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Munger: Gross Immorality Will Happen Without A System Of Wise Restraints

Charlie Munger, the long-time business partner of famed investor Warren Buffett, talks with the BBC. If you know anything about Charlie Munger, he’s famous for his quick wit, plain spoken wit and absolute genius. He has helped shareholders of Berkshire Hathaway amass untold fortunes.

Gross Immorality

Munger: Gross Immorality Will Happen Without A System Of Wise Restraints

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Transcript

How worried are you by the decline in the share price of Berkshire Hathaway-

Zeroes and this is the third time that Warren and I have seen our holdings and Berkshire go down top tick to the bottom tick by 50 percent. I think it's in the nature of long term shareholding with the normal vicissitudes and worldly outcomes and markets that the long term holder has is quoted value stock go down and them by say 50 percent.

Think you could argue that if you're not willing to react with equanimity to a market price decline of 50 percent two or three times a century, you're not fit to be a common shareholder and you deserve the mediocre result you're going to get. Compared to the people who do have the temperament who can be more philosophical about these market fluctuations.

You can never take all the boom and bust out of a capitalist economy but they could be enormously dampened if they were wise legislative restraints on human conduct that eliminated more of the same and folly that will inevitably come without the wiser strains. And what happened in America is that the people who were making money out of a lack of wise restraints just got more and more power by doing more and more lobbying and making larger and larger political contributions and and being aided by a certain. Ideological nuttiness which assumed that because free markets worked so well compared to say communism automatically followed that if there were no laws at all restraining. Financial Conduct the economy would work better and that's not so. The economy works worse if you allow unrestrained send volume. In finance that goes back all the way to the South Seas Bubble. Without a system of wise restraints, gross immorality and extreme craziness will happen in markets. They need to be dampened. Center and falling needs to be stepped on.

Both parties have wings that are full of idiots. That is the nature of the game and the reason it's worked as well as it has is that the people in the middle have sort of over time tuned out the idiots on both. But every once in a while the idiots given control and of course that has terrible consequences. So you'll regret the nature of the system. The thinking of the last 10 10 it went way too far in financial deregulation. And people were making so much money and the economy was doing so well. Because it was being puffed up by this idiot boom and idiot expansion of consumer credit. That everybody thought wasn't as wonderful. And of course it was your life for the next three weeks would be more pleasant if you went on heroin. But it would totally destroy you. Over the long pole. And that's what the economy does when it allows itself to be seduced by the potential for an idiot boom into allowing all this gross immorality in this and this craziness to take over.

To his credit. All the major figures he's the only one who promptly said I was a horse's ass. I'm ashamed of my lack of foresight. I missed this. Who else but Alan Greenspan is talking that way. So in my book he's sort of a hero. Oh and it is hard at his age. To look back at a career as distinguished as he is with as much success and adulation. And basically say I was a horse's bertud and that's what he's done.