[0:05]
OtherCharlie Munger may be best known as Berkshire Hathaway's vice chairman. Warren Buffett's best friend, confidant, and business partner for six and a half decades. But Munger was also a giant in his own right, a scold of corporate excess and greed, who preached to a large flock of devout followers about how to get along in investing and in life. A Renaissance man, Munger modeled himself after none other than Benjamin Franklin. He studied mathematics, physics, meteorology, and engineering, all before. before attending Harvard Law School. He trained himself in subjects as diverse as psychology and architecture. Munger passed away at the age of 99, just one month shy of his 100th birthday, and two weeks after our last interview with him. Tonight, we bring you a look back at the wit and wisdom of Charlie Munger.
QuestionerHey, Charlie, first of all, I just want to thank you for inviting us to your home today and for hosting us here. We appreciate it.
CharlieWell, I hope it'll be interesting. It's certainly a peculiar example of one life.
QuestionerIt's interesting that a man who started out to be a lawyer, ended up with an identity that's more like a gurus than lawyers. I called you a lawyer once, and I think that was the most irritated you've ever been with me, because that was how you started things, but you really have studied every field out there and tried to...
CharlieYeah, sure. To take things from different studies and different models in life.
QuestionerDid you go about doing that intentionally?
CharlieOf course. I could see the power of it.
QuestionerWhen did you figure it out?
CharlieWell, it came naturally to me, and that was what I would call naturally arrogant. And it wasn't that good of mind. You know, I was in the top 1%, but not. No prodigy. So I never would have succeeded in a field that required a mind to be that of a prodigy. But it was a much better mind than ordinary people had. And I recognized that quite early, and I just played the hand I was dealt in order to get as much advantage as I could.
QuestionerWhen did you recognize that? Were you a child still?
CharlieVery young. When I was taking courses in grade school, I was often revising the textbook and the course in my head to make it more correct because I realized the professor was doing it wrong.
QuestionerWhat kind of things would you recognize that they, that they would that they were doing wrong.
CharlieThey had some crazy idea. For instance, my Latin teacher was a maladjusted woman who was a devote follower,
[2:53]
CharlieSigmund Freud. And I recognized that Sigmund Fred was a horse assassin. I still first read him when I was in high school. And, of course, it was an odd little boy whose Latin teacher is teaching him Freud. But that was, she was peculiar, and so was I. And of course, When I read, I bought the complete writings of Segment Freud from the American Library. It was one big book. And I went through it very laboriously. And I realized he was a goddamn lunatic. And so I decided I wasn't going to learn that from my Latin teacher. And that's the way it is. That's what I went through all my life, trying to turn every teacher into my Latin teacher. Just a poor fellow. poor fellow. I hadn't quite learned to understand it right yet. Now, I didn't always succeed. I had some very unusual teachers. The best teacher I had in my life was Lon Fuller, but he was the best contracts teacher in any law school. And contracts is the best subject in every law school, at least I think it is, because it integrates so beautifully with the new doctrine of an economics that came along with Adam Smith and all those people. And of course, I could see the integration, and so could this landfowler was a damn contract teacher. I had been the leading contact teacher in some other law school, I was what got him to Harvard by transfer, which was rare in those days. And also I could see in the Harvard Law School something very interesting. When I went to the Harvard Law School in the immediate aftermath of a long, long range, in which 15 professors handled 1,500 graduate students. This is unheard of. Nobody had ever done anything like that. It just morphed into that system, and it did it early. And of course, when you have a system like that, it really helps to have a few big ideas. is that are strewn through the system that are useful, and as some borrassar that sees it. And that's what Lund Walter did. He really saw the old dam. He integrated the law and economics is what he did to some extent. And the reason he did is he wanted to know why do we have these contracts. So obviously make modern civilization work. And he never, he didn't explain exactly why. But I can sort of explain why to myself after hearing Lon Fuller, well, that's an ideal teacher. You had this idea of mental models before you got to him, though. Yes, and I just naturally came to it. But it was very much a Lonfoller-esque thing.
[6:16]
CharlieI was just awestruck by Lon Fuller. I have never been awestruck by any other teacher in my whole life. including some gifted mathematicians and physicists who did some remarkable things. But Fuller really, really had him, he really changed my life. He almost made me a law professor. I considered being a law professor. And I knew I'd be pretty good at it. Did you keep in touch with him for a long time after law school? I never kept in touch with him. He was so remote a figure. to me. And he was like Moses or something going down to the mountain top. And I was pleased he was there for ordinary. And he'd put it all in a book I didn't need Hunt Fuller. That's the way I handled almost all my teachers. I didn't need him. And... Let's talk about Benjamin Franklin. Yeah. He's one of the framers of our nation. He very famously gave out very... And he was a prodigy. And he was a prodigy. And he was a prodigy. in lots of different disciplines. Well, and he self-trained himself with like two years of grade school education. This is a very remarkable thing. And when he found late in life, he needed something like algebra. He went back and pulled down the textbook and taught himself algebra. How old were you? He was a very much a self-educated man. And that was a very much an interesting story for that reason. How could a man who taught himself everything? everything, you know, like Latin. And it was just, how could a man like that going to so many different fields and be the top guy in the whole country? And weren't we lucky to have him? Yes. Yeah. No, all those five or six people whom we now consider the founding fathers have worn pretty well. But you found Ben Franklin when? How young were you when when when you first came across what Ben Franklin had done? what Ben Franklin had done. Well, I think high school. And that's when you started modeling yourself after some of things? I don't know when I started modeling myself after Franklin Franklin, but I certainly tried to model myself a little. I like the mixture of financial life and regular life. And I couldn't copy. I didn't have any musical ability. And so Franklin was, he played four different. musical instruments, one of which he invented. Well, this is a lot of musical ability. God simply left out of me. And so I don't, I can't do it. So I never made any effort to annotated Franklin's musical ability. But any other ability he had, of course, I tried to imitate.
[9:35]
QuestionerYou started out in college at the University of Michigan. Yes. You were young when you went there because you had skipped some time in grade school. And you went from mathematics. Why did you choose mathematics?
CharlieBecause I could get an A& without doing any work. That's why I took mathematics.
QuestionerAnd then you shifted with time. Yes, yes. You did that for a couple of years. Yes. And then World War II interrupted things. You were 17 still when... Then decided that biology was not the proper science to handle a war. Or, geology was not the proper science to handle any war. any war.
CharlieAnd that obviously I had to start with physics. So I took physics.
QuestionerAnd then you focused on... No, I didn't take it very much because as soon as I'd mastered the first part of physics, I actually entered the Air Force as a private. Right. And marched around in some field in the middle of the winter and slept in a tent. And I must say it was pretty damn unpleasant to be outside in the winter, sleeping in a tent. sleeping in a tent. Look, this is the middle of November. We're in Southern California. Look at it. Yeah, this is pretty nice. Yes. And, of course, I noticed that it was like that. And it wasn't like that in Omaha at the time I was at Caltech. And it was in the middle of the water. And it was like this. And so I naturally thought this is better. Yes, I understand why you moved permanently. Yeah, well, oh, well. Well, you understand why the whole nation moved. Right. And move south and west is what it moved. It continues to do so. Yes, yes.
QuestionerSo Charlie, you were born on the first day of 1924. You have seen a century of history. And I wonder, do you ever stop...
