Charlie Munger, Warren Buffett's golden partner and a legendary investment master on Wall Street, recently made a rare appearance on a popular business podcast, discussing his investment views, experiences, and lessons.

Translation: Shuqing Bu, Jiaming Ge

Source: Wall Street News

Charlie Munger, Warren Buffett's golden partner and a legendary investment master on Wall Street, will celebrate his 100th birthday next year. Recently, he made a rare appearance on the recording of the popular business podcast Acquired, discussing his investment views, experiences, and lessons.

During the program, Munger talked about his investment experiences and unique insights into many well-known companies such as Costco, Coca-Cola, Apple, BYD, Tesla, and General Motors, as well as his insights into the Chinese and Japanese economies and investments, and his views on the future.

It is worth mentioning that Acquired is the first podcast that Munger has ever appeared on. Acquired is dedicated to revealing the untold stories behind the tech industry giants and has consistently ranked among the top podcasts in the United States this year.

Here are the core viewpoints of Munger, as compiled by Wall Street News:

1. Individual investors are just chasing prices up and down. If I were a manager, I would tax short-term profits and drive these speculators out of the market.
2. It is almost impossible to repeatedly succeed in VC investments. All investment projects are very popular, and investors must make decisions quickly. This means that most people are just gambling.
3. The future prospects of the Chinese economy for the next 20 years are better than any other major economy. China's leading companies are stronger, better, and their valuations are much cheaper. Therefore, I am naturally willing to include certain Chinese risk assets in Munger's investment portfolio.
4. When you hold a stock for 5 years, you may slowly integrate into it, or your understanding of it will become deeper. But when you realize that you have an advantage, you should double down. You must double down on the best investments!
5. If we (Berkshire) had used a little more leverage from the beginning to the end, our current leverage would be three times what it was originally, and the risk would not be so great. We don't want leverage to destroy our hedging position.
6. This (Japan) is an obvious investment opportunity. Japan's interest rates have been only 0.5% per year for the past 10 years. And these companies are indeed deeply rooted old companies, they have all these cheap copper mines and rubber bases, so you can borrow all the money 10 years in advance to buy stocks and pay a 5% dividend.
7. Some people will find some (investment) opportunities, but it is becoming increasingly difficult. I think the opportunity to buy companies like (Hershey, Hermes) is very low, so I don't even look for them. I only believe in and look for the investment opportunities that I think are possible to find.
8. I like companies like Apple that truly have a brand. Great brands should be bought at the right price, and the trick is to seize truly cheap rare opportunities.
9. If some companies' stocks are really cheap, even if it is a bad company, I would consider holding it for a while.
10. William Li is a passionate person, obsessed with personally making products, so he is closer to the front line. In other words, William Li is better at manufacturing than Musk.
11. Walmart is too attached to existing ideas, which is everyone's trouble. They just can't accept new things because the space has been occupied by old ideas.
12. I wouldn't casually advise any young person, I would carefully consider the timing and the object, and I don't want to be a spiritual mentor. The world is full of deception and madness, and it's getting harder for young people.

Below is the full content of this podcast compiled by Wall Street News:

Welcome to Acquired, a podcast dedicated to great tech companies and the stories behind them. I'm Ben Gilbert. I'm David Rosenthal.

Host: This is a very unique episode for David and me. Our good friend Andrew Marx arranged for us to have dinner with Charlie Munger and a few other people at Charlie's home in Los Angeles. You can hear Andrew asking Charlie questions backstage several times. We are sure that this is the only podcast Charlie has done so far.

Charlie and his partner Warren Buffett are among the most prolific investors in history. Charlie is 99 years old this year and will turn 100 on January 1 next year. Of course, our conversation was interesting because he is Charlie Munger, but also because the views of a person who has experienced the past 99 years of human history are interesting.

Of course, we talked to Charlie about Costco, his history of investing in retailers over the past 50 years. We also heard his views on other issues, such as the conditions required to build good partnerships, global securities market issues, the concept of investment versus gambling, and investment opportunities in today's world.

01 Individual Investors Are Actually Gambling

Host: Charlie, I watched an NFL game last weekend, and it seems that every ad is related to sports betting. Is this good for America?

Munger: No, of course not. Is horse racing and casinos good for America? Of course not. They are just very popular. That's it.

Host: Warren has already bet on it.

Munger: Well, but Warren has never gambled recklessly. He is more cautious. Remember, Warren is not an ordinary person and will not take a 10% chance lightly. Yes, it's that simple.

Host: The next topic is individual investors trading in the stock market, which for many Americans is similar to gambling.

Munger: Well, that's why it's organized. Individual investors know nothing about the company or anything that happens, they just chase prices up and down. If I were a manager, I would tax short-term profits and drive these speculators out of the market. This is good for every market participant.

Host: What do you think of the algorithms of quantitative investment companies like Renaissance Technologies?

Munger: Renaissance's first algorithm is very simple. This algorithm screens historical data, what can they decide?

