Munger’s 2023 Shareholder Meeting Record: Investing in China can allow you to buy some good companies at a cheaper price

At 2 a.m. on February 16th, Beijing time, Charlie Munger, an investment giant who had a huge influence on Buffett, attended the Daily Journal’s annual shareholder meeting in a black suit, with a bottle of Coca-Cola and some biscuits.

The 99-year-old “prophet” was the chairman of the Daily Journal, a post he stepped down last year, but was still on hand this year to answer enthusiastic questions from global investors. Topics ranged from ChatGPT to US inflation, high interest rates, and ways to improve happiness. Munger presented us with a wonderful life lesson.

Wonderful point of view:

1. Investing in China allows you to buy some better companies at a cheap price.

2. Artificial intelligence (such as ChatGPT) is very important, even indispensable, but it is difficult to realize many crazy ideas, such as not curing cancer.

3. Munger shared the secret of longevity: he likes to eat peanut butter candy, and rarely does deliberate exercise.

4. Human civilization doesn’t have high demands on us: we have to make realistic expectations of ourselves and others, and delaying gratification makes the chances of success greater.

5. Rationality is the best quality. If you are not crazy, you can already do better than 95% of people.

The following is the essence of the shareholder meeting (with deletions):

01 ChatGPT is very important, but it is not a panacea

Question: Recently, Microsoft’s application of ChatGPT has caused a lot of discussion. ChatGPT seems to be a good business model, you can even write codes, etc. What kind of impact do you think it will have on our society?

Charlie Munger:I think artificial intelligence is very important and indispensable to us, but it cannot realize many crazy ideas. For example, artificial intelligence will not cure cancer, which is what it cannot do. Now there are a lot of nonsense, for example, some people are going to use artificial intelligence in insurance underwriting, and some people are trying to use it in some daily life, including buying office buildings and the like. I don’t think it will be very helpful to us in these aspects.

Steven Mehill-Jones (Interim CEO of the Daily Journal):From the technology business sector of our company, we also want to try to use some artificial intelligence technology to solve complex tasks this summer, especially some daily tasks. I think this is very interesting.

We have many different types of activities, especially some daily work. I think this technology is still very interesting. We can observe whether this technology can help us do more daily work in the short term.

Question: Mr. Munger, what advice do you have for using ChatGPT?

Charlie Munger:A long time ago, someone said that he hopes to have what he believes in, which is of course very important. But I want to say that one factor that affects human beings to make wrong decisions is what I call the rejection of reality, which means that if people don’t like something, their brains will automatically make some mechanisms to resist it.

02 Investing in China allows you to buy some better companies at a cheap price

Question: Is it still a good choice for foreign investment in China?

Charlie Munger:There is no problem for investors to invest in China. Compared with investing in the United States, investing in China can allow you to buy some better companies at a cheaper price, and even if there are some uncertainties, it is worth it.

Question: Talk about your views on the semiconductor industry.

Charlie Munger:The semiconductor industry is a very special industry, because it requires you to put all your money into it, especially in the face of technology updates and iterations, the amount of money required will be even greater. I don’t want Berkshire and Daily Journal money is invested in one industry.

Semiconductor can be said to be a winner-takes-all industry, but it is also an imperfect industry. Maybe it’s a good area to invest in, but as an older person, I don’t want to learn something new.

03 Munger shares the secret of longevity: like to eat peanut butter candy, rarely exercise deliberately

Question: You are 99 years old and still in good health. Can you share the secret of longevity.

Charlie Munger:I have a peanut butter candy I really like and I don’t want to advertise my product (note: this refers to See’s Candy by Berkshire), but this peanut butter candy is really good.

Question: Everyone also wants to know about your daily habits, such as whether you do exercise?

Charlie Munger:I didn’t exercise very much, I did some exercise when I was younger, when I was in the army, but I rarely did it on purpose, maybe a game of tennis once in a while.

Question: Have you ever thought about changing this habit?

