and you know I could pick up the 20 main ideas in social psychology very easily and when I used them as a routine system I could see that the Moonies were using about six of these things in combination with the pabian stress and just as the dogs brains snapped in the lenen grug plug the Moonies have a term in their conversion method call causing the target to snap same damn idea and I found that very interesting and because IID reached a conclusion a very unpopular unpolitically correct conclusion that I've just given you because it gets into religion conversion is a tough subject and but anyway it satisfied me and so I expanded it into this corollary of looking for a Confluence of causes when you see a lapal Loa result in social science and that has been enormously helpful to me because I find that a lot of social sciences scientists have a weird Mania where they twist everything into whatever little concept they started with again it's that old saying to a man with a hammer every problem looks pretty much like a nail and I have worked hard to avoid that problem and of course if you grab the Big Ideas in all the disciplines uh by definition you're a man with multiple tools so you're less likely to commit the inanities of the people who twist every problem into being a nail well anyway there were a series of tricks like that I used as I went through life and it was amazing how many times I'd find something that I could easily solve with my little bag of metal tricks that had missed other people who were imminent in their feel I could go right into their territory sometimes and see more clearly than the professional Denison uh how his conclusions fit into the bigger picture again this is a very dangerous attitude to have an ordinary social discourse but it's a very good way to invest money and uh and uh at any rate that's the kind of a peculiar man you have here tonight and of course I idolized Ben Franklin because I identify with him of course he was so much more talented than I am it's just a joke to make the comparison but at least he was a totally self-educated man that wandered over a vast amount of territory and was pretty competent over the full range and uh and a lot of Franklin's knowledge was psychological too he was a great Observer of human nature and so uh there are implications of course in this attitude of mine in Academia and the implication is very simple social science in America is very poorly taught and the people who are the Denis and the people that they teach are way more incompetent than they need to be the solution is to get all these social scientists or the ones that have the capacity to do it at least so that they are comfortable across the boundaries of disciplines and see where the ideas conflict let me give you a simple example I once if you went around Caltech and ask people where do the laws of chemistry not apply practically everybody would say well they don't work in a hot plasma no big deal but if you ask a bunch of people that have taken the main course in economics and have gone on to business school in America and you say well you're selling something and which is measured in units and you want to sell more units do you raise the price or lower the price well we've seen supply and demand you lower the price then you say tell me the occasions on which if you want to sell more units you raise the price now this is an intelligent group you've been through social science I'm giving you some time will anybody who has the right answer raise his hand yeah luxury goods that's what do about one in 50 comes up with the idea of luxury goods that the price is sort of a signal that it's high quality and if it's not a signal of high quality it's a way of bragging to your friends that you have both discrimination and money and but the interesting one other interesting example is the one that happened to my Caltech educated friend bill ballhouse who was CEO of Beckman instruments company founded by another eminent Caltech professor and ballhouse had in his business collection a company that made some complex Gizmo that they sold for a lower price than the other two gizmos in the market and yet it was much better and it had lousy figures and ball house took one look at it and he realized that it was a gizmo where if it failed it imposed enormous costs on the owner of the Gizmo and he recognized that the price being low was sending the signal wrong in Reverse this can't be very good or so he raised the price enormously and sold way more units and of course the profits went up at a truly dramatic way so these idiots that can't answer the question are leaving a lot of money on the table that a man like ball house knows how to get and the world is just full of opportunities like that for people who get the main points and go across but of course that's not the main answer to the question that's just the ballhouse byway the main answer to the question is very simple suppose you raised the price and use the money to bribe the other purchasing agent well you can laugh because it's so obvious once somebody points it out but who was raising his hand over that one after all the fancy education you've had and so and the kissing cousin of that direct bribery of the other guy's purchasing agent that's the way title insurance is sold in America that's the way load mutual funds are sold in America that's that's the way a certain amount of Defense Contracting has been done or attempted to be done it's just it's a huge important part of capitalistic life that business of raising the price and using the money to enhance sales and of course there are legitimate ways to do it too like legitimate information through advertising or otherwise but there's a lot of illegitimate use of increased price to increase sales and that's a big part of the capitalist condition and if you don't have a brain that automatically has these things pop into it you haven't really assimilated social science correctly what good does it do to be able to pass a test parting back to the professor what he told you well that'll get you an academic label but it won't get you the many millions of dollars ball House made by raising the price and it won't get you really fabulous investment results in life if it takes some imagination if you don't see how all these things work and how they interplay and of course the way to get that competency like any other competency is to adopt the necessary elements and practice using it over a considerable period of time and a considerable area of complexity and uh now get to a really interesting question can we fix the social sciences so they aren't such total horses asses and the answer is yes is it likely to happen the answer is no it will happen eventually because well here I'm going to lose my humility PR I had a guy in the Harvard Law viw ahead of me he said to me once in the course of an argument he said Charlie think about it for a while and you'll agree with me because you're smart and I'm right great or well the liberal arts are going to come to the Munger system in doe course because they're smart and I'm right it can be done better but it can't be done better with a crazy reward system that allows people to be as silly as they are in many departments I always like the story of PJ oor who said you know he says the last communist dictator of Albania was a pure communist and he finally threw out the Russian Embassy because they'd lost the pure Faith then he kicked out the Chinese Communists because they'd lost the pure faith and I said finally he was only comfortable with two places in the world one was the Communist dictator of North Korea and