They found that if a stock rises for two consecutive days, it is more common for it to fall for two consecutive days next. than for it to rise one day and fall one day. They realized that this is due to "reward psychology," deep in the human heart is a natural trend follower, especially in the case of short-term bets. Quantitative companies use computer programming to automatically buy on the first day of an uptrend and then cash out before the close on the second day. Repeat this action every day, and the central clearinghouse will say, if today's settlement is 8.5 million dollars, it may become 9.43 million dollars the next day.

The result is that the easiest trade is the front end, the trades that index funds must make. Yes. They increase leverage year after year to get returns, and leverage becomes higher and higher. So their trading volume becomes larger and larger, but the profit becomes thinner and thinner, which brings them huge risks, I would never do that myself. This is the only way they can easily get returns—huge leverage. If you are already wealthy, this leverage will drive you crazy.

02 Reasons for Investing in Costco

Host: I'm curious, how did you first think of investing in Costco (formerly Price Club)?

Munger: Rod Hills (one of Munger's partners) knew Sol Price (founder of Price Club) and understood Sol's business. He told me, you have to go see him. So I drove to his store and chatted with Sol. Of course, Sol is a very smart person and has always been a lawyer, until he was 39, he opened a membership discount store for government employees.

Host: Was this during the Fedco era?

Munger: He was no longer at Fedco, in 1975, Hugo Mann from Germany acquired two-thirds of Fedmart.

Host: Did you invest in it before the merger of Price Club and Costco?

Munger: Yes, I bought their stock in the stock market by myself, I didn't get any help.

