We posted a full set of notes of Charlie Munger speaking at the Daily Journal Meeting. A Reader was kind enough to send another set of really extensive and well done notes which he took. Find them below (originally posted here)
Los Angeles—Charlie Munger hosted the Daily Journal Corporation’s (NASDAQ:DJCO) 2016 annual meeting at the company’s headquarters in Los Angeles, California on February 11, 2016. Detailed notes of the proceedings appear below. These notes fall short of a verbatim transcription. Rather, they represent my best attempt at capturing Mr. Munger’s wisdom as faithfully as allowed by the circumstances. Errors of transcription are mine.
Charlie Munger: (Inaudibly addressing the formal business of The Daily Journal for approximately five minutes)
Unidentified Audience Member: Can you please turn the mic up?
Charlie Munger: Is this better? (Audience cheers) Some of you may remember that this same thing happened at a Wesco meeting once. Back to the Daily Journal. Like many newspapers it was once a fine business. Of course the world changed a lot, as it has for other newspapers.
[drizzle]But some things have gone well, like our stock holdings. We made a lot of money in the foreclosure boom. We had more than 80% of the foreclosure notice business. It was huge prosperity for us and that gave us a lot of money, and we then used that money to buy securities at low prices during the panic. We were aided by that peculiar circumstances, and it offset the deterioration of our newspaper business. Of course, we’ve also entered the software business.
And what’s happened now is that we have more software properties than print properties and those businesses are doing much better. And the business is doing better because our product is way better than that of our main competitor. And there is an endless market for this stuff. District attorneys, courts; it’s hard to imagine anything more certain to flourish.
It’s agony to do business with public bodies and their bureaucracies and agencies, but it’s the agony that keeps many other software companies from coming into the market. If you’re Microsoft you’re into easy money. They did buy one of these businesses once, and it was not a success. The really big boys find it hard, and they tend to stay out. I think our prospects are thus better than our main opposition.
What you have here is a sort of venture capital approach to the software business. We’ve tacked on a software business to a newspaper.
(Audience laughs) With that I’ll take questions.
Questioner One: Tell us about one or two opportunities in technology and also give us one or two risks.
Charlie Munger: The one I was most excited about was getting into(inaudible, but could have been Journal Technologies). Crucial milestone. We bought this little nothing software company and now it has 80 or 99 employees. The new business is interesting because it’s in a big market. I think whoever gets entrenched in it will be in a very sticky business.
At least we will have entered a business where we’ll be hard to dislodge. The hurdle is that we want to be most important player in this new niche, which is a big niche. I don’t regard that as going poorly. It’s going well. (Authors note: Journal Technologies is a subsidiary of DJCO and supplies case management software to courts and justice agencies).
Questioner Two: I’m from Stanford. Thanks for donating the Munger building. You’ve said you want to know where you’re going to die, so you never go there. A few years ago Warren Buffet bought IBM, and some people say he walked out of the circle of competence. Can you comment in relation to the first comment?
Charlie Munger: IBM is a lot like us. They have a traditional business that is very sticky, but then the world changed. And of course, in the new world they are not the leader. Up came Oracle and Microsoft. IBM didn’t do too well with the rise of the PC.
But IBM is in a position where they have an old business and a new business. (Inaudible). The automated checklist is a great idea. It was particularly useful for Edison.
But now IBM is a kind of super market and I don’t really have an opinion about it. I’m neither a believer nor disbeliever in the new business. It could happen or it could not happen. I do think the old business is very sticky and will die slowly. On the Berkshire side, we have to play a long game. It may work in a mediocre way, it may work big.
Questioner Three: I want to thank you for sharing your wisdom with all of us. Two questions: What advice do you give to your grandchildren? Second question: do you have a favorite investment story you can share with us?
Charlie Munger: Well, regarding grandchildren I was not able to change my children very much. My situation reminds me of what Clarence Darrow said about the great poem: “I am the master of my fate master of soul. Master of my fate? I can’t even pull an oar!” That’s the way I feel about grandchildren.
(Authors note: Clarence Darrow, a prominent 19th century lawyer was quoting and challengingthe spirit of the poem “Invictus” by William Ernest Henley. Darrow said “Instead of being the captain of his soul, as I have sometimes expressed it, man isn’t even a deck-hand on a rudderless ship! He is just floating around and trying to hang on, and hanging on as long as he can.” Source: http://darrow.law.umn.edu)
Charlie Munger: What was the second question?
Questioner Three: Do you have a favorite investing story?
Charlie Munger: Well, I have many investment stories from my younger days, but not many that I haven’t told before. Al Marshall and I did something in 1962, where we were bidding for some oil rights. I soon realized that under the rules of the rights the only people who would bid for these oil royalties were oil brokers and they were a bunch of bastards. I realized the oil royalties business was populated by shady characters, who could be outmaneuvered easily. The Mungers were getting a $100k a pop for a while. (Authors note: Munger gave much more details regarding this trade / arbitrage but they were not audible)
The trouble with that business, is it didn’t work for very long, and that’s true of most investment stories. The trick is to get one or two or three.
Questioner Four: How does the current investment energy environment compare to the 1980s?
Charlie Munger: We owned Wesco for a long time. They did a lot of transactions. But it was only five or six outcomes that carried most of the freight. Now that is really interesting. To try and do a zillion little things is hard. Try to do a few things well, and it will work out. A few good decisions over a long period of time can lead to great success.