CharlieNot only that, I lived in the aftermath of a previous century of history. In fact, you could argue that about 90% of the progress of man has happened, in civilization, has occurred in the last two centuries. And I lived in the immediate aftermath of one. And it was a very important cemetery. That cemetery that ended when I was born, because in that, in that century, we figured out so very, very much that was quite important as a start. You stopped to think about the technical. revolution. It happened in that century. That's when they, you know, opened all these coal mines and created all these steam engines and, and so on. And so it was just, and of course, that was what brought the economic system up. So, man, had enough leisure, had enough time to think
[12:46]
Warrenwhen he wasn't just getting enough food to eat. And so it was an amazing time to be born. And be born in the place in that, century where all the growth was going to occur. The United States. The heyday of the British Empire, which was probably the most important empire that ever existed on Earth. Ended about the time I was born. The heyday. You're a stamp collector. Pretty much the whole Earth was colored red or pink for the British Empire. It was a little stanking island in the North Sea. And that's what they... And that's what they, and they created the most important civilization ever created. Now they borrowed heavily from the Greeks and the Romans and so forth to do it. But they did it nonetheless. And it was a very interesting thing. The idea that a system where 300 families owned half the land in England, and when the winter, when the summer came, in England, they went to London and ran the country as a matter of nobles oblige, that they were able to take the best of that 300 families and make them important parliamentarians. And that was their civilization, that was the way in which they took civilization, and their part of civilization, and the total leadership of the technical revolution. And then you come along in 1924. I remember immediately after that. My father grew up. in a world where if you want to go around Lincoln, Nebraska, he had to use a horse and buggy. There was no car. There was no broadcasting. It was a very different world. The railroads were primitive. And that's what he grew up in. But the last two centuries created almost all the growth. Before that, everybody, not everybody, like, 80% of all, people are farmers. And what's happened over the last 100 years, has been pretty remarkable too. Yes, and the hundred years I've lived has been even more remarkable. That's pretty much all of modern biology, modern medicine, and modern industrial civilization, modern chemistry. Just imagine what the world would be like. We had photographs for a hundred years before we had modern chemistry. And, but now it was done by a guy that was a natural, very good chemist. But nonetheless, and he created a mighty company, a great growth stock, and so forth. And it finally wiped out the shareholders in bankruptcy. Eastman Kodak. Yes, Eastman Kodak. It was just an amazing story that could happen. And of course, it helped me because if somebody is brilliant as old Eastman and somebody who hired
[16:10]
Charliewho hired as much many brilliant people as Old Eastman did, could take the company into bankruptcy. I figured that lesser people could easily take big companies in the bankruptcy, eventually, in spite of their best efforts. It wasn't like Kodak didn't try. They hired the most brilliant graduate students. They gave them all kinds of time to think. They learned everything, any important man on earth, learned as quickly as they could. They could and so on and so on. And even so, they wiped out the common shareholders. And that taught you what, as an investor, as a businessman? Sure, and I was going to be a common shareholder someday in some company, and it would help me to know that it was very easy to wipe out the common shareholders, even a great company run by a genius. I mean, that's an argument for being diversified, but... No, not, no, I, that, it's a, yes, it is an argument. for being diversified. But that's not really what the lesson you took away. There's some argument for being diversified. But there's also some argument for being non-diversified. And the argument for being non-diversified, better for a few people than the argument for being diversified. So the lesson I would take out of that is to be diversified. That's not the lesson you took out. What's the lesson you took out? Well, it was going to be very difficult to be excellent enough at anything to make any money. That's the lesson I took out of it. And then, and I could look around me. And I was lucky there too, because one of my father's two best friends, was a guy named Eddie Davis Senior. And Eddie Davis Sr., was the leading urologist probably in the United States at the time. And just working as a private physician who taught medical students, students, urology, without charging for teaching time. Because that's what doctors did in their days. They were volunteers at the medical school. And they also furnished free medicine to their colleagues whom they knew. So it was like a cartel against the rest of those and courtesy to the noble profession. And if you read the Hippocratic Oath Carefully, which I'm the kind of a fellow who did, It doesn't sound like nobility. What he was telling the doctors to do was to keep their secrets away from the people who might compete with them practicing medicine. Do not reveal the secrets of our craft, Outsiders. That's the great rule of hypocritees. Not do no harm?
[19:09]
CharlieWell, he gets credit for that one. But what he really emphasized don't tell anybody else how to do this. the people who have the modern system of this are the magicians. Okay. They have kind of a code of not telling fully how they're doing the tricks. Right. And for a long time I could not understand how they turned those women back and forth into apes or panthers and so forth in Las Vegas. Right. And I could smell a panther. And I knew panther smell. And I thought that is a hell of magic trick. They're fooling my sense of smell. And I couldn't figure out how they were doing it. I could figure out how they were filling my sense of smell. They were bringing in panther smell. But they weren't, but they also brought in, they turned the women into panthers and back into women. And I couldn't understand how they were doing that. And when I was finally explained to me by some guy who broke their code, like the code of Apocrates, don't tell the outsiders our tricks. What they had is they had little slats of mirror that slid out of little slats of bamboo. And by using those little slats of mirror, the very French of a button would slat, move out. It would show you a different image. And it was just a very, it was a clever goddamn contrivance to fool the eye and mind of man. But you saw a different, and smell a woman turning into a panther. I never saw that drink. It was a tiger more often than a panther. Yeah. But that's the way they did.
QuestionerLet me ask you about the Great Depression. You were just a child then. I know your family's struggle.
CharlieYeah, but I was an unusual child. And I was curious. And I saw what was happening. And it was just clobbering my family everywhere it looked. And it wasn't a little clobber. little clobber. It was a major clobber. What happened? Clobber, clobber. Well, my mother had two sisters, and my father had two sisters. And all four of those sons-in-law, who were my uncles, got utterly clobbered by the Great Depression. One was an architect and to be able to stop building practically everything. And he finally got a job doing drafting work for the kind of of Los Angeles, and they paid him 10808 for a month for doing that drafting work, which was above what they would have paid an architect, but not much above. And that's what he was earning. And then they passed the FHA rules, and that was competitive civil service examination. And he was a brilliant man, and so he took the examination and came in first.
[22:28]
CharlieAnd they made him chief architect for the FHA in Los Angeles, which is a huge program during the 30s to revive at least some building. And he set the standards for that. He wouldn't let the subdivider get by with much. You know, there was a rule as how many later a lot of outlets there had to be in every bedroom. And he'd make them put in the right number instead of the lesser number. And that was an important job builders under depression incentives being what they would naturally be. and a good architect being what he would naturally be. Right. And so the FHA, which was then fostering a great percentage of the total building that was going on in terms of houses. Just the guy, if you're going to build a house, you've got to have so many hours. Let's fill out, lots for a bedroom. Well, it was useful work my uncle was doing. Yeah. And he was enough of an architect that he could force in a little bit of grace too as well as the right number of electrical outlets. But... One of the things he was very interested in was the plaster screen. And most people don't even know what the plaster creed is even though they live in a building. But if you've got plaster that goes down into the ground, you get capillary attraction that sucks a lot of water up into the plaster. It's not desirable. It doesn't always do that, but it sometimes does it. But it's a tiny little incremental cost to stick as a little... a little thing on the bottom of the flaster as it comes to the end near the ground. And you put in that flaster screen, it can't suck that water out of the ground into your flaster. He made out, my uncle made everybody put in the plaster screen. And saved all these houses as a result. Yes, yes, yes. And of course, it was a good example for somebody like me to watch that being done. To put in the hard work early on and the extra step. No, it would. the extra thing that could be added at a tiny incremental cost and would last for a hundred years. Wow. You saw your family getting clobbered on all sides on the Depression. Yes. One was an architect. But how did that? One was a builder who was broke. He had loans he wasn't even paying off from the 20s, boom. Well, bubble when he was a builder. And he became, he made himself an appraiser. And finally he was almost as best appraiser. best appraiser. And he made a good living too. But he had terrible years in the early 30s. And he had a terrible medical problem with one of his children died very slowly of
[25:23]