Host: So how did you eventually meet Jim Sinega (founder of Costco)? Munger: Well, Sinega wanted Warren to be on the board of Costco, he was looking for investors with outstanding financial reputations. Host: As an independent director? Munger: Yes, he (Warren) didn't want to go, he said, "You let Charlie do it." I accepted a shorter plane trip to the board meeting, and that's how it happened. Host: Did Berkshire ever try to become their shareholder or get clients? Munger: I suggested to Buffett to buy the Frenchman's shares when Carrefour left India, but Buffett rejected the suggestion because he doesn't like the retail business. Host: Is it just that he doesn't like retail, or are there other objections? Munger: He is afraid of the retail business, and he is right. Gradually, everything that was once strong in the retail business has disappeared, partners have left, there are too many competitors in retail, retail is too difficult, he is very worried. Host: Did he have a bad experience with Diversified Retailing? Munger: No, we made a lot of money from Diversified Retailing, we didn't make money from the retail industry. The whole story is very simple, Buffett and I bought a small chain of department stores in Baltimore. It was a huge mistake because the competition was too fierce! We realized we had made a terrible mistake as soon as we signed the papers. So we decided to turn things around, take on the seemingly foolish consequences, rather than let it go bankrupt. In those recession years, we bought and bought, all the money went into these stocks, and of course, we doubled it. Host: But did this lead to Blue Chip? (In the late 1960s to early 1970s, Munger, Gellert, and Buffett gradually acquired a controlling stake in Blue Chip Stamps. This small company helped retailers issue coupons. Consumers collected these coupons and then used them for purchases at stores.) Munger: We should do something that people don't know about, yes, we spent about $20 million to buy a small savings and loan company. When we left that company, we got back more than $2 billion in securities from the "small investment" of $20 million, which became part of the capital base for investing in insurance companies in Nebraska. That's what everyone needs, a perfect start. Host: In our Costco episode, we started with a joke from about 10 years ago at a Berkshire meeting, where Warren told a joke about you on a hijacked plane, and the hijacker could fulfill your last request, and you said you wanted to give a speech. Munger: That incident reminded me. Host: Buffett's response was like "shoot me." We hope you can tell us about the advantages of Costco? Munger: You rarely know you are right in your life and are sure that what you are doing will work. Maybe you only need to do this 5 or 6 times in your life, and you may try it two or three times early on. Many people have gone bankrupt, thinking everything is easy, but the reality is very difficult and rare. Host: What made you realize that Costco was one of the few great moments in your life? Munger: Their prices are cheaper than anywhere else in the United States, and they are large, efficient stores. Costco has ample and spacious parking lots, all parking spaces are 10 feet wide, rewarding people who come to the store with special benefits in the form of points; making suppliers wait (for payment) until Costco receives payment from consumers. You have a company as big as Costco. Always implement the "ultimate value for money" strategy, and have a large parking lot, would you miss the Munger case? The company has always implemented the "ultimate value for money" strategy, bringing higher sales and higher turnover efficiency for individual products through low-priced high-quality goods and focusing on 3700 popular SKUs, and high sales volume and high turnover in turn drive down sales costs and operating expenses, forming a positive cycle; on the membership management side, membership fees are the main source of profit, and membership fee income is basically equal to the company's net profit scale, promoting the company's performance to achieve sustained high-quality growth. Host: Have you seen another company succeed using low SKU and low cost? Munger: Gelson's, a small grocery chain in California, has adopted a strategy similar to Costco's, but their operations are not as efficient as Costco's, so they cannot achieve similar success. Host: When you look back at these few great companies in your life, you should bet big, as a young investor, what advice would you give to David and me? Munger: When you hold a stock for 5 years, you may slowly integrate into it, or your understanding of it will become deeper. But when you realize that you have an advantage, you should double down. You know you are right, but business schools don't teach this. It's incredible. You must double down on the best investments! Host: How do you cultivate this level of belief? Munger: You keep working and exploring, and you realize it, through a lot of reading and thinking. Host: You and Warren have had a harmonious working relationship for half a century, has anything changed? Munger: In the early stages of our collaboration, there were many things that were indeterminate, and nothing could easily give the Munger case. Host: How do you maintain a harmonious relationship? Munger: We are very similar, we both want our families to be safe, to do a good job for investors, and so on. We have a similar attitude. Host: In these decades, has the idea changed? Munger: No, Warren is still very concerned about safety, more concerned about the safety of Berkshire shareholders than anything else, if we had used a little more leverage from the beginning to the end, our current leverage would be three times what it was originally, and the risk would not be so great, we don't want leverage to destroy our hedging position. Host: Berkshire's leverage, without exception, is funds without prepayment requirements, also known as "stable money." Suppose you open a new store, of course, you use leverage, without capital, who doesn't want to have a business with no inventory, right, on the first day of opening the store, you owe suppliers a lot of money, and these goods are quickly sold. What do you think? Munger: This situation will eventually reverse. Host: What do you think of debt? Munger: Many manufacturing companies can force suppliers to bear all inventory costs. These manufacturing companies transfer the burden of inventory to suppliers through cooperation with suppliers. Host: Back to the topic of partnerships, David and I have been partners in this podcast for 10 years. Of course, this kind of partnership is different from investment, but it is still a joint endeavor. After working with Warren for 50 years, what advice do you have for building lasting partnerships? Munger: It would be very helpful if you like each other and enjoy working together. But I don't use any formulas. Many long-term successful partnerships continue because one person is good at one thing, and the other person is good at another. They naturally divide the work, and each person enjoys what they are doing. For example, Jeffrey Brotman and James Sinegal of Costco, Brotman is very smart but not from a retail background, when all the board members decided to make Brotman chairman and CEO, Sinegal opposed it. It was a very unpleasant board meeting and a big fight, and later Brotman gave in.