Charlie Munger:No, I think everyone’s life journey is different, and everyone’s habits are also different.

Ask: What do you do when you wake up every day? What would you most like to do on your 100th birthday?

Charlie Munger:I wake up every day in a wheelchair and I don’t like it. Roosevelt also spent the last 12 years in a wheelchair, and I don’t really want to be like him.

Question: You gave a talk in 1995 on the psychology of human misjudgment, and you said that some human regression is inevitable as we grow older. You were 71 years old at the time, and now you are 99 years old, do you still hold on to your previous views?

Charlie Munger:Some people get smarter the younger they get, like Schroeder. I’ve also faded a lot now, but I’m still able to handle most things, which I think is a good result for my age.

04 Interest rate increase is inevitable, investors must learn to adapt to high interest rates

Question: Let’s talk about investment again. Do you think the current high interest rate will have any impact on investment?

Charlie Munger:Needless to say, now that interest rates are high, it’s bad for stock prices. But interest rate increases are also inevitable. We should not stay in an environment of zero interest rates for a long time, and investors should also learn to adapt to high interest rates. Not all things go smoothly all the time.

The current inflation rate is also high, and there will be more inflation problems in the future. The Daily Journal is also considering buying some government bonds.

Question: Our inflation is always emerging. It was more serious in the Paul Walker period in the 1970s. Is it necessary to learn from Paul Walker’s practice at that time?

Charlie Munger:I am quite optimistic about the long-term expectations, but in the short-term there will indeed be some fluctuations and difficulties, and of course I am not sure what specific problems will arise.

05 I can only teach someone what almost everyone knows, kind of like pulling someone off a cliff

Question: Mr. Munger, do you think there is currently systemic racism in the United States?

CharlieMunger:Of course, I think there are. Throughout human history, there has been a lot of discrimination against certain groups of people, but I think in my lifetime it has gotten a lot better and racism is on the decline.

Question: Do you think climate change will have an impact on the insurance industry in the next 25 years? Will you raise Berkshire’s insurance premiums?

Charlie Munger:I’m not sure I’m good at answering this question. While climate change is serious business, I think it may actually have a much smaller impact than people think. So I think it may not affect us to adjust the premium, I will wait and see.

Question: This question comes from a teacher who teaches personal and corporate finance courses at Indiana University. What do you think should be taught to students so that they have the foundation and common sense to deal effectively with their personal or business financial problems later in life?

Charlie Munger:Good judgment is essential. If a person has insufficient judgment, he may make some unreasonable decisions and have some bad influences. So my suggestion is to keep learning and keep improving yourself.

I once said that I can only teach others what almost everyone knows. It is a bit like pulling a person from the edge of a cliff. Maybe I will teach those who are willing and able to learn. But I’m not good at teaching people who haven’t started yet.

By the way, the operation of most education is actually a continuous selection of talents, some people can’t keep up with the progress, and eventually they are eliminated. I also had a conversation yesterday with a good law professor who is a professor in a famous law school, they always have the ability to make good students improve more, but they can’t make stupid people smart.

As the saying goes, fools live forever.

06 Human civilization does not expect much from us, making realistic expectations of ourselves and others

Question: In the eyes of many entrepreneurs or celebrities, one must have big dreams. But you said, “The secret to a happy life is to lower your expectations.” Can you expand on that?

Charlie Munger:Indeed, of course you have to try your best to go up step by step and strive for more achievements. This is the mystery of life. But there will always be people who get into emotional trouble because of it. After all, behind every success there may be a thousand failures. If you make unrealistic promises and fail over and over again, people will hate you for it.

We little beings encounter one another, and human civilization demands very little of us: realistic expectations of ourselves and others.

Question: An investor from China would like to ask you, after the epidemic prevention and control measures are relaxed, what health and safety suggestions do you have for the elderly?

