One of the best resources for investors are the Daily Journal Corporation shareholder meetings chaired by Charlie Munger. My personal favorite is his 2015 meeting in which he discusses Darwinism, Henry Singleton, human nature, and what he learned from Einstein. But there’s also a wonderful insight into how he was able to see that investing in good companies was a better strategy than the Graham and Buffett’s ‘cigar-butt’ style companies. He also provides a great explanation on why he side-stepped business school so that he wouldn’t be ‘polluted by the craziness’.
Here’s an excerpt from that meeting:
Question to Munger: Financial economists in recent years have rediscovered that highly profitable high quality companies are better investments than other companies. They tried to figure out where this idea came from. Then it takes them back to Buffett and then Buffett points to Munger. But this is an insight you seem to have had in the 50’s or maybe the early 60’s before you were even an attorney. You weren’t even Charlie Munger. How did you find this idea.
Munger: Well everybody with any chance at all knows that some companies are better than others. What makes it difficult is they sell at higher prices in relation to assets and earnings and so forth. That takes the fun out of the game. If all you had to do was figure out which companies were better than others, any idiot could make a lot of money. But they keep raising the prices to the fact where the odds change and I always knew that.
They were teaching my colleagues that the market was so efficient that nobody can beat it. But I knew people that beat the para-mutual system in Omaha. I know more about horses than other people. I knew it was bullshit… when I was very young. So I never went near a business school so I didn’t get polluted by the craziness. Never believed it either!
I had a gift for recognizing twaddle and there’s nothing remarkable about it. I don’t have any wonderful insights that other people don’t have. I just slightly more consistently than others have avoided idiocy. Other people are trying to be smarter. All I’m trying to be is non-idiotic. I find that’s all you have to do to get ahead in life is to be non-idiotic and live a long time. It’s harder to be non-idiotic than most people think.
You can listen to the full meeting here:
Article by Johnny Hopkins, The Acquirer's Multiple