the other was the English Department at Yale well you think I'm kidding but there is a lot of extreme craziness in some of the liberal arts and they select people who share their craziness and it is not necessary that Academia tolerate Forever This lack of multip multidisiplinary competence it's not that hard if some aging untrained fat old man can do it you know surely the young brilliant liberal arts people can do it will take a different incentive and a different system it might even be that a place like Caltech could do it but they'd have to get a rather unusual person to do it for them oh that's all right now I'll turn to it over to well I actually I'd like to I'd like to comment on your last thing because there's this old story which is a reincarnation story which if you are a very moral Economist and you die you get to come back as a physicist but if you are a very immoral Economist you get to come back as a sociologist and the story actually has some truth to it because we're talking about the degree of linearity physics for the most part most Parts is a linear subject cause and effect don't get intertwined whereas my wife's father invented something in sociology which shows the intrinsic nonlinearity extreme nonlinearity of the social sciences and that was the self-fulfilling prophecy yes indeed it was invented by Robert King meron and what it says basically is if Charlie were to say something about the state of the economy tonight by God by tomorrow morning the reporters who are here would have it in the newspapers and something might actually happen to the economy whereas if I said something about the economy in fact exactly the same thing as Charlie everybody would say ho home what does he know and so that shows the powerful nonlinearity of uh that exists in the social sciences words the problem partly is they're extremely complex and the fact we haven't come to grips with them means we haven't dealt with that nonlinearity appropriately comment I think you can do it without the fancy math better than they're doing it now ah we agree completely now I want to cite the example of another great Caltech man when I was at Caltech right across the court was Thomas Hunt Morgan mhm and I always thought the faint odor that I smelled was his damn fruit F and later I started paying the research expenses of a ecologist Garrett Harden whom I really liked and he had trained here at Caltech under Thomas Hunt Morgan and he told me something about Morgan that really fascinated me he said that in that day when they didn't have computers and when the main calculating device was the freeden calculator everybody in celtech had endless Freedom calculators except Morgan and he pretty well banned the freeden calculator from the biology department and when they said why are you doing this he said I'm like a gold miner in 1849 and I can walk along the banks of the river and I can use organized common sense and pick up these enormous nuggets of pure gold and as long as I can do that I'm going to use my scant resources to pick up all this gold and I'm not going to revert to any pler mining you know sifting the statistics for faint traces of something and I love that because that's what I've done with my life I just picked up the OB obious things that was around the riverbank with organized common sense and I'm glad to quick claim that plazer mining to people who like a lot of boring gravel sifting so I think that a lot of the people who are trying to fix the social sciences will make it worse by going into these very involved computations because they get into math very soon that they can't handle and they're walking right by great Boulders of gold on their way to this nonproductive math this is not an intelligent way to go with the problem yeah well that's something you've said talked about earlier this attempt at false Precision terrible Warren and I always say but we weite cans better to be roughly right than precisely wrong right we see over and over again people who know how to use these calculators computers now and there's a big complicated problem with multiple inputs some of it can be carefully measured and some can't so it's just horribly overweigh everything that can be measured this is truly asinine but you're in the insurance business so I'm I'm be I'm going to be a professor and tell a story about uh derivatives uh 20 years ago I uh decided I wanted to my wife and I decided to build a house on a tropical island and yet at hurricanes you know being a calch professor that's a risk I didn't want so I constructed a financial instrument which was build a house and buy an insurance policy uh hurricane did come damaged the house severely um and now more out of blind dumb luck than skill I cashed the check from the insurance company about 2 weeks before the insurance company went belly up because the insurance company had only insured houses on this island and therefore I hadn't constructed a hedge at all no of course not I had constructed a common mode failure and so the real question in society right now whether we talk about bundle Mor mortgages or any of the other F hedge funds is whether the risks are really independent and you can determine them or whether somehow there's these common mode failures that take down both systems at once these same people who are trying to ruin the social scienes by taking it into this extreme hopeless complexity of math that won't work are alive and well on Wall Street and creating Securities Etc and they've done the same thing there they have created things so complicated that nobody can understand them and therefore they take shortcuts they don't try they rot on the rating agencies there are grown men who looked at a bunch of collateralized debt obligations all of which were rated Triple A AAA by rating agencies and they all yielded 60 basis points more than normal AAA pieces of paper well anybody with a grain of sense would see danger flags flying I mean the hurricane concept would come quickly your mind but what these people saw was a marvelous opportunity to get a lot of money for themselves by lying and cheating they bought all these aaa's they leveraged four or five times over and then they told their investors they were getting Alpha they weren't getting Alpha they were taking a hurricane risk and telling the people they deserved extra pay because they were delivering Alpha well they were delivering extra profits as long as there was no hurricane no Financial heavy wind this is a deeply immoral way to create financial instruments it's a deeply immoral way to run an investment operation and of course it's attracted more and more people from eminent places like MIT people go into this derivative trading you know cuz it's hard to raise in standard oil inventing better oil refineries it takes time and there's competition and so on and besides when you're all done nobody's ever going to hand you $180 million and so these people do go into this activity and they create this hopeless mess of super complexity then they get trading systems which their accountants bless and they punch these buttons and if they've agreed to buy something 8 years in the future from a for 100 million and sell at 8 years in the future to B for 105 million they punch the button and both obligations disappear and it shows a $5 million profit receivable from the second guy well just because you can punch a button on a computer and show a $5 million do profit doesn't mean you have a $5 million profit what you have is a disastrous closing risk if the if the market goes horribly against you is the guy who's lost heavily the100 million bed is going to be like the