Whitney Tilson’s email to investors discussing Charlie Munger interview and birthday.
Munger Interview And Birthday
I'm a huge fan of investing legend and Berkshire Hathaway (BRK-B) Vice Chairman Charlie Munger and was a contributor to the definitive book about him, Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger.
Amid the turmoil in the public markets and the staggering macroeconomic environment, it should come as no surprise that the private markets are also struggling. In fact, there are some important links between private equity and the current economic environment. A closer look at PE reveals that the industry often serves as a leading indicator Read More
Munger doesn't give as many interviews or speeches as he used to, so I try to be there in person when he does – the best opportunities are at the Berkshire and Daily Journal (DJCO) annual meetings (I wrote about the latter in my February 13 e-mail).
And when I can't be there in person, I always watch the video afterward, which I what I did when Munger was recently interviewed by a professor at his alma mater (dating back to 1945!), Caltech. You can watch it here and read the 10-page transcript my analyst Kevin DeCamp did here. Here are some of my favorite lines:
- What has happened in the investment field is that so many people have gone into it and made a lot of money. When I was young there was almost nobody in the field and nobody was smart. And now there is a ton of people in it and almost everyone is smart, including good Caltech graduates. There have been so many people sucked into finance, by the money. So that's been a hugely important development that I don't welcome at all. I don't think we want the whole world in investing by trying to outsmart the rest of the world by buying securities, but that's what happened.
- I think great investors to some extent are like great chess players – they are almost born to be investors... Partly it's temperament, partly it's deferred gratification. Good investing requires a weird combination of patience and aggression – and not many people have it. It also requires a big amount of self-awareness in how much you know and how much you don't know. You have to know the edge of your own competency. And a lot of brilliant people are no good about knowing the edge of their own competency – they think they are way smarter than they are. And, of course that's dangerous and it causes trouble.
- I've spent a lifetime trying to avoid my own mental biases. A) I rub my own nose in my own mistakes. B) I try and keep it simple and fundamental as much as I can. And I like the engineering concept of a margin of safety. I am a very blocking-and-tackling type of thinker. I just try and avoid being stupid and I have a way of handling a lot of problems – I put them on what I call my "too hard pile" and I just leave them there. I'm not trying to succeed in my "too hard" pile.
- [I think returns in the next 10 years will be less than the last 10] because so many people are in it, and the frenzy is so great, and the systems of management – the reward systems – are so foolish.
- "Remarkable" is not too strong a word [for how much money printing there is] – astounding would be more like it. Well, it's unbelievably extreme. Some European government borrowed money reasonably for some tiny little percent of 1% for 100 years. Now, that is weird. What kind of a lunatic would loan money to a European government for 100 years at less than 1%?
- Nobody knows when bubbles are going to blow up, but just because it's Nasdaq doesn't mean it will have another run like this one very quickly again. This has been unbelievable. Again, there's never been anything quite like it. If you stop and think about it, think what Apple is worth compared to John D. Rockefeller's whole oil empire. It's been the most dramatic thing that has ever happened in the entire history of world finance.
- The other thing that's really remarkable, the last 30 years in China, they have had real economic growth at a rate for 30 years that no big country has ever had in the history of the world. And who did that? A bunch of communist Chinese! Now, that is really remarkable. So, if you're studying finance you have a lot of strange things to account for.
- Academia is not very good at the multidisciplinary stuff. Academia rewards the researcher who knows more and more about less and less. And there are real difficulties with that approach... It's hard to be that smart in the liberal arts. Partly because many liberal arts professors are so leftist. It's hard to be pretty smart if you're crazy leftist. You're gonna have the world a lot wrong.
It's amazing that Munger is still so sharp at his age – he turns 97 tomorrow. Happy birthday!