Charliemeningitis. And it cost a lot of money. He just couldn't pay it. He had not paid off that fully until the war came. So what did that? He finally paid it off and got quite full. got it quite prosperous in the Boz War Boobo. But he had a long period of his being utterly without money. And all these impressions aren't you? He moved into an extra house that my grandmother, grandfather Russell owned. And then he didn't have to pay ransom. What did all these impressions mean for you? I mean, these are formative years for you as you're watching this. Well, it's quite serious. It's a little boy of his cousin who's the same age, is dying next door and takes forever and causes a wards. And there's no money to pay the doctors, the hospitals, anything. That's a serious growing up experience. And I turned the other side of me, who lived Madeline Duffy, my great female flame. And Madeline and I were just inseparable living side by side. And Madeline Duffy and I were playing and I were playing with this little dog that was a stranger to us. We were very young. But I can remember her and the dog, so it must have been nearly four years old. Or four years old, more or less. And that dog was inches away from my cheek, but it bit her cheek instead of mine. And they didn't quite get the fast-door treatment in time. They got to it, but it was too late. And she died after terrible. after terrible trauma. And she was a very outstanding little girl who might have grown up to be a Becky Quake if the world had been different. And she never grew up. So I'm sitting there two dead children. Feel don't realize how high the death weight was among children until about the middle of the century that preceded the one in which I was born. which I was born. And in those days, if you wanted six, three children, you had six, and you shoveled three out of the graveyard before they even grew up. That was the system. That was mankind's system. That's an awful system. It was an awful system. The agony of doing that was just, you see the agony with somebody like Lincoln who loved his children so much and did not have a really functioning wife. and a man who has no functioning wife to have his children die one by one. So he lost three out of his four sons. They never grew up. And the one who grew up never had any children. As a little boy, I carried more money and all the other little boys. When I used to shoot agates in the schoolyard to make money playing competitive
[28:40]
Otheragots. Marbles? I made sure. You marbles. But agots were the most valuable marble. And I never wanted to do that. I never wanted to lose my good, valuable collection. You know, some guy was more coordinated than I was shooting marbles. So I would never play for stakes, and it's like I could play better than the other boy. That's kind of been a habit you've made throughout life. You don't play poker with someone you're going to lose with. Exactly. Right. I didn't always arrange the circumstances. I just fell under them frequently. But I got to play with competitors who were dumb calls. People who weren't assessing the odds. weren't assessing the odds quite the same way? No, no. They weren't assessing the odds the way it was easy to assess the odds. And you'd learn, you just paid attention when the teacher was teaching, you know, fair interpretations and combinations. You're saying you're in high school. The minutes they taught me those things on, I looked at them. And the math teacher who was teaching me was a dumb cough. And of course, he didn't have any idea how they were important and why. He just taught them. was one more thing he had to teach to get through the textbook. And I immediately realized that these things were terribly important. It would do wonders for me if I mastered them. But my math teacher didn't know that. I mean, that's where you get to, I think what you call... Lone Fuller. Yes. He knew that if you really knew economics, you'd be a better decision-maker. And that gets you... Quite a bit. Yeah. Yeah, that opens a big gate to a lot of interesting territory. The trouble of that territory is that territory is hard. Most of the leading economists are very talented people. It's hard to just get coherent in the subject, much less persuasive. And so it's a very difficult subject. And on the other hand, there are little sub-markets where it's easy to figure out how to do well. And a lot of people figure out how to work their way in. worm their way into those and stay there. A lot of what you do, though, also is picking your shots. I mean, I think you call it sit on your ass investing. Yeah, sure. Where you wait for the big fat pitches to come in. You don't do a lot over time. That's correct. You don't want taxes to whittle down or anything else along the way. No. And it's very obvious that every intelligent person ought to do that. And a lot of the intelligent people have figured it out.
[31:34]
CharlieIf you go into the intelligent people, if you go into the... decisions that the teaching profession makes with its IRA money and its pension money where it gets any choice. A lot of it is indexed and a lot of it is invested in shrewd. Shrewd investments held for a long time. So a lot of what I do is being done now, and that wasn't true when I was young. I couldn't just look at somebody else and see some. I saw some people who've gotten rich by by holding a few good things. So you think it's harder to make money now?
QuestionerWell, that's a very interesting question, and it's a very important question.
CharlieAnd of course it's harder. It's so much harder you can't believe it. The people that have found it harder are the people that made Warren so rich. Ben Graham and his colleague Dodd in a damned adjunct course at Columbia. And by the way, Graham was invited into three different... in the three different economic departments at Columbia on the full ten-year track and turned him down. He was that good at literature and math and so forth, both, which is rare. And Ben Graham was interesting. Ben Graham was polymathic, like the Davis is a different way. And the same thing, also somewhat musical. And so I saw something like a dancer. He liked a dancer, well, he left out of me. And anyway, what Brandon Graham did that was so interesting is that he taught that you should find a few good things and stay with him for a very long time. But a long time to him was a few years. It wasn't a few decades. And he did that for like 40 or 50 years and a little investment partnership with incentives and so on. And his... investors who were, by and large, not very rich, did very well with him. After he got his share, they got a good cut that was higher than what other people got after fees. And so he did a valuable product. And he taught you got into things, he could be a lousy business, but they were cheap enough, they're still all right if they had enough assets for share. So you're getting at least twice as money assets as you were paying for. And he just floated around for the best. available stuff among companies good and bad. That was his system. And he had worked for 50 years. His clients had good returns. Well, after he became so famous, partly with the help of Warren Buffett and Warren Buffett's success, everybody tried to do the same thing. And of course, everybody crowded in, trying to be a little bit grand.
[34:51]
WarrenIt got more and more competitive. And that's what's happened now. And the low-hanging fruit that's fruit that Ben Graham had a lot of because of the Great Depression has gone away. And if you just ran float from one undervalued bad business into another and pay all the costs and it just doesn't work well enough for the people to actually put a little money to be worth bothering with. That's the way it works now. But at Graham's time, it was the best way there was.
QuestionerWell, your upgrade on that was to just look for good businesses. I saw immediately the Graham, the Graham was. was wrong. Right. And you look for it. The real money was in the really great companies. Right. Which carried you up and up and up and up and up. Is it?
CharlieWhoever, but I did not really think that we'd ever have one that would, in the so many hundreds of billions in Berkshire. I did not anticipate when Warren and I were starting with our little piddly start than we'd ever get to a hundred billion, much less several hundred $100 billion. It was an amazing occurrence.
QuestionerWhat happened that you didn't anticipate? What led to that success that you did?
CharlieWell, we got a little less crazy than most people, and a little less stupid than most people. And that really helped us. Then in addition, we were given this much longer time to run than most people because something kept us alive in our 90s. And it gave us a long track. It was a long track from our little fiddling start, all the way to the 90s. Those are the two things that really happened. And, of course, we wise up over time. We got into better and better companies. We understood more and more of the bad things that could happen, you know, and how easy they could creep in. And we avoid them even more assiduously when we were old than we did and we were young. And it all worked. I think that.
Questionerback in 2015 for the 50th anniversary of Berkshire, you wrote in the shareholders letter that among many other things, you had a $60 billion pile of cash at that point. You thought that that pile of cash would decline over time because you'd be able to buy more and more things. Now you've got almost $160 billion in cash. Is there an opportunity for a really big purchase with that? And do you think you'll see one?
WarrenWell, of course, there's an opportunity for a really big purchase. purchase a lot bigger that people can make who don't have is 160 billion. We have $160 billion in cash, plus a great credit rating we deserve.
[37:57]
WarrenAnd who in the hell has that? Not very many. Yes, but what it's going to be, I can't tell you. It can't be anything too small because it doesn't matter how good it is. We're of a size now, or too small just doesn't move the needle very much. So we need something big to come along and use up all our cash and some borrowing. But who's more likely to find something than a guy who has $160 billion in cash? Fuzz a long history of buying bargains. I don't think it's hopeless. It may have to be done by some different people. You know the next time we may not be able to squeeze a little more lemon juice out of the old lemons. We may be able to squeeze a little more lemon juice out of the old lemons. We may be able to, they may have to squeeze some new lemons, meaning new people may have to make the decisions. But who can make them better than somebody who has watched the early process all through all those years and seeing how well it works? And it starts with a little legacy of $160 billion of cash. So you're talking about Greg Abel, Ajit Jane. Yes, Ted and Todd. Or somebody not yet identified. The main.