hurricane insur on my friend's Island and the answer is yes in many cases he's going to be like the hurricane insurer on the we're just seeing that stuff unfold and you can't watch it unfold without feeling the way I feel about a lot of the liberal arts professors the people who did this are despicable the accountants that bless the accounting have despicably failed in their own profession if I make loans for many years nice little 75% mortgage loans on decent houses to hardworking plumbers and I have a wonderful low bad debt risk and then I suddenly decide I want to report a lot of extra income so I have somebody recruit a bunch of bums from skidrow and you know charlatans are just out of the penitentiary and I have them agree to pay these very high interest rates on 100% loans and so forth and I say to my accountants AC crew all this interest these people have agreed to pay me as income they haven't agreed to pay it to me yet but in due course it's due and the way you'll do that is just assume that my bad debt experience on this new class of loans will be like the I formerly made well as I've described but nobody in his right mind would have an accounting that acur the interest on the new loans but in America the accountants bless that stuff and they would say you would make my life too difficult if I had to do anything but look back and count the old bad debt experience and just extrapolate it into the new type of loans this is not a modest fault this is a significant fault in our common civilization the professionals have horribly failed us and the academics that have allowed these professionals to prosper without appropriate criticism they have failed us too and The Regulators we're Insight of the example have 200 Regulators in Washington they have two companies in Washington and they're so whole job is to watch these two companies for unendurable future troubles Fanny May and Freddy Mack 200 people in off that's all they have to do they ended up with I don't know $30 billion worth of miscalculated earnings and it just was totally insane it was a Mad Hatter's tea party I me all these people have horribly failed us with the most Elementary Common Sense nobody ever said look this is too difficult at least for the kind of people you have doing it and yet it was obvious it was too difficult for the kind of people and the guy who headed Freddy Mack was a PhD Economist and bur has a subsidiary and it was headed by a PHD psychologist and the only thing he improved in his tenure was the wine seller the corporate wine seller and when the money finally ran short and this Chief Financial Officer said we're running short of money for the wine seller he said take it out of the depreciation reserves well the depreciation reserves are a liability account PhD in Psychology I mean I don't invent these stories one of the be if you're a collector of inanities you can top anybody always with a true story well the problem we academics have is we almost always solve problems uh we think we can solve as opposed to problems that are real problems I'll give you a quote which you may not know and that's from fiser black uh Prof of black shes uh he was a professor at toughs and he decided late in his career to take a very nice job at Goldman SA and then he said something very wise that I think you'll like which was he said market efficiency looked a lot different from the banks of the Charles than it did from the banks of the Hudson there was another Nobel Prize winner at Stanford and he looked at the investment success of burshire halfway and he said it's luck he said it's you know of enough monkeys or flipping coins some guy will win two or three times in a row and there's a name for this in Academia it's sigmas so we were a one Sigma event and then we were a two Sigma event and then we were a three Sig we get to three sigmas this is really unlikely yes he got to six sigmas of luck to explain berer haway at that time the audience was laughing so hard that he stopped doing it but that was the only thing that stopped him he would be at nine segas by now which would happen about once in the history of the universe yes we can't let you get away from a educational institution without talking about uh education calac is a small manufacturing op operation we take raw material that we get from the high schools and we turn it into a product now I'd like to say we don't make Chevrolets at Cal effect we make formula ones but we are dependent on the quality of what comes in because we have to work with it and what we work with is come what comes out of the educational system in the United States and I have some opinions but I would hear your opinions about what's happened to one of the best lower level Educational Systems in the world over the last say 40 years well of course the educational system failed horribly in the central parts of the big cities and the price that our civilization will pay for that failure is really huge and of course it has it has multiple causes of course it's going to be harder to raise schools when the more competent people flee to the suburbs and the Central City gets lower and lower average quality because all the successful people are leaving the same thing happened in Germany when they partitioned Germany there was a period when anybody could get out and five million of the most competent people in East Germany went West well now what's left is the worst 17 million out of 22 and they've got a communist system well of course they get an awful result if you cull all the best people out and turn the rest into Communists it's not going to create a wonderful result I mean imagine arranging so that Germans are no damn good I mean this is really hard to do but uh but so something like that happened and it and uh it was a huge mistake and what he's complaining by the way about are marvelous people it's just that they could they're not Tom tombrello because how many of those are there but Caltech gets marvelous people and the average quality of the ending freshman at Caltech is simply marvelous and the average quality of the institution in terms of the way the professors the administration and everything behaves is wonderful and the asininity around Caltech is way low for a human institution and if any of us had no friends or family left and we were thinking what are we going to do with our worldly Goods when we have to part with them I don't know about you but I wouldn't have a better candidate than celtech I'd have way more confidence in it than I than I would have in say an elite AR uh Ivy League school I think they're pretty good too but I think celtech would be more reliably sensible and more reliably ethical than the other places and so Caltech is a is a very remarkable place and you shouldn't judge the World by Caltech uh this is this is way better than normal and they have to un understand where the man's coming from most of our students volunteered to come here Charlie was drafted sent here so he was not a volunteer he was a drafty and uh he learned to be a weatherman so if you think he knows which way the wind is blowing he has a degree in it by the way that's an interesting subject because I was going to do this I looked at the ordinary meteorological text like meteorology 101 is now taught in America and I compared it to what I knew after getting what was then a graduate degree at Caltech and you can't believe how much they figured out in those 60 years I mean it is just it's just it's just unbelievable how much better it is and of course they've got better measurements and better they got moving diagrams the physics is better you think we would have known