- **Host**: Was the infighting after you joined the board? - **Munger**: It was before. - **Host**: Do you think it's beneficial for your long-term partnership with Warren that you don't live in the same city? - **Munger**: It might be helpful for me, but Warren maintains very close relationships with everyone and has lunch at Berkshire headquarters every Saturday. Warren and I spent a lot of time together when we were young because there wasn't much else to do. As they got older, they had more things to do and more things in life. It's different from when they were young. Investing successfully is very difficult. In the venture capital field, investing successfully time and time again is almost impossible. ## 05 The VC Industry Is Doing Very Poorly - **Host**: What are your thoughts on venture capital (VC)? - **Munger**: Some projects can become very hot, and you have to make quick decisions, everyone is just gambling. - **Host**: Do you think VCs are playing their proper role in society? - **Munger**: No, I think the VC industry as a whole is doing very poorly. The rest of Charlie Munger's views on VC were not recorded, but the topic shifted to Bitcoin. - **Host**: Regarding Bitcoin, you've mentioned it in many comments, I'm curious about your specific perspective: Is Bitcoin as an independent store of value unlinked to any country a good thing? - **Munger**: It is beneficial for the world to have a currency accepted globally. In the past, the pound was the main currency in the international investment field, then gradually shifted to the dollar, and it still dominates now. Some countries like China have a large reserve of dollars because they buy products and services from the United States, and the United States can independently issue dollars. - **Host**: What about ordinary people who can't get dollars? - **Munger**: When people have enough money, they can always get dollars. Dollars are easily exchangeable, and you can easily get them no matter where you are. - **Host**: Returning to the topic of the role of venture capital in society, if you could design a perfect system to provide funding for a country, how would you do it? - **Munger**: VC is legitimate, it's a very legitimate business. If you want to give the right people rights and nurture them, you have to help them. You know the tricks of the game, so you can help them do business well without interfering too much. They will hate you. Overall, after dealing with a large number of people from VC, people in the business often dislike VC. They don't see VC as their partner, they don't think VC is helping them, on the contrary, they think VC only cares about themselves, so they don't like VC. - **Host**: Are there other possible ways of operating? - **Munger**: That's not how it is at Berkshire. Berkshire's strategy doesn't easily invest because other companies raise prices. If a business has problems that Berkshire can't solve, we might sell that business. If a business is halfway decent, Berkshire usually won't sell it. This strategy helps build a reputation and maintain long-term business relationships. - **Host**: Is the buy-and-hold strategy the key to aligning the interests and goals between investors and asset managers? - **Munger**: Many people handle things in a standard way, lawyers use standard documents. In a specific investment environment, most people achieve similar results. You don't want to make money by deceiving investors. Many venture capital firms use unethical or exploitative ways to make a profit. The world is full of private equity funds set up by former Goldman Sachs partners, they raise tens of billions of dollars or similar amounts, charging investors a 2% management fee and other fees. This practice allows them to make hefty returns. But investors don't get good returns. - **Host**: Do you think this is a problem with the fund management fee structure? - **Munger**: Unless you can achieve extraordinary investment results, you shouldn't charge additional fees. Pretending to achieve excellent investment results is easier than actually achieving them, so the venture capital business attracts people who are not suitable for this line of work, those who see venture capital as a means to get high returns, rather than for real investment success. Those who make the most money from venture capital are often similar to investment bankers, deciding which hot new areas to enter. - **Host**: So how do you think large endowment funds should operate? - **Munger**: They have started to take action. These endowment funds say they are still willing to pay high management fees, but they will invest twice as much in the next investment cycle and won't pay any management fees. This means a 50% reduction in management fees, and this change in fee structure is happening across the United States. They are angry and misled by the high management fees and think this fee structure is unreasonable. ## 06 Investing Is Getting Harder - **Host**: Regarding the issue you mentioned about venture capital, with abundant funds and fierce competition in the current market, is there still undervalued and valuable investment opportunities in the current market compared to the "Cigar Butt" era of the past? - **Munger**: Some people may find some opportunities, but it's getting harder and harder. One of the simplest cases is Home Depot deciding to mimic Costco's business model and apply it directly to the furniture industry. This was a very good business decision, and Home Depot made a lot of money as a result. - **Host**: Who else is mimicking Costco's business model? - **Munger**: Another one, Floor & Decor, they mimic Costco in the sales of their flooring products but continually adding various other categories may become a problem. - **Host**: Why hasn't Walmart competed with Costco? - **Munger**: They are too attached to existing ideas, which is everyone's trouble. They just can't accept new things because the space has already been occupied by old ideas. They have a habit of acquiring real estate, even in places that were originally worthless, so