CharlieThe main trick that Berkshire shows is the power of what I call the Wooden effect. And Wooden was the most famous basketball coach of the whole era. You figure out what the hell he really did, which of course, somebody like Warren and me, we just automatically do it. He concentrated at about 90% of the playing time in seven players. And everybody else was just a sparring partner for the people. And that turned out a great system for winning a basketball because you identified your best player and concentrated so much of the playing time and your best player. And more playing creates better, better, better. You learn by playing. In a way, you can never learn just by shooting practice baskets. And they concentrated all this playing time in his best players. Simple idea. That's what, that's what Berger did. Of course it worked better. And everybody's not. learned it. You've talked about... Everybody would know it automatically if it were just a little more obvious. If all of us had to make a living, backing people in chess tournaments, but there's very little revenue to pay anybody, anything, we'd all recognize we have to get into the top seven players or something like that or have no chance of winning, you know, chess tournaments. And everybody would be trying to play the wooden style to get the bet, but...
[41:04]
CharlieBut an investment picking it, people think anybody can learn it who just goes to Harvard or Columbia or something. And of course, anybody can't learn it. It's like chess or mechanical ability or a lot of other abilities. It's somebody who does it a lot and has a natural attitude for. Who's the outlier? Who gets the big results? And that's what happens in the investment world. Just a few outliers make money. money. Now, we've also created a whole lot of people who get the reputation of being geniuses, run venture capital funds and so forth, and do pretty well for themselves because they get paid so outlandish. But they don't really get the bottom 80% of the people invest in venture capital. When we had a row, they didn't even look at it. So they're just making... The other people who stumbled into Sequoia in the right year were different. They got a long long run when Sequoia didn't try and grow and they got the advantage of milking Sequoia. But that was rare. Nowadays, everything is quite different. I do not think venture capital will win in the future the way Sequoia once did. And I don't think Sequoia will win in the future the way Sequoia once did. It's too hard. It's too damned hard. Meaning that it's... There's too much failure, difficulty. accident in the world. It's really hard to have a stretch like Sequoia has had as an investment firm. Now everybody thinks if they sort of copy the method, they'll get the result. And of course, it's like a meeting with John Wooden's example. You can compete in John Wooden's example while you in fact do something else, which is what they're doing. And of course, but they're not going to get something else. They're going to get lousy results, not wooden results.
QuestionerYou talked about some of the joy you found with some of the investments Berkshires made along the way. I think Washington Post was a great one.
CharlieWell, of course, who doesn't like to happily enjoy extreme success accumulated with people who are extremely admirable. That's what Warren and I have gotten to do. Well, of course that's a lot of fun. And a lot of the people at Sequoia have had a lot of fun because they've been a lot of similar things.
QuestionerWhat, besides the Washington Post, though, which is one you mentioned in a 1995 speech, as being one of the best investments ever, what other investments have been some of your favorites? I'm thinking of maybe a BYD or a Costco.
[44:02]
CharlieWell, I've often favorites, but again, BYD is a good lesson. I didn't find BYD. LeLoo found BYD. And he encouraged me, I didn't, I encourage him to get this partner's And he found, as his, occasionally would do a B-Y-D-A-A, a venture-held of investment in his early life, something I would never do, or notherst tell them to do anyway. And so he did one or two similar transactions that were a lot like Sequoia. He went into B-W-D-A-M- and was so small that it would have been appropriate in an early stage, support investment. And it was a public company, but it was just so small. It was barely a public company. And he went into it. And this little nothing company headed by this, we could see that two things about Munchon Fu. One, he worked 70 hours a week, and the other was he was a genius. And of course, the idea of having somebody was a genius and had all this mechanical aptitude that Warren and I lacked was interesting, at least to me. And so I was willing to take what was piddling money by hunger standards and have some of it invested by Louis Lidou and Lim. But then he came to me and said, Juan Chon Fu wants to buy a bankrupt auto plant in China and starting there, go into the auto business. And I said, let us mind. God, this is a horrible news. I said, it's a really dumb idea. Who in hell has ever seen? succeeded in creating a new auto competition with older companies that are as admirable as Toyota and so forth than Mercedes and people really know a lot about autos and have a big lead and I said let's talk him out of it so we tried to talk bunch on food out of going into it he paid no attention to us he charged into it well this year he'll probably sell two billion automobiles at huge profits for automobile, mouthwatering to lead to delicious profits for auto. It's a huge stunt. And we, Warren and I share the, not Warren and I, but Oh, and Genu, Bon John, I mean, Lee Lou and I share the distinction of urging him not to do it. Thank God he didn't take you up on it. Well, he did. That's what geniuses do. They don't listen. It's just amazing when he's done. Of course, he's been lucky, but all the great records are partly work, partly talent, and partly luck. That's what you expect to win. With this many people in the game of investment, of course the big winners are going to be people who get luck and who get work and talent and luck. That's what we've had.
[47:36]
WarrenWe've had, what was interesting about Berkshire's history, is what turned the first $300 million of Berkshire net worth into the first $3 billion of Berkshire net worth, into the first $3 billion of Berkshire net worth. Now, some people have now gone back and checked all my figures, but some people figured it out. But the way we, the results we got in turning $300 million into $3 billion really quickly. really quickly, helped us a lot. What was it? Well, it was blue chips, stamps, and seized candy, and the Buffalo News, newspaper, and the early insurance operations under Rashi Jane when he came to us. It just, everything worked at once. We made these unholy profits out of these fiddling businesses weren't that good. And it was a very remarkable thing. And there was some luck involved.
QuestionerWarren has said that his worst trade ever was buying Berkshire Hathaway itself, the Mills. Yeah, sure. What was your worst trade?
CharlieWell, my worst trade was buying a block for the Bunger family in Alibaba, which is a pretty good company. But I think it got overhyped. And Jack Ma was made mistakes in dealing with Chinese goods. dealing with the Chinese government. I had some bad, everybody has some bad ones.
QuestionerYeah. You have an off day. The greatest tennis player goes out there someday to the center court and has a bad day. It happens.
CharlieI think people learn more from their mistakes sometimes than the successes.
QuestionerYeah. Yeah. But they were, what really is knowing you're going to have a very bad day. Do not live your life in such a fashion that a bad day can kill you.
QuestionerWhich means what when it comes to investing?
CharlieMaking sure. sure you don't use leverage?
QuestionerWell, they aim for the fences. It's like a hitter at baseball, which has to head home run on every fetch. The great home hitters do not remotely swing at every pitch. It's happily good. They wait for one that they can really handle. And that's what great stock fair is do, too.
QuestionerHow do you know? Because I know leverage has always been something that you guys have shied away from, using too much leverage in situations. But you're also...
WarrenWell, yes. It wasn't like we didn't use any. Insurance float gave us some leverage. That's why we went into it. And average out over our lifetimes, we've benefited from insurance flow. But I guess the difference between not wanting to over leverage in a situation, but also knowing that if you think something's a real deal to really load up on it,
[50:55]
Warrenbecause you're only going to have so many great pitches, perfect pitches. Yeah, we're not holding our cash. For the boom it's going to come in 19 and 99. Yeah. We may end up that way. But it may be have a different protagonist, but that may happen, which is fine. I think some of the lessons in life that you give people, though, I guess if it's so much harder to do things now, and you've talked about this, how for this generation it's going to be harder to do things like buy a house, make the same sort of money, be able to get a head, be able to get ahead in such ways. Of course. It's going to be harder to earn the same kind of percentage returns after taxes and inflation as this last generation of endowment managers earned. They've trained all these universities to expect a 6% yield return because that's what they want in order to do what they spend as they want. But it is not given in the stars that the 6% annual return will surely be wonderful. for the good investors of an era. I mean more broadly. Yeah, yeah. The great bulk of the investor may earn a lot less than 6% instead of a lot more. I just mean for, you know, the average person who's looking at this thinking it's going to be harder to buy a house. Is it is the American dream further out of reach for young people today? Well, for some it is and for some it isn't. There also was never a place where anybody who got a degree in computer science got a degree in computer science, got a salary, a cash bonus, and a block of cheap stock every year for free, just not just floating in. And sometimes in a very good company. And there are more companies like that that are offering benefits like that to people that are just starting out in computer zones. So in some sense it's easier. So for some people, it's easier. There'll always be something in a rich civilization. It's a little better than other people get as well as well. people get as well as a little worse. And all these people frustrating today in computer science are in the right place and they're transferring more.