everything about the phase changes of Water by the time I was at Celtic there's a lot we didn't know how can they not know the phase changes of water Tom will know but it's it's it's weird the way water behaves in every little change of phase it interacts differently with radiation right we've learned a lot of stuff there's a oh on your Ben Franklin story I was listening to the Saturday noon broadcast of the Metropolitan op Opera how many of you listened last week yeah Lucha de LaMore but in the last part of the Opera there's a very eerie piece from the uh orc Orchestra you know what in instrument it was the glass harmonica invented by Benjamin Frankle so there was a man who really understood all sorts of things from bifocals to uh very interesting musical in instruments selftaught he played four different musical instruments this is just a casual this wasn't he had a broad range indeed he sang pretty well too i' I'd say if anybody saved this country by getting the French to come in and uh help us with the British at York toown it was Franklin yeah well I noticed a denner that he was gazing at us from the wall of the library I know you're a fan of Jared Diamond Jared Diamond gave the commencement address at Caltech last year and a few years ago he wrote a very interesting book called collapse which has among many o other examples two that I find very in interesting one is of course the collapse of the Vikings colony in Greenland as the weather got cold again uh the ES who' come in from the north of course didn't notice it they were eat eating Seafood uh the uh Vikings were eating sheep and cattle and when those disappeared with the Colder Weather they starved to death the other was Easter Island where they got into a mad race to create some artificial economy of building the great Stone heads and of course destroyed the ology of the island and ultimately themselves I thought that can never happen now so I have to tell a story from about 30 years ago when I was cons still Consulting at Los Alamos and a friend of mine worked in something called X division where they made uh things called Forma nuclear bombs and we were having a conversation about the competition and this competi this conversation went on for a while and it kept saying you know we' got to keep ahead of these guys they are really giving us a bad time and we can't keep up with them and you know after a little while I said you know this doesn't sound like the Soviet Union he said Soviet Union those guys don't build anything we care about we're talking about Livermore and so there we were in a mad Race using up the country's treasure in a wild attempt to keep up with ourselves building the equivalent of stone heads so are we doing anything like that you see in our society Charlie are we building ston heads or competing with ourselves uh when the real competition is doing something else well sure but you go into the really fundamental tensions of multidisciplinarity every biologist thinks a little like Paul Erick you know they think my God you know carrying capacity of the land you Excel it tragedy's coming and every Economist thinks we've had compound interest at 3 or 4% for 300 years and who's to say we can't do it for 500 years more and they just each live in their little world and nobody thinks that these ideas in the end have to synthesize in the real world and of course from neither side are they very good at the synthesis every ecologist underestimates the power of the ideas of the economists and every Economist tends to believe that any troubles from carrying capacity are almost non-existent I once heard an economist say that the supply of coal was infinite and I said how did it become infinite and he said well not quite infinite but I am not inventing these story they're in my collection of inanities as I say if you just join my collecting Council you can have all the fun I've had all my life and you'll never run short of material no I think Jared diamond is to me very interesting I think Guns Germs and Steels was one of the great books written but the main point was wrong Jared really believes that the people on the in New Guinea were just like a bunch of literate Jews in Berlin and 1890 except that they were wore lone Claws and we're illiterate but uh that's a delusion the genetic Evolution continues to work after you get a civiliz ation and man's breeding patterns will reinforce it will reinforce and accelerate and change but the genetic Evolution doesn't go away and it's really stepped up that's why all these dogs are so different Al than they're all descendants of the wolf I mean what you can do to change nature when you start breeding with some selectivity and uh so anyway I can understand why he was wrong on that because he lives in Academia and it's not politically correct to accept there could ever be any genetic difference between individuals if you say have you noticed that Zulus are taller than pygmies they just look at you like you're spat in the fireplace that's a social error but they don't say that the they're exactly the same height they just look at you with detestation but the truth of the matter is that there are part of the problem with the United States is that we are now competing with some people who have some considerable genetic advantages over us they're called Chinese I don't know why the Chinese Meed in a malthusian trap and under an idiotic system of government got a genetic mix that was so good on capitalism at capitalism when it was Unleashed that's a very interesting question but some kind of selective breeding happened over there I see my friends adopt these Chinese girls were utterly discarded from the remote henderland and what one of my granddaughters well I'm now seeing a sample what so great I say I'm not like this idiot professor at Stanford who you know six signas of luck there's a reason why these girls are working out so well in many cases way better than the people had their own children and there is we are starting to have a very major competition with a group of people who on average have some genetic advantage over us I have to like it if the Chinese displac the mongers some of whom are here tonight my attitude is Bomb voage but it happens over and over in this country when my grandfather came at the end of the 19th century 13 years old with a 9-year-old brother by themselves uh illiterate impoverished uh I'm sure the people in the US despaired that these Sicilians were coming into the country and it was going to be the downfall of the place of course maybe it was but they did survive and they did bring their parents and their younger siblings o over and so each generation uh seems to have absolute despair at the people coming in but they save us I call this the vampire economy that the US lives on the fresh blood of immigrants and each group get gets replaced by another group yeah but I think we could safely take in a whole lot of Sicilians and we get about the standard number of tombrello but if we try that with a Chinese we'll get way above a standard of course you got it this is now that cing blood has run thin we need to be replaced by something better no I don't say it in a tough blood I just say that I don't think we'd get more physicists out of Sicily than we which reminds me of one of my favorite true stories when Shockley was on his craziest when he tried to recruit all these Nobles laurates to donate their sperm so that the Next Generation could have the advantage of all the selective of breeding and he came to I think it was Mueller a famous no B LA and meller said to him well he says he says you're barking up the wrong tree he says what