the entry cost is often zero. And they know how to build large stores, that's their strategy. So for them, entering affluent areas and paying for it feels offensive. Costco focuses only on good places where rich people live, and Walmart has not taken any action on this for many years, which is a serious mistake. - **Host**: Do you know Sam Walton, the founder of Walmart? - **Munger**: I haven't met him, I know one of his sons. He divided Walton Enterprises into six parts, so they never paid too much tax. ## 07 BYD Is a Miracle - **Host**: Tell us about your views on the automotive industry and car manufacturing. - **Munger**: It's very difficult to enter the automotive industry now and make high profits, no one knows who will become the ultimate winner. The emergence of electric cars has completely changed the entire automotive industry and requires a large capital investment. The way cars are sold has also changed, along with the strong presence of unions in the automotive manufacturing industry. So he doesn't even pay attention to the automotive industry. - **Host**: Due to the disruptive innovation of electric cars, do you think today's automotive industry is more worth investing in compared to 50 years ago? - **Munger**: Perhaps for one or two truly high-quality electric car companies. But for other companies, definitely not. - **Host**: Do you think BYD is one of these one or two? - **Munger**: BYD is a miracle. That guy (Wang Chuanfu) works 70 hours a week and has a very high IQ. He can do things you can't do, he can look at the parts of other car manufacturers and figure out how to make them. - **Host**: You invested in Hyundai, how was that investment for you?- **Munger**: They are also very smart. I lost some money but not much, I am stubborn and persisted until I almost broke even. ## 08 Japan is an Obvious Investment Opportunity - **Host**: Regarding Berkshire's investment in Japanese trading companies, why is Buffett's investment in Japan a no-brainer? - **Munger**: It's an obvious investment opportunity. If you are as smart as Buffett, maybe two or three times in a century, you will have such an idea. Japan's interest rates have been only 0.5% per year for the past 10 years. And these companies are indeed deeply rooted old-line companies, they have all these cheap copper mines and rubber bases, so you can borrow all the money 10 years in advance, buy stocks, and pay a 5% dividend. No need to invest, no need to think, there is a lot of cash flow, how long will it take you to find such an opportunity? If you can get one or two of these opportunities in a century, you are lucky enough. We can do this - because of Berkshire's credit, but others can't. - **Munger**: Reminds me, I recently studied this company, Nike. But I don't like this kind of fashion company. If it were Hermès, I would invest, but other than that, I wouldn't want to invest in a fashion company. ## 09 Big Brands Have Strong Pricing Power - **Host**: What do you think of LVMH, the company? - **Munger**: If you have enough time, patience, and ability, you might be able to achieve success similar to LVMH in your lifetime or in three or four generations. However, even with so much time, achieving a successful business like theirs is not easy. - **Host**: What do you think is the enduring value of the world's best brands like Hermès and LVMH? What makes them enduring? - **Munger**: They have brand loyalty, and it took them a century to achieve this. The discussion turned to comparing Kirkland Signature with the Hermès brand. - **Host**: How do you view the value of brands? - **Munger**: It's very hard not to like brands. Because we were fortunate to buy See's Candies for $20 million, our first acquisition. We quickly found that we could raise prices by 10% each year and no one cared. We increased profits without increasing sales. For about 40 years, we raised prices by 10% each year. It's a very satisfying company. No need for any new capital investment, that's the benefit. Before and after we bought it, the company's basic situation didn't change much, still had two big kitchens and some leased stores. When Charlie See's eldest son Laurence See died, the See family needed to pay high estate taxes, so they urgently wanted to sell the company. When we bought See's Candies in 1972, its pre-tax income was only $4 million. - **Host**: So the buying opportunity only arose when the See family needed liquidity to pay estate taxes? - **Munger**: We knew this because Charlie See and a Blue Chip Stamps investment advisor, Robert Flaherty, met on a cruise to Hawaii. We paid Robert a finder's fee, although we haven't paid one since. - **Host**: How do you view the pricing power of brands like See's Candies or Hermès in their respective categories? - **Munger**: I think the opportunity to buy companies like this is very low, so I wouldn't even look for it. I only believe in and look for investment opportunities that I think are possible to find. - **Host**: What about other well-known brands in other categories? Such as packaged foods or others. - **Munger**: Many professional investors buy nothing but the stocks of well-known brands. They usually start with Nestlé and then just fill in the gaps. They may perform slightly better than the market average, but they won't achieve great success. - **Host**: Why can Heinz have pricing power but not Kraft? - **Munger**: That's interesting. Brands in certain categories are very important to consumers, such as Heinz ketchup, people may change brand choices because of the specific taste of a particular brand and are willing to pay a higher price for it. So, we can raise the price of Heinz ketchup. However, for other products, such as Kraft cheese, people may not care as much about the brand, so trying to raise prices may lead to market backlash, including from the ultimate consumers (housewives). - **Host**: Because the sauce is a unique flavor that is difficult to imitate, it's a business opportunity, so this brings pricing returns. - **Munger**: Yes. People get used to and like it. This happened in Korea as well, where a Chinese person controlled 95% of the market share of every major sauce. - **Host**: Is Coca-Cola the same way? - **Munger**: Yes, of course. ## 10 Three Elements of Successful People - **Host**: What do you believe at 99 that you wouldn't agree with at 70? - **Munger**: At 70, I knew investing was difficult, but now I know exactly how difficult it is. But some investors who charge high management fees and carry interests will say it's easy and start deceiving themselves, but investing is very difficult. - **Host**: If you were in your thirties or forties again, would you still choose the investment industry? - **Munger**: Maybe, because it suits my