QuestionerCharlie, let's talk a little bit about bureaucracies, because you have duly noted the problems with bureaucracies, whether it be a big company, whether it be the government. Have I ever? Right. So how would you fix some of the bloated bureaucracies out there? Let's start with the federal government.
CharlieThat comes in my too hard pile. hard pile.
[53:51]
WarrenI can't tell you how to do that. That would be really hard. Because you have the problem, A, figuring it out and B, getting it done. And to solve both those problems are really, that is really climbing a, it's like picking the high pick on Everest and saying, okay, I'll waltz up there in a day, you know. You aren't going to waltz up there. It takes several days to do. There was a presidential candidate who recently said, that his solution for that would just be to fire everybody in the federal government whose social security number ends with an odd number. Does that sound like a good way to fix it? It does not. It's too arbitrary. And it may be that you need it for some bigger fix than that. And maybe you're never going to get it too. And maybe it's just something like old age that we're never going to get rid of. But you are still a believer in the needs. in the need for a government. Of course. I'm a, if you get right down to it, what I am is a lover of the progress of civilization. That turns me on. Oddly enough, the man whose name I bear, my father's father and my father's mother, both thought exactly the same way. And the great moral book, they took me to church and the Presbyterian church and all that. And but in Sunday school, to take on lessons and all that. But when they really want to teach me something, which turned them on, it was the legend of Robinson Crusoe, created by Daniel DeVoe. They just loved that guy creating a little English civilization and I got him vacant island. And that he could do it, and he worked at it. And of course, that was lesson they were trying to do it. lesson they were trying to teach the grandchildren. And I was so amused by it. I could see immediately what they were trying to do. And I get them to see immediately they were right. Of course, even if you're giving a goddamn desert out and you turn into a civilization if you can. Civilization is important. I accepted all those moral lessons. Now, they never said this is who we're trying to teach you, A, B, C. But they did make me read reference, not just every week, but every night. Before I went to bed, I got a little dose of Robinson Crusoe. I was a little tiny boy. And, of course, it was good for me. And of course, I never got over it. I'm still following Robinson Crusoe's method of going at life. That's what I did. I imitated Robinson Crusoe. My grandfather's teaching worked.
[57:20]
CharlieThat was a funny way to raise grandchildren. And I was the first grandchild on that side. And so I went down. I don't live there for weeks on end sometimes. And so I got doses of all these lessons from Sunday school and also from Robinson Crusoe. And of course, I really absorbed the Daniel Crusoe lesson. Then I was lucky with my ancestors on the other side of the family. I am very good at learning things from dead people. That's what everybody should learn. And so I had one grandfather on the other side. grandfather on the other side whose life never overlapped mine. He was dead before I was born. But he was the richest man in his town, had an immense old house. And he invited all the grandchildren to come in and stay every summer, as many of us want them. And of course, it's fun to go stay with a rich old grandmother. You know, who kind of owns the town. And he was the majority owner of the main bank. And Army's a grandchild. And the old man had been a pioneer. He'd come there as a pioneer and lost all his money in some bank failure in the East. So from absolute nothing as a pioneer in Iowa, he had eventually made himself the richest man in his town and so forth. And he lived to be an old man, as you can imagine. And what he loved to do was talk about the hard old days of living in a sod house, which is a cave. You moved into a. a cave in the winter. How many people want to raise two little children? In a cave, you can imagine yourself doing it? No. In Iowa winter, living in a cave with two little children. Well, that's what he gave his wife in marriage. And they, from that poor start, ended up with this huge success. And by the standards of his time and place. And he did that, he said, he loved to talk about the early days, because he was so proud of having survived them. the Indian wars and everything. And so he was pleased to talk about, reminded him of all he'd surrounded. My grandmother, Ingham, wouldn't talk with the grandchildren about the early days. They tried to talk about it and they said they were mean hard days. I don't like to remember them. Get them out of them, don't know, don't talk about it in front of me. And that was her reference. So she wouldn't allow people to talk about the early days. But Grandfather Ingham just talked endlessly about the inner days. Now he'd surmounted all these hardships. And when he taught the grandchildren of a fiscal nature, he says, you know, he says, people think I was the best farmland in the world and I own a lot of it.
[1:00:22]
WarrenAnd it's a good place to have a bank and I own the main bank. And he says, it looks pretty easy. Looking back in retrospect, it was damn hard, I want you to know. And he said, and interviewing my life, what you grandchildren have to realize. his version of Robinson Crusoe. He taught every grandchild. If they give you a real opportunity, the world's not going to do it very often. And you're only going to get three or four of these invitations to the pie counter. And when you get your invitation, for God's sakes, don't take a small helping. He basically said, lever up when you're sure you're right. And of course, that's good advice. But be sure you're right is what makes it hard. I go, how can you be sure you're right? Yeah. Well, but you can't, that's the point. You can't do it very often. There's a few times in a lifetime. Even if you're a Grandpa Ingham or Warren Bubbett, you only get a few trips to the pie counter. If you take out of Warren Bubbett's life, the ten most important trips to the pie counter, the whole record would look like done. It would be just worthless. And we knew enough that. We knew enough to take a good helping when we were over the trip to the pie counter. Now, we did take way smaller a helping than we could have easily handled. Berkshire could easily view twice what it is now. And the extra risk you would have handled were practically nothing. All we had to do is to do is a little more leverage that was easily available. In hindsight, you're glad you didn't, just from the potential risk? It's an interesting example. The reason we didn't is the idea of discipline. appointing a lot of people who had trusted us when we were young. Under a thing that left us, if we lost three quarters of our money, we were still very rich. Right. That wasn't true of every shareholder. Losing three quarters of the money would have been a big letdown. So we were very cautious in dealing with our shareholders' money. If Warren and I had owned virtue without any shareholders that we knew, we would have made more. We would use more leverage. I've had people. say recently that because of the multiple wars that are going on around the globe right now, if you look at Israel, if you look at Ukraine, what's happening with Russia, people say that we are potentially in the worst of times, if you look at China for the potential to take over Taiwan. It could end up blowing up human civilization, which I love so much.
[1:03:11]
OtherAnd naturally, I hate getting anywhere near. Imagine coming at life with a basic attitude of Grandfather Munger and Grandfather Ingham. how little I want to see growing up when it's been so hard to get it where it is from where it was. Of course, I don't want to blow enough. You worry about that right now? Yeah, of course I worry about it. I don't spend too much time worry about it because there's something I can't fix myself. I frequently put it on something I call my too hard file. And then I just don't think about it. So I would say atomic war is in my too hard file. I think we're near. I know we're narrower than I like being right now.
QuestionerCharlie, Warren Buffett has said that he could fix the budget deficit problem in Washington by simply saying that any member of Congress couldn't be eligible for re-election if the national deficit was more than 3% of the GDP.
CharlieYes, that kind of thing has been done in some places that got enough trouble. And it has worked. It can't physically be done. He's certainly right about it. It can be done. Whether it will be done, neither one voter, I can tell you. But is that the proper situation that's just setting up the right incentives? Well, we may come to a place where we simply have to, where we mismanaged to the place where it's obviously we have to go back to something that's more like, that's more like Adam Smith, and just take the inequality. It's dead of the poverty. I like inequality a lot better than I like poverty. I mean, is this modern monetary theory that's gotten out of control at this point, do you worry? Of course, modern monetary theory. Modern monetary theory was a level of indebtedness, which in the past would have happened only during a war, can now be routinely created to avoid any kind of unpleasantness from some families getting squeezed by hardship at the very bottom of the very bottom of the at the very bottom of the economic order. I'm not sure the whole damn system works when some families aren't being squeezed at the bottom of the economic order. That may be our path to civilization, and maybe the only one we got. In that case, we just have to be financially responsible whether it feels good or not, even whether it works well or not on a temporary basis. Maybe we just have to do it. And that may come, by the way. I mean, the most recent news is that 87 for, there was an 87% increase in the U.S. cost for borrowing money over the last year.