my sperm has given America is two guitar players if you want to have Noel laurates you better look among the Immigrant illiterate tailor well that's um on that note uh I would like to thank Tom and Charlie for very entertaining first part to our program well thank you for the first part and now we would like to allow some time for some of you to uh ask questions uh there are a number of microphones which are in the in all ways here and you should come to the m and um mention you would you are and ask only one question very briefly uh and from Charlie I have to tell you we do I have to say that we have at Caltech a large number of physical scientists life scientist Engineers we also have a few social scientist there may be a few questions here from our social scientist go ahead hi Mr brire shareholder from New York um usually at the Westco media ask you a business related question we're not at Westco meeting not a business meeting so let me ask you a political question uh last night I was at the dinner in Oma that Warren hosted for the DNC raising money for the Democratic party and uh there he gave a very El I'm very sorry to hear that well I'm I'm going to ask you to elaborate on that actually because he gave a very uh total a story about how he was the son of a far right-wing Republican Congressman grew up uh you know hearing about Godless Communists etc and so at some point in his youth sort of sat down and very calmly and rationally in the way he described it much like investing I think uh um thought about you know laid out his worldview what he thought was important Etc and made a rational unemotional decision that you know what the Democratic party is right for me and uh so I asked him afterward I said you know do you think this Administration might tip Charlie over to our side and he sort of laughed and said well maybe but uh but if I were to ask him about it he' never come over uh so I figured i' I'd ask you about it and I'm not going to be so rude as to ask you who you're voting for might Hillary or Barack uh be able to count on your vote this November but rather to a bigger question uh about how did two such like-minded people who in your early comments have never really disagreed on anything can communicate so well and finish each other's sentences and so forth end up uh into political parties that can't seem to agree on anything um and sort of more broadly if you could maybe tell us you're you're a similar story to what Warren did you become a republican because you sat down calmly and unemotionally and thought about the issues and or was it something like most people I think it's one question okay one question and one well Whitney I think that if you're a really intelligent person you have to hold your nose in reviewing either party yes and just exactly which one gives you the most offense can vary between intelligent people and Warren and I get along so well because he's not a normal Democrat and I'm not a normal Republican go ahead Aon you um I've read couple um of things where of speeches that you recommend books occasionally I'm wondering if there are you've mentioned that it's important to study across many disciplines but there are a couple of books three or four on your mind that you'd recommend um ones you've recently read or ones that would help in what you've talked I'm going to duct that here because I've got a crowd of cult members at the berer haway meeting coming and that's where I'll do that one okay next Okay I uh have a general written very a very specific question I trust that you're not a uh shall I say a skeptic on the issue of uh climate change and global warming and the uh impact of human activity on raising the temperature of the Earth uh specifically uh what do you feel is the responsibility of Corporations if any to deal with that issue within Investments you hold as opposed to maybe making uh charitable contributions to deal with this specifically for example Pacific Corp is owned by bur B Burkshire hathway uh it is proposing several coal burning power plants in the in the uh Southwest and also there's a question of dams on the clth river in Northwestern California do you believe that uh Pacific Corp has a social responsibility to address this issue of global warming or do you believe it's better off if the corporations maximize their income and then set up foundations to remediate social problems yeah well I'm not going to speak for Pacific Corp which has its own Executives that are more expert in these areas and it's their responsibility under the Burkshire system which involves delegation just short of abdication and but on global warming uh I can give you an easy answer do I think there's some global warming caused by increased concentration of carbon dioxide yes do I think it's nearly as big a problem as Al Gore thinks it is no and I think some of the solutions that are proposed by these True Believers that are so excited about global warming uh have created some of the biggest Asin entities of all and the worst of the an Asin enties that makes me grieve for my fellow citizens is trying to turn corn into motor fuel this is this is one of the world's stupidest ideas and it involves partly something you would agree with in figuring the cost of the Corn they don't count anything for the top soil that's lost with every corn crop which any ecologist would care about terribly so the whole thing is just asine it shows how this True Believer stuff which gets onto a cult-like Mania can cause terrible failures of cognition like turning corn into motor fuel I mean it is really crazy and it's a disgrace it's not it's it's it's it's it's really awful and so we want to beware getting too influenced by these people who obsess on these on this one issue it is going to be very hard I think we have a reason for not using up the petrochemicals the uh petar of the earth and that is they're so useful to man for reasons other than keeping warm and running engines for transportation and when they're gone I don't know what Tom brell's solution is but I'll bet it's not very reliable and I agree and so I think we've got a good reason for doing this and you've got a very good sufficient reason to reach out for a fairly stupid reason with a lot of mcgn it's really not very smart and you ought to be ashamed of yourself next go ahead hi my name is Cecilia U I'm an undergraduate here at Caltech and when I heard you talk about the Space Race it kind of reminded me of um the recent 50 years in space celebration and one of the best speeches I've ever heard given by an astrophysicist named uh Dr Joe Tyson he mentioned that the Apollo race actually created one of the greatest impedes in America for uh social or for scientific advancement and the advancement in education so when you called it um a race of head building big head building I wonder if it's about time that America had another such big head building race to create another impetus to study science and especially in the public education system Tom I think she wants you to answer well I'll be hap happy to but I'm probably even more opinionated than Charlie be hard I think the Great Adventure of our time has been to explore the reaches of the solar system with robots that the robots can go there they're not affected by radiation they're not affected and they last forever Voyager was La was launched before you were born and it's still out there exploring the edge of the solar system there are lots of places that our machines can go and tell us what the adventure is and we don't have to send men to do it frankly I think it's uh a bit like uh building those Stone heads on Easter Island you can see