nature. But I really don't like the high management fee and carry model, and I prefer to invest with my own funds, I think that's better because it brings greater freedom. This way, you don't have to deal with investment banks, investment advisors, and VCs, you don't need other people. One of the purposes of being wealthy is to no longer rely on others. - **Host**: If you and Buffett were both 30 years old now, starting to work together, do you think you would still build a company similar to today's Berkshire? - **Munger**: No, we wouldn't. Almost everyone who achieves outstanding results has three elements: very smart, works very hard, and very lucky. If you start early and keep trying for a long time, maybe eventually you will have one or two of these elements. - **Host**: If you were to start over today, would insurance still be your choice? - **Munger**: It depends on personality traits. Insurance is ideal for certain personalities, it requires great patience and time to get returns. And it requires competing with opponents for a long time, making money is very difficult. - **Host**: I've heard your view that once you have enough wealth to self-insure against risk, you should try to avoid buying insurance as much as possible. - **Munger**: Think about those who have problems after excessive drinking and then claim huge amounts from the insurance company, why should you pay your share to make up for the losses of those who engage in unwise behavior. - **Host**: Do you have insurance now? - **Munger**: I don't have fire insurance. - **Host**: Do you have car insurance? - **Munger**: I have to, it's the law. ## 11 Tech Giants Are the Biggest Winners - **Host**: Everyone is very focused on technology now, I'm curious how you, not from a tech background, view investing in Apple, what gives you such confidence? - **Munger**: Every investor needs to have some significant involvement in 12 companies to do better than others. It takes at least two or three companies to heavily bet on to make your investment performance superior, and if you have that idea, Apple is a very reasonable choice, it's not hard to think of that.- **Host**: It's not difficult to list investment targets, such as FAANG or meme stocks, Microsoft, Apple, Google, Facebook (now renamed Meta). But choosing one and investing tens of billions of dollars, creating trillions of value, is very difficult for me. How did you choose? - **Munger**: We couldn't find other stocks worth investing in. - **Host**: Because of valuation? - **Munger**: Yes, we bought low and then got about 10 times the benefit. - **Host**: It might have been the first purchase in 2015. For me, this concept is very interesting. If you look at distressed debt, I think Warren pointed out in the last Berkshire letter that these are very good decisions. Or if you look at venture capital, it's a classic power law distribution. The performance of any asset can be attributed to a few very good decisions that run through his entire career. - **Munger**: Exactly. - **Host**: But there are no assets that can be repeatedly used for these strategies. - **Munger**: No, the opportunity hasn't disappeared, it's just become very small. - **Host**: You mentioned this idea, when we talk about Apple, some companies are very important. Do you think these large tech companies are the biggest winners? All pensions, Berkshire, university donations, and everyone's retirement funds are invested in these companies, do you think this is the natural result? Do we have to end up this way? - **Munger**: Yes, it's the natural result. - **Host**: What leads to this result? - **Munger**: Human nature and competition. - **Host**: Which factor is most important? - **Munger**: This crazy venture capital, when they all become foolish, it naturally leads to a result. - **Host**: Will there be a $20 trillion company in the future? And then even larger companies? - **Munger**: Yes, I think so. ## 12 Bullish on the Chinese Economy - **Host**: Will you continue to invest in China? What is your stance on this? - **Munger**: My stance on China is, first, the prospects for the Chinese economy in the next 20 years are better than any other major economy, and second, China's leading companies are stronger, better, and their valuations are much cheaper. Therefore, I am naturally willing to include a certain amount of Chinese risk assets in the Munger investment portfolio. As for the specific risk value, this is not a scientific question, but I don't mind whether it's 18% or any other proportion, as long as the Munger family thinks it's appropriate, I agree. - **Host**: Would you hold TSMC at this time? - **Munger**: I like companies that truly own brands like Apple. (Did not directly answer) ## 13 Only Study Cheap Stocks and Great Brands - **Host**: I'm curious, what are the other large companies that haven't been mentioned, whose advantages are worth studying for investors? For example, the advantages of Costco? - **Munger**: I only study two types of companies. Well, I'm a faithful follower of Ben Graham. If a company's stock is really cheap, even if it's a bad company, I would consider holding it for a while. I occasionally do this and have had some success. But I'm a bit like Howard Marks, I've made one or two particularly large bets, not hundreds of times. Easy money from hundreds of times is almost non-existent. - **Host**: One is "Cigar Butt" (cheap stocks), what's the other? - **Munger**: Great brands, to buy at the right price, the trick is to seize rare opportunities that are truly cheap. Costco's current stock price is still okay, but it will become increasingly difficult. - **Host**: Regardless of the stock's prospects, how do you view Costco's business in the next 10 years? - **Munger**: It can do very well. ## 14 Young People Are Facing Increasing Challenges - **Host**: One more question. What advice do you most want to give to young people? - **Munger**: I wouldn't casually give advice to any young person, I would carefully consider the timing and the recipient, and I don't want to be a spiritual mentor. The world is full of deception and madness, and it's getting harder for young people. - **Host**: Everything seems to be overvalued, where can you find attractive opportunities? Is it possible to find them? - **Munger**: Of course it's possible, it can only be possible, in fact it may have already happened. - **Host**: If capital is abundant but opportunities are scarce, how can one become wealthy? - **Munger**: That's the nature of it. Biological evolution has led to highly evolved beings like humans, but in any case, this process is achieved through brutal competition and tens of thousands of years of mutual killing. In other words, nature improves intelligence through