[1:06:09]
CharlieInterest rates are high, but they come down to ridiculously low levels. I was going to say they're high, but not high historically. Well, talking economically. Yeah. When the English console didn't lose purchasing power way back in the 1800s, early, 2.5%. Where did we get the idea that every endowment? that every endowment should get 5%, 5% real, 2% or 3% of inflation. That was written in the stars. I do not think it's written in the stars. We may have to do something so unpleasant, but it looks like we're bringing you back.
CharlieAnd the Chinese said to the Russian peasants, earn your own grain by farming your own farm. And if it fails, it's your problem, not mine, which is what they say. said, that was a hardship lesson at the time. It happened to work. It was, it was, it was, it looked like a hardship lesson. But it really was an invitation to plenty. It was say, eat this spinach and it'll really be good for you. It's capitalism. And you've said all along that capitalism is the best system. Well, it works. If I like your little medallion, and you like my $7 restaurant. And we trade. them I may think your little medallion is worth X and you may think my little wrist budget is worth $7. And we may work out some kind of trade, but if yours is worth $1,000, if yours is worth $1,000 and mine is worth $1,000, we both made $1,000 because that's the way we value them, and the voluntary exchange hasn't goes to government in anything. The GDP just goes up by $1,000. dollars in the United States. I'll exchange my watch for your medallion. And there's nothing else that will do that except capitalism. And do it automatically. You need capitalism plus somebody that creates a sound currency, that uses a medium exchange. When you got those two things, now you and I can have a simple system of exchanging watches for medallions. And we both want to do it.
Charliesomething we can do and it's just that was the stuff that somebody like Ron Fuller he was interested in that stuff and in seeking out to make his own work more meaningful he tried to understand it and you guys see him struggling with it and it was early in the history of economics of the discipline when this was going on now the main ideas had been discovered but but the main ideas had not been discovered in law schools. I mean, Lon Fuller was one of the very few people who had some vague understanding of how economics interwoved with law.
[1:09:46]
CharlieAnd of course, it's the combination that helped me do as well as they didn't want. You've said that proper incentive structure should be set up for public policy too, that you have to think about it very carefully. If you want to go into public policy, you should go in and think about what the end results are going to be from some of your actions they take. Well, it's not that. in the business of saying to make it fairer so that the hardships of life are more widely distributed. If you call it fairer, you can call it more generous. But either way they mean the same thing. They want the hardships of life to be mitigated for some people. That means other people can sell things to the government that they use in helping unfortunate people. And people have a different idea of about the government. They think it's mildly cheating. The government's all right. It's a big, dumb bureaucracy. Everybody's, they're engaged in manipulating us so they can live well. Of course, we can finagle a little so we can live well. And therefore, it's okay to cheat the government. And the cheating of the government is so extreme. If I could just wave a wand and take all the cheating out of the workers' comp system, who can not be in favor of the workman's comp system? system. It says if you're injured in course of doing your job, that makes you a living and feed your children, and now you can't function for a while, the government will lift down and give you a lifting hand. That's why they created compulsory workers' comp insurance, because it just seemed unfair that some people got so utterly clobbered by things that weren't their fault. And yet that wonderful system, it is ripe with fraud. They puffed their injuries up so they can get time off, they puff their injuries up so they can have extra much cash. They puff their injuries up so they can get permanent disability pay. And they have doctors and lawyers that help them do it. I mean, mislead the government in an unfair fairness. So in an effort to cure an unfairness, we may find that there are whole areas where the way human nature works, we have to endure more hardship. And the endure. and the unfairness that comes with it. There was... The ordinary rich person who talks that way is talking, because he wants to hold all his wealth and keep a great, and make the disparity between his wealth and the ordinary people get greater and greater.
[1:12:40]
CharlieThat's his ambition. But it doesn't work that he gets what he wants. The ordinary outcome of the well-to-do families is they go back to the mean. If you look to somebody as rich as the Rockefellers. And that was really, And that was really rich by the standards of a near human being. Even the Rockefellers will eventually go back to the main. Pretty close anyway. It just happens. There's a lot of misfortune out there, both fiscal and other kinds. And it takes it down one after another.
QuestionerHenry Ford and John D. Rockefeller were the richest people in the world when you were born in 1924. Today it's Elon Musk. Is it just new people who come through with the system?
CharlieI don't regard Elon. Musk is truly that rich because I don't think it's sure that everything he's working on can work. I think he could get his ass handle to him in autos. I would not invest in Elon Musk's autos myself.
QuestionerBut you've been impressed by what he's built.
CharlieYes. Who cannot? Again, that's another lesson. What is the lesson of Elon Musk? The Musk is, it's always an outlet, somebody who has a, a very ridiculous amount of money. It almost always has an element of luck in him. He's been quite lucky in what he's picked to double down, double down, double down, double down. And then he's used leverage so much that he's doubled down right to the edge of extinction, maybe two or three times. How many people can go to the edge of extinction without stepping into it? He's done three times, maybe he's got six more in any, I don't know. I put Elon Musk in a file. in a file. I never read against him and I never read with him. As far as I'm concerned, he doesn't exist. My life works better if I treat the world as though he didn't exist.
QuestionerLet's talk just about a few cultural things. I know reading is the one way that you say the only way people can really get smart. You don't know anyone who's gotten smarter who doesn't read a lot.
CharlieWell, yes, even the fiction, which includes a good deal of the Bible. The Bible and the Shakespeare and the... and great novels and all that stuff. The people were good at painting pictures and painting and telling stories. And people learn best when they learn a story. It looks more like a piece of a life story. So it works.
QuestionerWhat are you reading right now?
CharlieWell, and now is it, my life is, people know I'm on books. And they kind of like for Charlie's Almanac or something.
QuestionerYeah. So what do they do?
[1:15:59]
WarrenThey send me books. Gifts. So I get so many books in this house as gifts. I don't longer buy books. I just select from those that people will give me. And I kind of like doing it. I think they kind of like doing it. It's very peculiar. But I would guess that that would happen. But I've got to be sitting 99 years old. And all over the world, people who speak a different language, Indian or Hindu or. or totally different language, Chinese. But I think this business, I'm an enormous admirer of what Ben Graham did to teach that damn course for the better part of 50 years. And the fact that he did so by reaching any, without reaching any extreme prosperity, is also an interesting lesson. And another interesting lesson was half of all the money he made was, one great stock and that stock was GEICO indirectly held through the insurance companies and the Berkshire insurance companies and so on. So he got a big ride out of GEICO. And that was more than half of all the money he ever made. So even Graham, to be respectable on a record, had to have one big trip to the pie counter where he took a big helping instead of a small one. And he did it once and did it right. And again, very interesting lesson. That's not the way been competent has taught in the many men in universities. Identifiable big opportunities are hard to find. They may be there, but they're not identifiable. It's like I don't have a mechanical ability to do what Dr. Davis did. I just don't have it. It's not there for me. You don't have it. It's not there for you. You have to get it. Or get a substitute. You have to get a substitute. well and something you're good at.
QuestionerI think I heard that you've been binge watching Seinfeld. Is that right?
WarrenWell, I've finally gotten so I've seen so many reruns twice. I don't want to see him a third time. But I do like a bunch of self-centered people making the wrong decisions. It is ridiculous. It's utterly ridiculous. These people go out of their way to get insane worries and so on. And so on. solve some of their problems with humor. It's a show about nothing, though.
QuestionerYes. Yes, but it's not really about nothing. It's about the humor of life, being used to make life quite durable. By kidding one another, which is what they're doing, because they're really kidding in the audience. They are amusing us all. And thinking about age, a lot of companies are getting rid of mandatory retirements.