Charlie Munger:I also had Covid-19 before, but my symptoms were mild, just a runny nose for about 10 minutes despite testing positive. However, compared to the new crown pandemic, I think it is more important for the elderly to try to avoid falls. I have older friends who died from falls. A good friend of mine uses a cane and I’ve had a walker for about 6 1/2 years and it works great and I’ve never had a fall and now I’ve got a wheelchair. My advice to seniors is to be cautious and not fall.

07 Pay for a great business, great is good

Question: You gave Buffett a very good suggestion, that is, to buy good companies at a good price. This has changed some of Buffett’s investment philosophy, instead of picking up cigarette butts as before.

Charlie Munger:There was a time when fruit was everywhere and you could easily get good stuff in the orchard for cheap, but that went away and then there was a decline in performance.

More than half of all the money Ben Graham has made in his lifetime has come from 1 stock. That stock was GEICO (Government Employees Insurance Company). So you see, what he taught me was how he got rich. In my opinion, this is what great businesses should pay for.

Greatness is good.

08 The first choice for investment is a good company, and then consider the management

Question: When you value a company for potential investment, do you value the company itself or the management more? Or what would you consider first?

Charlie Munger:I think the company comes first, then the management. If we only invest in good management, but the company is not very good, we will not achieve such good results.

Ask: What if a good company has bad management?

Charlie Munger:Like Coca-Cola, it has been run by a bad manager for a long time, but its profitability is still very good, which is why I want to invest in good companies. The most glorious period of Coca-Cola was 25 years ago.

Question: What experience do you have in evaluating the character and ability of the company’s management?

Charlie Munger:Everyone makes mistakes. In my life, I am most moved by the rise and decline of IBM. IBM used to be the American company I admire the most. But in the past 10 to 15 years, with the rise of competitors Apple and Google, IBM’s decline was inevitable, as was Kodak’s decline after the advent of digital photography.

Bill Gates once said that when a truly disruptive technology emerges, it is easy for the new technology to completely replace the old one. It is difficult for a long-term successful enterprise to change its business model and way of thinking. But our Daily Journal company will continue to cope with the new world, especially the constant changes in the newspaper industry. We are making automation software for courts, which is another completely different industry. .

Question: You once said, “You don’t have to invest a lot to be rich”. So, would you hold a stock for the long term? Who would you choose to do this now?

Charlie Munger:A good position is very important. If we encounter a good company, we will definitely hold it for a long time.

Nowadays, many good companies are not cheap. The price-earnings ratio of some good companies in the United States is generally 25 times or even 30 times. This actually has certain risks. If you make a wrong move, you will lose a lot. There aren’t many of them, although some good companies have ok prices. In this case, 95% of the US fund managers I don’t want them to give me a job because I think it is too difficult. The current 401K plan in the United States achieves a positive return ratio of far less than 5%, which is a very rare phenomenon.

09 Poor Charlie’s Almanac “New Edition” Already in the Works; Delayed Gratification Makes Success More Odds

Question: Will you publish a new Poor Charlie’s Almanac?

Charlie Munger:It is already being done now, and it is a Chinese version on the Internet.

Question: At your age, having amassed enormous wealth, do you still delay gratification? What advice would you give to young people?

Charlie Munger:I am indeed old now, but I still use the practice of delaying gratification. This behavior has no age limit and is applicable to anyone.

We are all looking for opportunities to enjoy life in different ways. Some of this (delayed gratification) are born, and some can be learned through the day after tomorrow.

Question: Are you born or made?

Charlie Munger:I learned early on to delay gratification. Children love to eat marshmallows. If they are willing to wait a little longer, they can eat more marshmallows. Those who are willing to spend a little longer and eat more marshmallows have a greater chance of success in the future. Luckily for me, I was born with this skill and no one taught me.

10 Be loyal to shareholders, even after they die

Question: Warren Buffett is a “learning machine”. In addition to this quality, what other qualities do you think Warren has that make him one of the greatest investors in the world?

Charlie Munger:Warren is not only a very good thinker, but he is also a good learner.