why I asked for Tom Brella to be here it diffuses the natural antagonism go ahead David Winters um negative you've got a negative lopolo effect in financial markets today Charlie any thoughts on how this plays out well when it's this bad uh I think there will be some reaction and some change in practice and some change in laws and if we don't get changes in laws they'll change the labels when they reinvent cdos they'll have some different name they have poisoned that name permanently and uh but I think the lessons are just unbelievably important an advanced civilization did not need this much mess we didn't need this much lying we did not need this much crazy Envy driven uh pursuit of uh unreasonable gains with no conceivable social contribution this was not a pretty scene and uh and yet it was something like the south sea bubble as long as it was going on when nobody wanted anybody to criticize the party and no so I think there will be changes do I anticipate great wisdom from our legislative class I hope not well they gave us the problem in the first place I mean they were peeled let's take the simple little subject of margin requirements in the 20s we had a great mess caused by 90% loans against stock and rampant speculation and so on so they passed tough rules giving the Federal Reserve the right to control margins which they did for a long time and the banks had to apply there was none of this crazy credit when I was young if you wanted to buy Securities frequently you had to put up 50% sometimes 75% sometimes 100% of the price of the security fade in Fade Out the class that was going to make money out of running derivative exchanges and all kinds of things option exchanges wanted the equivalent of a new G gambling parlor where they could be the cier and so they talked up a lot of free market economic ideas and said after all liquid markets capitalism we have to and they created derivative markets so which totally obsoleted the margin requirements that had been part of the American regulatory scene human nature needs margin requirements just as it needs restrictions on selling heroin to 14y olds and our legislative class item by item repealed all that stuff and once it started making money they just multiplied it and then they got into to systems where the clearance is a huge problem and we're starting to see that now in some of these obligations where you can have the contract but the contract can't clear the other guy is not good for it the procedures are not proper it's like his insurance company that insured against hurricanes until it came to the island where they wrote the insurance it's like what I call the accounting for bur's derivative book it's a new class of asset entitled good until reached for by the way it was $400 million that the accountants blessed but when we reached for it just went to mist I don't think that you should have a lot of assets on your books that are in the category good until reached for anyway uh this thing just morphed into this diseased outcome and uh and so it's it's and it's hard to predict what the legislative reaction will be I think we've created such a vested interest now and all the people that profit from this stuff that I don't think we're going back to margin requirements and I don't think we're going to rid of all these stock option exchanges I knew we never needed them Warren went and testified before Congress that we didn't need this stuff he was a solitary voice there was one man was that on there saying what do we need option exchanges for but it didn't work then and I don't think it'll work now uh it's it's really it's really quite sad what happened you would like to feel that as tson said that the thoughts of men are widened with the process of the Suns why do we have to repeat the same old FES over and over again in a thin disguise but evidently we do my friend Garrett Harden wonderful man another Caltech trained man he used to say if Aristotle were alive he would be a very grumpy old man cuz you would have seen the same damn mistakes made over and over and over again and that may be some of the problem with me next question it happens quicker you don't even have to die get in this condition hi my name is Brett hinov I wanted to know what you think the most important career or uh academic experience a young person could get today would be to become a great investor in the future well I think it helps to have a generalized competency in dealing with words and numbers and quantities and Concepts and of course it helps to practice with that con competency and then if you collect Follies the way I do and stay away from the Follies uh when you're as old as I am you'll be a richual man okay next one good evening mronger uh professor tomell and by the way I'd rather be you my name is Dennis armanii I graduated from calch three years ago and now I'm a proud employee of Glen air Peter Kaufman's my boss's boss's boss so my question to you this evening is that when I started Caltech in 2000 uh got my PhD and now work it went from never really hearing about China to now the United States has to pack up its bags and just say we're done why is it such that whenever the United States are why is it so easy to write off such a great country all of a sudden that in the oh I'm not writing off the country I'm not saying necessarily you but it seems like the world in general just says we're no I'm just recognizing reality that a new competitive Force has come into the game that's hard to handle you don't write off the country if you're a very good golfer and Tiger Woods comes along you know I mean this is a very talented collection of people and if they keep going the competition is going to be very tough burshire goes out of its way not to compete with these people head on next question now if you if you think you can handle it all I can say is anybody's smart enough to graduate from Caltech with a PhD and go to work for Glenn a does not need any help from me you have it made and you don't have to worry about China either good yeah um hi Mr Munger my name is James Lynn um I remember reading a long time ago um like you know Warren Buffett you and Buffett were I'm not into like macroeconomic things issues like um but uh Mr Buffett he I read recently he's been like investing in the Brazilian real and you know basically um long foreign exchange foreign currencies um so what's I want to see what's your outlook on the US dollar and interaction with you know the economy and how bad it can get and how bad can this stock market get yeah well you know averaged out Berkshire has not made its progress in life by making wonderful macroeconomic predictions we figured out how some things were very likely to do way better than other things and we got into those things occasionally in recent years Warren has kept out of other Mischief by doing things like by the Brazilian reel and he's done it very intelligently and he's made a few billion dollars but it's it's a sideshow you know when the markets are scarce for our kind of activity Warren has to do something and he's so used to a few billion dollars coming over the transom every that he's he sometimes stretches a little if it's easy enough okay but I can't help you with a simple solution to getting rich with soft white hands next question hi my name is Helen Lee um I'm a Caltech undergrad here and as calch undergraduate uh undergraduate education goes we learn things from math and physics to chemistry biology all the sciences that you can imagine um but we don't get a lot of insight into you know business and investing and as sort of a new investor my question is what in your opinion is