Charlie Munger speaks at the Daily Journal annual meeting

SEC Chairman Gary Gensler and the SEC's role in financial system integrity is hard to evaluate; there are inherent moral compromises in finance and wealth management because people prioritize their families over clients; as a result, it's very difficult to manage others' money properly and enforce integrity.

“Well, it's hard to fix. What happens, of course, is that people rationalize their own way of making a living. There's some moral compromise in most activity that people are in where they make a living and particularly so in things like finance and wealth management and so forth. And of course the people making the decisions care more about their own families than they care about the people whose money they're managing because that's just the way human beings are constructed.”

Getting rich and staying rich will be way harder for the generation graduating from college now than it was for Munger's generation; house ownership in desirable city neighborhoods costs so much more; income taxes will probably go up too; the investment world is plenty hard.

“For them to get rich and stay rich and so forth, it's going to be way harder for them than it was for my generation. Think what it costs to own a house in a desirable neighborhood in a city like Los Angeles. It's not a and I think we'll probably end up with higher income taxes too and so on.”

The pandemic has shown that many workers got used to not being in the office five days a week and don't want to return; this trend will likely persist permanently, especially in computer science; this is partly constructive because it reduces unnecessary meetings, flights, and corporate overhead.

“this is a very interesting thing that the pandemic has given us. An awful lot of people have gotten used to not being in the office at five days a week. And I think a lot of those people are never going back to five days a week. It's amazing the percentage of the people in computer science that don't want to be in the office for a normal life. uh they want to do a lot of it from locations that are more convenient to them. I think a lot of that's going to remain forever.”

For-profit educators have lured people with dreams and cheated them; once a social safety net (like student loans) is created, everyone wants more of it; Benjamin Franklin warned that when citizens can vote themselves money, the republic's end is near, and we're probably closer to that end now than 200 years ago.

“There's been a fair amount of disreputable private education that kind of lures people in with dreams and cheats them...Once you start a social safety net, everybody wants more and more of it. The people that have the loans, they want the loans forgiven. It gets to be a big body of people clamoring for money. Benjamin Franklin was suspicious of this. He said that when the citizens of a republic learn they can vote themselves money, the end of the republic is near. Well, it may not be as near as Benjamin Franco thought, but it's it's probably closer we're probably closer to the end than we were 200 years ago.”

Passive investing through index funds has caused an enormous transfer of voting power to people like Larry Fink at Vanguard; Munger predicts this change will not be good, though he thinks highly of Fink personally; he's uncertain about wanting Fink to be his 'emperor.'

“Oh, huge. That is that's another thing that's coming. We have a new bunch of emperors and they're the people who vote the shares in the index funds. Maybe we can make Larry Frink and the people at Vanguard Pope. All of a sudden, we've had this enormous transfer of voting power to these passive index funds. that is going to change the world. And I don't know what the consequences are going to be, but I predict it will not be good. I think the world of Larry Fank, but I'm not sure I want him to be my emperor.”

When Chinese government moved from collectivist agriculture to private family plots where peasants kept crops after costs, grain production went up 60% in the first year; this demonstrates the power of aligned incentives over ideology.

“When the Chinese went away from collectivist agriculture and let each peasant have his own plot of land and he got to keep the crop after his costs, the grain production went up 60% the first year.”

In early motion picture industry, practically everyone took advantage of shareholders and it was just the culture; this is deeply embedded in human nature; it makes running proper civilization hard.

“I was in the early days of my life, I was I worked a little bit on the fringes of the mo motion picture industry and I would say practically everyone sort of took advantage of the shareholders and that was just the culture and that is just deeply into human nature that people are going to behave that way.”

In Munger's 98-year lifetime (1922-2022), most of modernity came in the last 100 years; the previous 100 years (1822-1922) got another big chunk of modernity; before that, life was pretty brutal, short, and limited for thousands of years.

“If you take the last 100 years 18 1922 to 2022 most of modernity came in in that 100 years and then the previous 100 years that got another big chunk of modernity and before that things were pretty much the same for the previous thousands of years. Life was pretty brutal and short and limited”

First 100 years of modernity (ending ~1922) brought steam engines, steamships, railroads, improved farming, improved plumbing; next 100 years brought widely distributed electricity, modern medicine, automobiles, airplanes, recorded music, movies, air conditioning.

“The next hundred years gave us widely distributed electricity, modern medicine, marital, the automobile, the airplane, the the records, the movies, the air conditioning in the south. And think what a blessing it was. If you wanted five children, I mean, if you wanted six children, if you wanted three children, you had to have six because three died in infancy.”

Warren and Munger have been blessed because they haven't dealt with tyrannical or impossible bosses; many people live under impossible-to-work-for bosses; this is a major blessing that enables good work.

“There are so many people that live surrounded by tyranny. There are a lot of bosses in the world that are absolutely impossible to be under. They're really psychotic and you really can't do anything about it in many many cases. Warren and I haven't had those problems. That's a blessing.”

Government welfare stimulus was probably too liberal; Munger thinks Larry Summers was right that stimulus overshot; capitalism requires that able-bodied young people who refuse to work suffer agony; excessive stimulus broke this incentive mechanism and was economically disruptive.

“I think we probably overdid that a little. I think Larry Summers is quite possibly right that we overshot a little with some of the stimulus and it would have been smarter with to do a little less. If you stop to think about it, what makes capitalism work is the fact that if you're a able-bodied young person, if you refuse to work, you suffer a fair amount of agony. And and it's because of that agony that this whole economic system works. And so the only effective economies that we've had that brought us modernity and the prosperity we now have, they imposed a lot of hardship on young people who didn't want to work.”

Otto Bismarck, the Iron Chancellor of Germany with unlimited power, created social security and government safety nets; he wasn't a hero of democratic capitalism, but he was actually one; showing how complicated life is that autocrats can create good institutions.