Warren and I were lucky to have a lot of shareholders early on who believed in us. We have established a good reputation among them. We are loyal to them, even though many of them have passed away.

Question: How would you rate Greg Abel? Is he a “learning machine”?

Charlie Munger:Greg is a great business leader, both as a thinker and a doer. And he’s very good at leading other people to get things done, he’s an amazing guy. We are lucky to have Greg working for Berkshire. He’s also a “learning machine” who, like Warren, is always learning new things.

One of the interesting things about Greg is that he’s better at some things than Warren. Warren knew this, and he continued to guide Greg to do better.

Berkshire is doing great and we are lucky to have a 92 year old man who is working and in great shape. Of course, we’re also lucky to have a CEO like Greg.

Greg is trying to run the business of all utilities like a regulator, which is a smart way of thinking.

Question: You mean, it’s a good belief?

Charlie Munger:Yes, why not? If you want others to treat you this way, you need to do the same. This is the golden rule, and I don’t think anyone who does it will fail.

11 I Became a Better Investor After Understanding “All Companies Die”

Question: What impressed you the most during your tenure as the vice chairman of Berkshire Hathaway? How do you become a better “learning machine” through these things?

Charlie Munger:What impresses me the most is the demise of the company. A business world is almost the same as the natural world. Many animals and species will die out, and they are all following the laws of nature.

All things are replaced, which is a natural law, and many companies are on the road to extinction. Take Kodak, for example, which was once one of the greatest brands in the world. We all use film, but it suddenly disappeared from the world. In fact, within a certain range, everything will perish. I didn’t realize this when I was young.

Another example is Xerox, which seems to be around forever and has been around for a long time. I think these companies will still be around when I am old, but in fact many of them have died, and no company lasts forever.

Or some great department stores, which were the most important part of the whole community, providing residents with daily necessities, seemed to survive forever, but finally closed their doors.

Once I understood this, I became a better investor.

I spoke to Walmart’s Doug McMillan, who has been carrying lists of the top retailers in his wallet for decades, and he lives in constant fear that Walmart will be disrupted.

Once, IBM had a very leading position in the field of smart manufacturing, but now it has become just one of all smart manufacturing companies. So companies will rise and fall, even if the managers of the business are talented and hardworking.

12 Patience, delayed gratification, and keeping promises improve your resources and opportunities

Ask: Who is the person you most admire?

charlieMunger:Opener’s Jim Senegal, I might say. He didn’t go to Wharton, he didn’t go to Harvard. He has been working in a shop since he was 18 years old. Now he is the CEO of Market Opener. He’s been in business all his life, and he’s so good at it.

Ask: What qualities in life have helped you the most?

Charlie Munger:Quite simply, the answer is rationality. If you’re not crazy, you can already do better than 95% of people.

Also, you have to be patient, know how to delay gratification, and don’t do crazy things. Also try to keep your promises to others. Then, you greatly improve your resources and opportunities. It’s that simple.

Ask: Why are so many people not doing this?

Charlie Munger:This is an interesting question, I don’t think kids can do this automatically. If you have 10 kids, some will do better and some will not.

Question: Is it harder to be rational when you have success and wealth, or as you get older?

Charlie Munger:I think it’s hard, but if you’re young and practice hard, you get better, but it’s never easy.

If I were to ask you a question, which one would you buy if you invested $1 million in one stock? Without income, living expenses and spiritual world expenses can only be met through this one stock. I don’t think many Americans know how to answer that question, and they don’t even know where to start.

I often tell people around me that no matter what your current life is like, the increase in age and wealth will make you move closer to this trend (insist on rationality). I woke up this morning thinking I’ve been saving on pants, it’s a habit that’s ingrained in my mind, and there’s nothing I can do to change it, I’ve always been that way.

Source of this article: Securities Market Red Weekly, original title: “Record of Munger’s 2023 Shareholders’ Meeting: Investing in China Can Allow You to Buy Some Good Companies at a Cheaper Price”

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