the best piece of advice for a new investor or for current investors well I think it's very useful to get the capitalist perspective namely how do you make this thing work for the people that own it because the reality will make more sense when you go at it with that perspective so even if you don't intend to get rich you want that perspective because you'll you'll understand the reality you're dealing with better so I think you mentally want to make yourself an investor as part of the proper training of your mind and since you have to do it anyway to improve your mind you may as well get rich while you're doing it and so if you underspend your income while you're life and keep learning and collect all the bonehead experience mistakes other people made and avoid them and so on uh I would confidently predict that you'll do just fine but there's no one book or one idea or something that's going to do it the one idea that people use is the one that Ben Graham borrowed from engineering which is the concept of a margin of safety in other words factoring in all the probabilities you want a bonus probability you want a margin of safety in what you're doing and that's a very good concept when you're designing a bridge and it's a very good concept when you're when you're making an investment you want something that will handle some mischances from life and still do well and so if there were one concept why Ben Graham would have said that's the concept but it's easier to State than it is to work it out Case by case Tom I interrupted you to throw out a AER like concept the things you're learning should be connected to one another and that's part of your job you're learning a bunch of separate things at calch try to figure out how they're connected to one another and that may mean reading a lot of other stuff but it's all of a piece it's not a bunch of separate compartmentalized things and I believe I've lifted that from Charlie yeah but all this stuff is really quite obvious that's and yet most people don't really know it in a way where they can use it which is a very interesting educational problem next question hi Charlie welcome to keltech uh my name is John Lee I'm the president of Kelch fangon club and fangon is a mze in China and which is persecuted by the Communist party now uh at the I came from China so the strategy you were talking about raing price to pay to bribe the uh the purchasing is where very commonly practiced right now in China so it's nothing new and uh that is not unknown in the United States either actually I think they are also buying American president I know that in 1998 uh when I went to the Chinese Consulate they were giving us such instruction to pay for the American president candidates anyhow I think a big money or economic growth in the country with morality going down is very danger for this Society for this world as which has been verified in the second world war and I think right now many people have PID attention to the human right abuses in China as you may know the Communist culture is totally different from traditional Chinese culture and the Communist Party is using their power to persecute all kind of people and supporting you please can you please State your question my question is right now where many people like Steven Spielberg are putting a pressure on the Olympic but some of the big American company are still sponsoring this Olympic without paying attention to the human right abuses what do you think question what is your question do you think about this company should do should they sponsor a question State your question yeah should this international company sponsor this Olympic games which still have human right abuses thank you well my answer would be yes I figure that China is a nuclear power we have to get along with China whether we like it or not there would be nothing much more asinine and creating a lot of needless tension with the nuclear power and particularly one which is improving decade by decade from its worst condition so this idea that I think getting along with China and sharing in their pride with their Olympics is a is a very good idea The Human Condition being what it is thank you we are running out of time so I'm going to allow maybe two or three more questions and I'm sorry for the many of you would like to ask additional questions so go ahead hi Mr merer my name is Greg ragy this is my first time seeing you in person and it's a real pleasure I was pleased to hear you speak about common sense and the LA laaloa effect and your lattice work of mental models I wonder if you could give us a specific example of how you integrated these ideas to recognize a great investment uh that would be of great help to those of us uh trying to understand and replicate your success well some of the ideas were so simple we noticed that in city after City the Monopoly newspaper made more money every year and in some cities there were still two newspapers and one was slowly dying and so we bought the one that was sure to win does it strike you as a complicated idea it's the new newspaper and one time we did that with the Washington Post we made a billion dollars with 10 million so a lot of these things are perfectly obvious and you just have to train yourself to you have to develop the knck of using the knowledge you have next it's a knack you have to work at it won't it won't come in just over the transom because you'd like to have it hi I'm uh Chris canelli and I'm a freshman here at Caltech and I was wondering what do you say the in your what you can see into the future what the biggest issue and maybe it's runner up are for what is going to be the dominant concerns in the future um some people say like China's a rise is a big issue or environmental collapse what in your mind are those big issues well the issues that could do us in of course there's a big nuclear war uh the successful Mass use of pathogens uh these would be very serious things to put it mildly and uh and of course something could happen that we don't anticipate I would not predict that environmental collapse is going to be the big killer of human beings uh man is a very clever creature and when things get tough we can do all kinds of things the guy spoke about global warming if we want to change the temperature of the earth once you're talking about trillions of dollars we can change the reflectivity of the earth 30% of the solar radiation it just bounces back and we have things like mirrors the difference in reflectivity between a really good snow field and a black body is the difference between 95% and uh and zero in terms of reflectivity and so there's a lot of potential and the guy who I remember first suggesting changing the reflectivity of the Earth was John Von noyman probably the some people would say the greatest mathematician of the last 100 years but certainly he was up there and uh so I think all kinds of things we can do to the shortage I see is it all gets back to energy you got enough energy you can do practically anything but and of course Caltech is way ahead on that they've examined all the options and they're all for using the sun better that's the correct answer and I think man will be clever enough to do it and if he doesn't like the temperature of the earth I think man will be clever enough to change it and uh so I'm not I don't have the environmental Terror a lot of people and that's from a man that gets very nervous on the way we treat cows I do not like the fact that the average dairy cow in the United States is kept pregnant by artificial insemination 270 days a year I suspect that many hormones in the milk is not a good idea I