[1:19:37]
Questionermandatory retirement ages. Boards are getting rid of a lot of those ages, mandatory retirements. But there are questions right now about whether Joe Biden or Donald Trump are too old to be president at 81 and 77 years old.
CharlieWell, I mean, every one in America is too old to be president. It may be just too hard a job. The way things have worked out, maybe this is like my cousins, my cousins. meningitis, maybe it's just a hand too tough to play. Maybe you're not going to be allowed to play it out. We don't know.
QuestionerYou mean the age factor or?
CharlieNo, I'm talking about the atomic war factor. Just the idea of being president at all.
QuestionerYeah, yeah. If you've got a big ruin of smoking country, it's not much fun being president. So that is something that really, you can say you set it aside and it's not worth worrying about, but...
CharlieI don't know much time on it because I can't fix it. because I can't fix it. It goes into my too hard file. Even if I had all the power, I couldn't fix it. If you gave me the power to write all the laws of the world, I would sit down, even if it happened a day, and try and help you write those laws. I would think it was the most important thing that mankind could possibly do because there's a lot of laws that are stupid and cause bad results. And if you know what they are, where you would just eliminate the ones you didn't like and put in ones that. would help and I think somebody like Warren who naturally thinks the way I do on this issue, he'd be quite happy making laws for the whole United States.
QuestionerAnd you would too?
WarrenYeah. I'd feel it was my duty to try too.
QuestionerWhat would be the first to go or the first to get written in?
CharlieWell, there are all kinds of things. I would, where the fraud just gets too much. I think you just have to take it out. But there are whole professions that go out. And there's a whole half progression that goes out. Half the chiropedic progression should go out. It should not exist. Chiropractors.
QuestionerChiropractors, yeah.
CharlieYeah, it's horseshit. Because?
QuestionerIt's not true. It's not going to help you. And I should say you're somebody who was chairman at a hospital as well, so you've seen a lot of this up close.
CharlieYeah. To try and do things they couldn't help. You've seen that with other. Modern medicine. doesn't really allow it. A licensed does not allow you to practice medicine. I can't give Becky quick penicillin because I'm a chiropractor.
QuestionerRight, right.
[1:23:00]
OtherBut I could if I were a doctor. Right. What else would you tick on?
CharlieWell, taking the fraud out is also important. How can a whole lot of fraud be a good thing? And almost everybody has known that. And the early legislators, legislators made, they made creating an artificial currency. You tried to pass it off as real. They made that as a very serious crime. Of course, they killed you for it. And that was probably a good rule of that step in mankind civilization, was to kill the counter herders. One thing I'll guarantee you is the counterfeiter who's dead is not going to counterfeit it any more currency. They can't do it after they're dead.
OtherNo. Well, there are actually people in our liberal arts universities who think that it's cruel to kill people because they can't do any more mischievous after they're dead.
CharlieBut I consider some people so damn mischievous that it's a very good place to have them as dead as soon as possible. So you bring back more capital punishment? Yes. I might have less in some places and more than others. I'm sure I would.
OtherThere's an article that just came out about Oregon, which decriminalized all of illegal drugs and is now rethinking that decriminalization because of what it has led to. They thought by offering people help to get to cure their addictions that that would be enough to offset it. What they've found instead is that they have places that are overrun with drug users on the streets, making it very difficult to live.
CharlieYeah. Yeah, of course that's true. Yeah, of course that's true. And that's the kind of problem you weren't into. The great rulers are people like Leek on You and Lonfowler and Leek on View. He said, figure out what works and do it. That was his sole message. Figure out what works and do it. And of course, mathematically that translates, figure out what doesn't work and avoid it. Right. And both rules are correct. And you have to get it right or as close to right as you can get it right.
OtherPart of the advice that you give people in life is pretty basic stuff, but if you follow it, it's really excellent advice. I think your first one is is have low expectations. The second one is have a good sense of humor. And the third one is surround yourself with love of friends and family, obviously.
CharlieYeah, sure. I have a hard time thinking of a time when you set your expectations low though.
OtherYeah, well, I did. How so? Well, let me give you an example.
[1:26:12]
WarrenPerfect. Here I am, a little boy growing up on a hall. And my father, one of my father's best friend is living two blocks away. And he has two sons, and I'm right in the middle of the age of his two sons. And I'm a little older than one, a little younger than the other. Eddie Jerry Witts Jr., sort of mechanical genius. He can take anything. apart quickly and put it right together in perfectly. And he also reads books all the time, and that's probably all he ever does is sit around reading books. He's a very bookish little genius with vast mechanical ability. And Eddie Davis Sr., his father, was the son of the leading mathematics professor at the University of Nebraska. And he didn't have any money. In those days, he had a huge family, and they didn't die. And he couldn't, it was very difficult supporting the amount of professors' income. And he went to all kinds of stratagems. He'd make his own raincoat out of a piece of oil cloth to save the money of buying a raincoat and so on. And nobody else did that, even by the standards of the 30s. But that's the way he did. But he was a very talented man who wrote math textbooks and so on. And Dr. Davis had enormous mechanical ability, as well as enormous mental ability and being physically dexterous. He could do anything. He saw things in three dimensions. And it was quite obvious that anything required mechanical ability, I would not be as good as the two Davis. You know, I just no amount of effort work was ever going to do it make me into a flycaster like dr davis was or any else who didn't have that kind of ability and so I decided to stay the hell out of businesses where I would compete with people like Eddie Davis Jr and Eddie Davis senior in their strong suit knowing your competencies knowing knowing your circle of competency right and that kept me away from those businesses totally but Part of your advice in life, I think, is to understand that change comes with life and adapt to it. And it's something I think about a lot in my own struggles with life. Not everybody knows that. I could have done a lot better if I've been a little smarter, a little queer.
QuestionerWhat are you talking about? Yeah. You've had success in everything you've done in life. What would you, what would you like to do differently?
WarrenI might have had multiple trillions instead of multiple billions. Do you sit around thinking about this? What would you have done?
[1:29:24]
WarrenI do think about it. I think about it. Yes, I think a lot about what I nearly missed. By being just not quite smart enough or hard-working enough.
QuestionerWhat would you have changed? If you could go back and look at the left hundred years. Of course, it would be a cinch to go back and do it, knowing what was going to happen now.
WarrenYeah. I would be the richest man on earth.
QuestionerWell, what did you miss? What was there, something where you zig where you could have zoned?
WarrenWell, I would have started earlier for one thing. And I would have compounded longer. And I would have compounded longer. would have come out better. So saved even more. And of course, I would have ended up richer. I was going to live to be 100 years old. And I constantly am aware of the facts that I basically screwed up. Given the hand idea, I could have done a lot better, quite easily done a lot better.
QuestionerBut you are not somebody who spends a lot of money on yourself. We are living, we're sitting here in a beautiful house, but this is a house that you've lived in for 70 years. I know. You could have moved and spent more. about 60 years.
WarrenYeah. We're similar. But you see, we're both smart enough to have watched our friends who got rich built these really fancy houses. And I would say in practically every case, they make the person less happening now heavier.
QuestionerHow so?
WarrenHaving a basic house really helps you. Having a really fancy house that's good for entertaining a hundred people at once. It's a very expensive thing to do. And it doesn't do you that much good.
QuestionerI think one of the things you've said along the years, at least this is what I've been told, is that it's not staying rich that's difficult, it's staying same.
WarrenYeah, of course.
QuestionerWhat happens?
WarrenWell, most people go a little crazy in some way or another. I mean, that's a lot of your life. A lot of your life and advice is... Avoiding traps.
CharlieInvert, invert, and try and figure out where you don't want to be.
WarrenYes, and then divide it.
CharlieYes, of course. That's what everybody's life is with any sense. All the people I know. and my friends now, they never would become alcoholics. It was too dangerous. They would, they just don't, they don't, they don't get near it if it takes that many fine people into deep trouble.