competition, which is not pleasant for the losers. - **Host**: So, in the past hundred years, we have cruelly transferred all these values from labor to capital. Now, capital is competing for very small opportunities. - **Munger**: Capital has never been easy, it's just relatively easy compared to today if you look back a long time ago. - **Host**: If it continues to become difficult, you will get the result of natural competition. - **Munger**: Yes, what will happen after modern democratic systems face some challenges? Who knows what will happen? Maybe it will be quite abnormal, like in Europe. - **Host**: Some people think that there are not enough good ideas in the world right now to match the amount of capital that wants to invest in them, is this idea too pessimistic? - **Munger**: Success has never been easy, I thoroughly understand that, it has never been easy, and now it's becoming even more difficult. You need to pay attention to how you deal with people and build a good reputation. - **Host**: I think you're not saying there are no opportunities, but the expected value is lower and the wealth is less. - **Munger**: The wonderful thing is that you only need to become wealthy once, you don't need to climb this mountain four times, you only need to do it once. - **Host**: Well, this is your two-sided philosophy, you have to patiently wait for huge opportunities, but when the opportunity comes, you have to realize it. - **Host**: Another question about Costco that I've always wanted to ask is, with multiple strategies such as low SKU and high inventory turnover rate so wonderfully combined, why haven't other companies done it? - **Munger**: It takes strong execution to do this. You really have to get started and then analyze every day, every week, every year, for 40 years. This is not easy. ## 15 Success = Business Model + Culture - **Host**: So do you think success must rely on business model and culture? - **Munger**: Yes, culture plus model. Yes, absolutely. Very reliable, hardworking, and steadfast execution for 40 years. - **Host**: Take the ketchup story for example. You can raise the price of ketchup by 3%, no one will notice, but if you really do that, it will ruin everything. - **Munger**: I would say, the core principle is not to raise market prices, strive to keep prices low and continue to do so in the long term.- **Host**: This reminds me of the hot dog story. When Craig took over as CEO of Costco, he did try to raise the price of hot dogs, is this story true? - **Munger**: I don't know, no one has talked to me about this. - **Host**: Was it not discussed at the board level? - **Munger**: No. They wouldn't think discussing the price of hot dogs is an important thing. - **Host**: One thing that fascinates me about Costco is that they seem to only grow at 10% per year, even though they have no capital constraints. Even if they could get a lot of funds for free, they seem to do this. - **Munger**: I can tell you, it's hard to open too many stores in a year. New stores, new managers, new political environments, and so on. These are difficult things. And there's a lot to learn, teach, and implement. So they don't want to do things that are beyond what they can easily handle. - **Host**: One interesting thing I found about Costco is that, despite having the lowest prices, most of their customers are wealthy. Was this an unexpected discovery over time, or was it realized early on? - **Munger**: Saul Price realized this during the Price Club era, he always wanted rich people to work hard to save money. - **Host**: Not just because they are the wealthiest customers, they are smart customers, they are picky, wealthy customers. - **Host**: Let's talk about some topics outside of Costco. At this year's Daily Journal annual meeting, you mentioned that young people understand the rules, and old people know the exceptions. - **Munger**: That's an old saying from Peter Kaufman. - **Host**: What do you find to be the most useful exception in life? - **Munger**: Take these hot dogs at Costco for example, that's an exception. Most others would have raised the price of hot dogs a long time ago. They just don't do it, they know it's one of their selling points, it attracts a lot of families to shop. Even if they had the opportunity to raise the price of hot dogs, they don't do it. ## 16 Wang Chuanfu is a Genius, Better at Manufacturing Than Musk - **Host**: One thing I've never fully understood. I know you are a loyal fan of BYD, the Chinese company that produces batteries and electric cars. - **Munger**: I might be a big fan, but I'm sure when this company is racing on the track, I feel very nervous. This company is very ambitious. - **Host**: Is this dangerous for a company? - **Munger**: Of course, that's why it makes me nervous. - **Host**: So, do you think this company should grow at a pace lower than its capabilities for more sustainable growth? - **Munger**: If it's safer, easier, and so on, you can do that. But like Costco, their extreme approach to the price of hot dogs has had positive results, and in some things, they wisely chose not to change these ways. - **Host**: It looks like a spectrum, on one side is Costco, not a fast-growing company because it's difficult; on the other side is a company like BYD, achieving crazy growth. - **Munger**: BYD sold at least 2.5 million cars this year, most of them electric, unheard of. Much more than Mercedes. - **Host**: Also far surpassing Tesla. - **Munger**: Really? Every company has had a lot of trouble and losses, they have also encountered terrible trouble, making the wrong type of vehicles, making a lot of mistakes. - **Munger**: But luckily, they are at the forefront of the electric car industry. Its acceleration performance far exceeds other brands, making it more dynamic than most cars. I really like BYD's electric cars, in many ways, it performs better. - **Host**: When making a 90-degree turn, a BYD car can move directly to the parallel position on the opposite side, and then continue forward. The tires rotate 90 degrees and move forward. If one tire is flat, the other three wheels can still work and run for a hundred miles. - **Host**: Will their business model be better because there aren't too many parts? - **Munger**: Better, because they are simpler. - **Host**: Have you made similar investments before? You invested $270 million in BYD, which is now worth about $8 billion. - **Munger**: Many "smart people" make VC-type investments. In fact, BYD is a listed company with relatively low liquidity, our investment is not VC-type. They are very proactive, like stepping on the gas pedal and going all out. - **Munger**: We advised them not to enter the car industry easily. BYD entered the car industry by acquiring