don't know whether it is or not you know I know enough to raise my eyebrows so I think there are all kinds of things that we will learn to change and by the way that may be one of them but so I think man will be clever enough to avoid the worst of the environmental troubles whether man will avoid the other troubles I'm way more negative I think the Folly of man is up to some pretty extreme things imagine Adolf Hitler taking over a civilized country like Germany and he could have won I mean to some extent we were quite lucky in that war when I went into the army in January of 1943 a year after Pearl Harbor I was Drilling in the mud with wooden guns I mean we were very lucky that we had all these oceans and that we broke their codes and we had these wonderful science and that Hitler kicked out all the brilliant Jews we just had a we just had a lot of good fortune and the next time we may not be so lucky so I would argue that the next time we should be wiser okay next question good evening Mr Munger my name is Mike McGowan I live in Pasadena I'm a Wesco and a birkshire shareholder the fellow about one ahead of me asked my question and you answered it um so I'm going to kind of rephrase it you've spent a really interesting life looking for the truth in a number of situations and then have acted upon it whereas other folks in Wall Street and in Academia and in other cultures seem to even if they see the truth they don't follow it they find it easier or what have you to follow their fellows in doing this what is it that you've done that you could suggest or that seems to be a model for these guys kind of discarding the opinions of their fellows and pursuing something that would really be as you said developing The Knack for this I think to some extent I was naturally disrespectful of the received wisdom and I wanted to figure it out better and I think to some extent that was an inherited disposition and I turned what many people would regard that horrible lemon and a lemonade but I don't know I think you can make that kind of lemonade out of my kind of lemon I don't know if you can do it without of marshmallows okay next question good even evening Charlie uh yeah welcome to Caltech uh Beckman Auditorium I'm Jay whitcraft from Sierra Madre and I bring greetings from a fraternity brother and classmate of mine Peter Munger who I believe is a cousin of yours back in Philadelphia uh my question is uh I'm in the CR Madre foundation and we have a problem it's a small town 11,000 people 3 and2 square miles and we're trying to keep our budget together and because of a cut back in taxes that we used to get from the state uh we're hurting for money and I wondered if you have any suggestions as how our city could help us uh or how our foundation could help the city uh do better with our budget well lots of luck fixing the reactions of politicians and government govern to deal responsibly with financial problems this is a big this is a big order uh and I think you'd have way better chance of doing it in si Madre than we do in Los Angeles uh it's almost in the N nature of things that the politicians will make all kinds of promises and do all kinds of things to please the voters and sort of put off the obligations until tomorrow and so they're constantly building up a great load of future obligations and they're constantly posturing for votes it's distinguish from really trying to get the right answers and of course this causes problems and it's no fun to suddenly have to chop activities out of your accustomed um you know lifestyle and you know I solved the problem for myself in my own way and I'm I'm afraid I'm going to have to leave you with the problems of Sierra Madre final question uh you upheld Benjamin Franklin repeatedly for his ability to master many disciplines uh and you spoke a lot about the inanities and social sciences and Wall Street um I'm exactly half your age and just in my lifetime I've noticed a big shift uh in the incentive structures and everything uh from University admission to Youth Sports as well as the workplace in rewarding specialization uh do you think that is there any alternative way that you can think of to reward multidisiplinary success as opposed to the very high degrees of specialization that seem to be what gain people's status and financial reward well of course we should have high degrees of specialization and if you get a nice little cancer in some Gastly place you will not want a guy that really understands PR you know I me and but of course it's my argument that you can be quite competent in your specialized field and also have the common sense over a broad area if you work at it appropriately let's take the case of Newton more than half of the powerful creative period in Newton's life was totally wasted on Alchemy and Theology and in the remaining half he managed to create a quite a distinction in his chosen profession he had power to burn now let's assume you're not Newton you're just a good guy who's going to be a good mechanical engineer you know don't you think you can get a general competency just as you might be a good engineer and also play golf there's plenty of time to do it without ruining your specialized competency all you have to have is the will and the technique and uh and every hour you delay in doing it's just you're just increasing the chances that you'll remain in the shallows now most people are happy in the shallows after all there's always somebody that's in a shallower place thank you yeah I would like to thank all of you for joining us this evening I believe it was an exciting discussion and I enjoyed it very much myself I'm sure you did uh before we leave for the evening I would like to present Charlie with a very small token of our token of our appreciation for his presentation on today thank you and uh as you leave the auditorium you will be offered the possibility of not purchasing but of taking one of those DVDs thank to the generosity of Peter Koffman and it is an interesting DVD it's a 2our show on science there are very few of those it was made by a number of PBS affiliate it's being shown all over the country on PBS stations and what is even more exciting it's two hour on science and it is entirely done at Caltech and JPL and I really encourage you to get one of those I think we have enough for let's say one per family or one per small group please make sure you get one before you leave and join me again in thanking Charlie monger and Tom tomell for the evenement

הקלטות קשורות

2003

כלכלה אקדמית: חוזקות וכשלים (UCSB, 2003)

הרצאת הזיכרון של Herb Kay שנשא Munger ב-UC Santa Barbara, והתקפתו החריפה ביותר על תחום אקדמי יחיד. הוא מודה שהכלכלה היא הטובה שבמדעי החברה, ואז מונה כתשעה דברים שאינם כשורה בה — 'קנאת פיזיקה', התבדלות תחומית, התעלמות מכוונת מפסיכולוגיה, היעדר תרבות של ייחוס מקורות, ועיוורון לאפקטים מסדר שני — כל אלה מובילים לביקורתו המתמשכת על השערת השוק היעיל.

14 בדצמ׳ 202053 דק׳

שיחה עם Charlie Munger — בוגר מצטיין של Caltech‏ (2020)

שיחה וירטואלית באורך כשעה הקשורה לפרס הבוגר המצטיין של Munger מ-Caltech, שהוקלטה כשהיה בן 96. בהביטו לאחור על חייו, הוא מדבר על רציונליות כחובה מוסרית, על מה שגרם לשותפות Berkshire לעבוד, על הקריירות והטעויות שעיצבו אותו, ועל איך לשמור על חשיבה צלולה בזקנה. אחד הראיונות העשירים ביותר של מאנגר בסוף חייו שצולמו בווידאו.

14 בפברואר 2018שעתיים

האסיפה השנתית של Daily Journal 2018

Munger בגיל 94, כשעתיים של שאלות ותשובות לבדו. הוא פותח בשני העסקים של Daily Journal — הוצאה לאור משפטית מצטמקת ותוכנת מערכת בתי משפט צומחת (אך נמכרת לאט) — ואז מקיף את גישת המודלים המנטליים שלו, מיזם הבריאות שזה עתה הוכרז בין Berkshire ל-JPMorgan ל-Amazon, ומדוע הוא נשאר סבלני כשאין מה לעשות.