WarrenYeah. I knew quite a people having lived so long and have scattered around through different activities. And I bumped into a lot of different people. And I noticed as I got older and older
[1:32:00]
Charliethat all the people that had had very, very early heart trouble, the males that had very early heart trouble. Had one thing in common. They all smoked a lot of cigarettes. Oh. So I could see that coming fairly early. I tried to learn to smoke so I could be a cool kid, like the other kids in high school. I tried to ruin my life, but it nauseated me. And so I said, I said, how well this? People have lured me into a goddamn thing. You've got to get nauseated, boy, learning to do it. And I said, I'm not. interested enough in going through a lot of nausea that I want to smoke, so I just didn't smoke.
QuestionerNow you did drink from time to time, right?
CharlieYeah, sure, but I didn't. Again, I was, and I even drank to ex a few times. But I was always, there were enough alcoholics and near alcoholics and my own family to make me worry about liquor.
QuestionerYeah. And so I was always very cautious about drinking.
Charliecautious about drinking liquor. Now, I did occasionally get drunk and throw up. That gave me the nausea, which enabled me to give a liquor.
QuestionerDo you still drink? I mean, living to 100, everybody wants to know what's the secret? What is the secret for you? What did you conscientiously go?
CharlieWell, I don't know the secret. I avoided the standard ways of failing because my game in life was always to avoid all standard ways of failing. You teach me the wrong way to play poker and I will avoid it. it. You teach me the wrong way to do something else I will avoid it. And of course, I have avoided a lot because I'm so cautious. But you do things you like, like, like you'll eat peanut brittle or...
QuestionerYes. Doesn't matter that much.
CharlieOkay. I drink that coke. Yeah. I'm sure that I go shortens my life a little. But I don't give a damn if the last week of lying there and consciousness goes away. It's only the good part of life I want anyway. You know, there are all of these billionaires now, Silicon Valley types, who are trying to do anything they can to extend life, like crazy things. They find they've got a family full of Parkinson's. And because I watched my mother and my sister die of Parkinson's disease. And so I'm familiar with that one.
QuestionerYeah. That's a very unpleasant thing.
CharlieI do not like the last month of Parkinson's disease. I've seen it up close.
QuestionerYeah. It's no fun for the people in it.
CharlieIt's no fun of the people in it. the people around them. It's no fun at all. And Dad Coatman will be helping me skip it.
[1:34:45]
CharlieWho knows? He's helping me skip the last month, not the first month. There are some new ways that people think that they can extend life, though. And one of the crazier things I've heard is this idea of doing a blood transfusion with younger people, so you get younger blood. I mean, there's like some silicon ballet types that are doing those things. Well, but that was crazy. You got to remember the practice of medicine and my father's boyhood was Charlottons for depression. People learn to make a living at it, and they gradually learned a few things they can do with the help with patients. But they, but basically they did a lot of nonsensual things. If other people want to know what the best way to live is, you would just tell them, avoid the crazy things. Avoid the things that take you down.
WarrenYes, yes. Yes. Avoid crazy at all costs. Crazy is way more common than you think. It's easy to slip into crazy. Just avoid it, avoid it, avoid it.
CharlieOf course, of course, of course, of course. Of course. I think another thing you've said is whatever you are, wealth and age will make you more so.
WarrenYeah, sure. You've given away a lot of your money.
CharlieYeah, but not like Warren. More than half of the munger money is already even best of the descendants. So I've made exactly the opposite. It was a smaller wrong money. But I made exactly the opposite decision for the majority of our money.
WarrenThe majority of his money give away. he gave away. Now he didn't exactly give it away. It goes to public foundations that go on for another 100 years. That's not exactly giving it. It's not exactly like wasting it. It's having some significant.
QuestionerIs there anything left on your bucket list? Anything you'd like to do?
CharlieWell, that's an interesting question. I am so old and weak compared to what I was when I was when I was 96 that I no longer want to catch. a 200 pound tuna. It's just too got that much work to get it in and takes too much physical strength. So I don't know why I would have paid any amount to get you a 200 pound tuna. When I was younger, I never caught one. And now I give me the opportunity. I would just decline going. I won't even go out after them. There are things you give up with time. You're pretty active. You've got a business. social schedule? You're on Zoom. You have breakfasts and lunch?
WarrenWell, I like it that way. That's my idea of a proper old age for me. And I didn't plan it. It just happened.
[1:37:50]
CharlieAnd when it happened, I welcomed it. I am very good at recognizing unfair advantages. And I got unfair advantages in old age. The way I got unfair advantages in old age, the way I got unfair advantages in non-old age. And when they came, I just grabbed them. Boom, boom, boom. The one grab I never made was for her third wife. Too late. Why? It's too late. There are people for whom it's a necessity. Necessity. They're so much more comfortable in marriage than they are outside it, that they really need it to be human. That's just the way they're put together. And for sure. such people, I represent the 100-year-old dating app. But you'll find that if you put it in, that not many 100-year-olds want it, they're just lying there.
QuestionerYour partnership with Nancy, your second wife. Yeah, so it's a 52-year-old marriage. Yeah. It's a long marriage. And she got to live all the way to 86, which is a long life. And now there are some tough stretches, but most lives have some tough stretches. And hers came very near the end. I mean, Charlie, people probably look at you and think you're incredibly wealthy. You've had all these great opportunities and things that have happened in your life, but you've struggled too.
CharlieOf course, everybody struggles. The iron rule of life is everybody struggles. I try and think back of what the toughest moments might have been and how you got through some of those. And I mean... Well, we all know how to get through them. Through, the great philosophers of realism are also the great philosophers of what I call soldiering through. If you soldier through, you can get through almost anything. It's your only option. You can't break the dead, you can't cure the dying child, you can't do all kinds of things. You have to soldier through and you just... somehow you soldier through. If you have to walk through the streets crying for a few hours a day, as part of the soldier, if you go ahead and cry away, but you have to, you can't squit. You can't cry all right, but you can't quit. You've had time in your life when you've done that? Sure. I cried all the time when my first child died, but I knew I couldn't change the fate. In those days, the fatality with the childhood leukemia. but leukemia was 100%. That's gone away. Now the cure rate is way up in the 90s. And it's an amazing development. Think of how much pleasure it's given me to watch the cure rate for leukemia.
[1:41:27]
QuestionerWhat mankind did, what mankind civilization did, was soldier through those tough years that took away my cousin Tommy from meningitis and then and took. I took away my son Teddy from leukemia. Imagine cure, imagine pretty well fixing that disease for families who came into life later. It's a huge achievement. You can see why I like civilization. To me, civilization is what man has done with the last two centuries. And it's been a good thing to watch. Charlie, Warren Buffett told me that a long, long time ago. You told him he should live his life. He should live his life. write his obituary the way he wants it written and then live your life accordingly.
CharlieYeah, sure. I assume you've done the same thing for yourself.
QuestionerWell, no, I've written my obituary the way I've lived my life, and if you want to pay attention to what is all right with me. And if they want to ignore it, that's okay with me too. I'll be dead, but what difference will make. And so, but I think it's a good, it's not a bad idea. It's a more than I, both live in the same house for decades decade after decade. All our friends get rich and build better and bigger and better houses. And naturally we both considered bigger and better houses. And I had a huge number of children, so it was just a while, even. And I still decided not to live a life where I look like the Duke of Westchester or something. And I was going to avoid it. I did it on purpose. Why? And they would be good for the children. that it would spoil them?
CharlieYeah. When a rich family, you think your duty is to use the wealth that live grandly. That's whatever he's doing with the money. You will learn from the people that are doing it. Is the plan for your life, the obituary you would write in your 30s the same you would write today?
QuestionerSure. I basically believe in the soldier-on system. Lots of hardship will come and you're... You've got a... handle it well by soldiering through. And a few where opportunities will come. You've got to learn how to recognize them when they come and not make too minor a trip to the pie counter when the opportunities available. And those are simple lessons.