Here are Charlie Munger’s notes from DJCO Meeting – sent by a grateful reader. For more informal notes see our storify and check out Jason Zweig’s great story/interview with Munger here.

Munger Letter by ValueWalk

Note: VW spoke to trusted attendees and while they could not vouch for the entire accuracy of everything below, they believed it overall looked to be correct.

“Welcome to the largest DJCO shareholder meeting not counting shareholders. We have a few shareholders and lots of groupies.”

“I welcome all of you including the groupies.”

“Our independent accounting firm, BDO, that’s our new accounting firm, is here. We prefer you to our old accountants. You remind me of something someone once asked me – what is my largest source of felicity? My wife’s first husband, that’s easy. You have a lovely position.”

“If anyone has any desire to look at the old minutes, Jerry has them. We don’t have any lunatics here who want to see the minutes?”

“Who in the hell are the 864 who abstained from the vote to hire the audit firm? You know, after the Japanese bombed Pearl Harbor, there was 1 vote against war. There’s always some nut.”

Full Notes Of Charlie Munger's Speech At DJCO Meeting

DJCO Meeting: Charlie Munger briefly talks about accounting

“I am going to talk very briefly on accounting and then not anymore on the subject. To be as late in filing is absolutely unheard of – you wouldn’t have an audit so late if the mafia was running it. Our ‘lack of internal control problems’ are trivial and of no consequence to anyone with any sense. They were like the doctor who wanted to cure the nosebleed by fishing around in the groin. They were confused and fishing around the groin charging for it by the hour. They did us an enormous damage the way an elephant would storming a barnyard stomping chickens. You can always use a useful bad example…” It is an example of a way to never to do something to one’s customers since DJCO is in the software sales business. “The auditor was feeding our main competitor lots of red meat and billing us for it.” It didn’t hurt in financial community due to reservoir of trust but did hurt them with customers. No feeling that EY was any worse than any other of Big 4. Business situation would’ve confused any auditor. Turning the other cheek didn’t start with Jesus – the real guy was Aristotle – suck it up and continue and have paid all the invoices. “Part of our trouble is that our business situation was complicated, and I’m sure we didn’t draw the top talent.” DJCO is large relative to other clients of new auditor. Charlie and Jerry are good at getting along with people they trust and admire but not good at disguising it when they’re around people they don’t admire, and that’s a fault of theirs. “Hopefully the new auditors will be more admirable – hard to imagine it could be worse.” Auditor did it “utterly unwittingly – turning the other cheek like Aristotle.”

DJCO is a declining business as have said time and again, and the golden revenues from publishing foreclosure notices in recent years was like being part of a big event like the Black Death – still have 90% share in public notices of foreclosure but there practically aren’t any left; “if you take the whole history of businesses that make surplus but go to hell due to technology, the result is lousy like Kodak. Technological obsolescence. Thomson Reuters is an exception, which is really rare. BRK is the other rarity – out of 3 failing businesses (New England textiles, Baltimore department store certain to go broke, trading stamp) came BRK – out of that little nothing, the excess capital we took out did better than anyone else – BRK just passed GE in market cap as a matter of fact; Kodak actually invented most of the stuff that others made money off of; GM towered over the economy when I was young – technology is hard; our declining business will last a while but at really modest profits”

DJCO Meeting: Charlie Munger says future is the software business

Future is the software business and really like that – info should be in the cloud

“Most big software companies hate dealing with the government other than IBM but we like the agony as fewer people will come into it; trying to do something that people haven’t done” – odds are better than even that they pull it off

“As to surplus money, thank god we have it – all this extra money on the balance here and using it to create a software business; people are honest and cheerful about what is ahead; I actually kinda like the new model we have even though I don’t understand it” – not many new entrants – would buy his product over competitor’s and that’s his true test

Question about what he looks forward to and what he doesn’t look forward to in the next year. Charlie Munger starts his answer addressing the questioner – “spoken like a true groupie.” Had a very favored life and wonderful associates; problems his abilities could solve; luckily selected easy problems his whole life and has a good batting average; thankful to be alive; easy to be discouraged by what’s wrong and forget what’s right; doesn’t like vast growth of legalized gambling including that run by Wall St (derivatives); one legal drug is enough – liquor – 5% of alcohol drinkers ruin it for the other 95% – at least 1 of 20 descends into total alcoholism and those who recover have to be cultists to save their life – one more drug is a bad idea; doesn’t like tendency of governments to pay off fraud – bad for people to learn to lie to get money from the government – don’t do anything for injuries that can be faked – “it is appalling that you can buy all these diagnoses to create a big fraud puddle – the government is paying people to be crooks”

It is fabulous what’s been solved over last 100 years and how much better off the average person is. Harvard thinks they’ll soon create pancreatic cells from stem cells – will be unbelievable for diabetes; take the cars we drive – clever engineering and safety – a lot being done right; “hard sciences people make you feel good about your country”; “liberal arts people at the bottom of the pit are not welcome at my dinner table – if you’re gonna have an orgy, hold it somewhere

1, 2345  - View Full Page