a bankrupt car company. I thought it was a grave for them, why would they do that. But they didn't take the advice and continued to act. - **Host**: When he told you about this plan, had you already invested? - **Munger**: Yes, it ran very well after making a huge mistake. It almost went bankrupt because of the early dealer system. - **Host**: What attracted you to invest in BYD? - **Munger**: That guy (Wang Chuanfu) is a genius. He pursued a Ph.D. in engineering, and with one look at the parts of other companies, he knows how to manufacture. I've never seen anyone like him, he can do anything. - **Munger**: He is a born engineer, and good at execution and problem-solving, which is very important. He is a combination of various talents, which is very useful. He has solved many technical challenges in the electric car field, including electric motors, acceleration, and braking. - **Host**: How do you compare his BYD to Elon's Tesla? - **Munger**: Wang Chuanfu is a fanatic, obsessed with personally manufacturing products, so he is closer to the front line. In other words, Wang Chuanfu is better at manufacturing than Musk. ## 17 The Newspaper Business is a Gold Mine - **Host**: Charlie, you will turn 100 on January 1st next year, which is an incredible day. Do you have any plans? - **Munger**: I will have a party. - **Host**: Is there anything that has fascinated you recently, or anything fun? - **Munger**: Personally, everything is interesting. Even if politics itself is very bad, it's still interesting. - **Host**: When you look back on the time you spent with Warren, when did you have the most fun? - **Munger**: I've always had fun. - **Host**: Is there a specific era that you miss the most, feeling like the good old days? - **Munger**: Well, there was a time of sweating. - **Host**: The Solomon Brothers. - **Munger**: Yes, we had big problems to solve at the time, there could have been huge losses. - **Host**: When we examine Berkshire Hathaway in the podcast, our conclusion is that the entire franchise was at risk during the Solomon Brothers period, blocking the entire reputation and future of Berkshire Hathaway. Do you agree? - **Munger**: It's not that serious, it would have survived anyway. - **Host**: What would happen if you made the entire investment of Solomon Brothers zero? - **Munger**: Everything would explode. We could have written off the bad debts, we could have handled it very well.- **Host**: Do you think this was the best time of your life? - **Munger**: We encountered terrible problems with our investment in the Buffalo Evening News. - **Host**: The Buffalo Evening News. - **Munger**: Buffalo had two newspapers at the time, and we launched a Sunday edition, sparking intense competition. As a result, the competitor went bankrupt. - **Host**: You were both young and ambitious at that time. - **Munger**: No, but I was very eager to make the Sunday edition work. If it weren't for the Sunday edition, I wouldn't have held onto that publication for 50 years, and other competitors also had Sunday editions. - **Host**: What made the newspaper business so attractive at that historical moment? - **Munger**: The newspaper business is a gold mine. - **Host**: Acquiring the Buffalo Evening News and launching the Sunday edition was to monopolize the local newspaper industry. Yes, to play a big game, you have to play in town. With a newspaper, you can do that. Of course, I mean, for decades, the EBITDA profit margin of the newspaper was between 50% and 60%. Right? - **Munger**: No, that's the profit margin for small newspapers. The EBITDA profit margin for large newspapers is between 25% and 40%. - **Host**: Sorry, I overlooked the scale of the newspaper. - **Host**: In fact, do you still think eBay has been committing crimes all along, and have you demonized it in the past? - **Munger**: Indeed. So you have a big trucking company and you deduct earnings from truck depreciation. Then you're lying on the profit side. ## 18 General Motors Was Once a Great Company - **Host**: I mean, when the concept of EBITDA profit margin was invented, you witnessed its rise with John Malone, TCI, and Liberty, right? What were you thinking at the time? - **Munger**: Well, I've never liked extreme operations alone. I didn't want to be called a great manipulator like John, who paid less income tax than anyone else, he just pushed everything to the extreme. - **Host**: Perhaps the last question is, what do you think are the greatest companies you've seen, whether you held them or not? - **Munger**: Well, there are many great companies. General Motors was once a great company. Yes, at its peak, General Motors was a great company, it just gradually declined. - **Host**: How many companies do you think have predictability, when you started out, there were many businesses that could be said to remain unchanged 10 years later. Do you think this number is still the same now? Or do you think it's harder now? - **Munger**: I think most places will undergo significant changes in future threats. - **Host**: Do you think it was the same 50 years ago? - **Munger**: There's a difference. Berkshire owns a lot of what I call professional industrial assets, these companies can withstand real fierce competition just because they've been around for a long time, and they're very good at what they do, and they have a good reputation and high value, and so on. - **Host**: Besides Berkshire and Costco, what companies today can you confidently say will have the same good business in the next 10 years? - **Munger**: I think many companies are quite good, but you usually can't say what will happen, because you might encounter people who push everything just to maintain public relations. So no matter how good the business is, there's a bit of hypocrisy. ## 19 Getting Along Harmoniously with Family - **Host**: Charlie, I have a personal question to ask you. David has a two-year-old child, and I'm about to have my first child in a month. Do you have any advice for us in building a family? - **Munger**: Of course, you need to get along harmoniously with each family member, you have to help them through difficult times, and they will help you too. I don't think it's as difficult as it seems. I think half of the marriages in America are very smooth. By the way, if both parties have to marry someone else, it will be just as smooth. - **Host**: Well, you've said that the best way to have an outstanding spouse is to be worthy of one. As long as both parties feel that way, that's the secret to success. - **Munger**: Of course, and in matters like raising children, you have to trust your other half. - **Host**: I agree with your point, Charlie. - **Munger**: Good luck.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。