“By the way, you know where that came from? Otto Bismar. He was the iron chancellor of Germany exercising the unlimited power of a German king. Uh that's who gave us social security and so forth. Nobody thinks of Otto Bismar as a great hero of democratic capitalism, but he really was. Shows how complicated life is.”

Berkshire isn't buying new acquisitions because others are bidding prices up; private equity buys things for fees on larger asset bases, not for returns; using someone else's money makes acquisitions easier; Berkshire's surplus cash helps it appear responsible to governmental bodies buying software.

“the the reason we're not buying things, we can't buy anything at prices we're willing to pay. It's just that simple. Other people are bidding the price up. And a lot of the buying is not by people who really plan to own them. A lot of it is feed driven buying. Private equity buys things so they can have more fees by having more things under management. Of course, it's a lot easier to buy something if you use somebody else's money. We're using our own money.”

Ben Graham value investing principles will never die because the fundamental insight—getting more value than you pay for—is the essence of investment; people can become divorced from value (buying quotations on ticker), but the principle remains eternal.

“They'll never die. You can't. The idea of getting more value than you pay for. That's what investment is. If you want to be successful, you have to get more value than you pay for. And so it's never going to be obsolete.”

The bubbles and wretched excess of the 1920s contributed to the Great Depression, which in turn enabled the rise of Hitler; current market excess has serious consequences and society should not enable it just because participants enjoy the gambling.

“You can argue that that the wretched excesses of the 20s gave us the Great Depression and the Great Depression gave us Hitler. This is serious stuff. You we we we should but it's awfully hard.”

Japan is better adapted for stasis than the United States because it is monoethnic and culturally cohesive; running a multi-ethnic nation like the U.S. with different groups is way harder than running a monoethnic nation like Japan; a Harvard professor has written extensively on how ethnic diversity makes governance more difficult.

“I think the Japanese are better adapted for stasis than we are. I think it's a dutyfilled civilized bunch of people. A lot of them older, not many young people. And and they just suck it in and cope. In our country, we have terrible tensions. It's way harder to run a country which is not monoethnic like Japan. There's some professor at Harvard that has written extensively on this subject. It's way harder to run a nation like the United States with different ethnicities and groups and so forth than it is to run Japan. There are Japan is basically sort of a monoethnic civilization which is proud of its ethnicity”

The key seduction of paying off interest-bearing debt with non-interest-bearing checking accounts is so attractive to legislators that it gets overused; when politicians have checked the ability to create money, they inevitably use it excessively.

“Think of how seductive it is. You have a bunch of interest bearing debts and you pay them off with checking accounts which you're no longer paying interest. Think of how seductive that is for a bunch of legislators. You get rid of the interest payments and you just the money supply goes up. It seems like heaven. And of course, when things get that seductive, they're likely to be overused.”

Munger has conquered envy in his own life and doesn't envy anybody; he doesn't care what others have; but other people are driven crazy by envy, and some play to envy to advance political careers; whole networks want to pour gasoline on flames of envy.

“I have conquered envy in my own life. I don't envy anybody. I don't give a damn what somebody else has. But other people are driven crazy by it. and other people play to the envy in order to advance their own uh uh political careers. And we have whole networks now that are that they want to pour gasoline on the flames of envy.”

The GameStop short squeeze, Bitcoin boom, and excessive venture capital funding represent wretched excess in the stock market, where gambling parlor dynamics now co-exist with legitimate long-term capital formation; the ideal solution would be financial transaction taxes making stocks much less liquid to separate gambling from capital development.

“certainly the great short squeeze in GameStop was wretched excess. Certainly [snorts] the Bitcoin thing is wretched excess. Um, I would argue that venture capital is throwing too much money too fast in and there's a considerable wretched excess in venture capital and other forms of private equity. And so we have a stock market which some people use like a gambling parlor and the transactions of the people who love the gambling parlor aspect of the business and those who want to make long-term investments to take care of their old age and so forth. I mean, you model it in one market and it goes out of control because the the stock market becomes an ideal gambling parlor activity. I don't think that ought to have been allowed either. If I were the dictator of the world, I would have some kind of attacks on short-term gains that made the stock market very much less liquid and and drove out this this marriage of gambling parlor and legitimate capital development of the country. It's not a good marriage and I think we need a divorce.”

Paul Volcker's decision to raise the prime rate to 20% to combat 1970s inflation caused a horrible recession but was ultimately the right policy; modern politicians are unlikely to tolerate a new Volcker-style tough recession, so future troubles will likely be different and potentially worse than 1970s stagflation.

“I think conditions that allowed Vulkar to do that without an interference from the politicians were very unusual and I think it in 2020 hindsight it was a good thing that he did it. I would not predict that our modern politicians will be as willing to permit a new vulkar to get that tough with the economy and bring on that kind of a recession. So I think the new troubles are likely to be different from the old troubles.”

Renewable energy (solar, wind) has become efficient and competitive; Munger supports conserving hydrocarbons rather than depleting them rapidly because petroleum has enormous chemical uses in fertilizers and chemistry; he treats U.S. petroleum reserves like Iowa's black topsoil—a national treasure to be stewarded, not consumed as fast as possible.

“There is no question about the fact that we've got a lot of renewable energy we can get from solar and and wind and that it's gotten pretty efficient and competitive. And I am in favor of conserving the hydrocarbons instead of using them up as fast as possible. And I'm in favor of of all this new generating capacity now that it's gotten so efficient from solar and wind. The petroleum has enormous chemical uses and fertilizers and chemistry and so on and so on. And it's it's precious stuff and I don't mind having a goodly part of it that's remains in the ground. It's a good place to store it. I regard the petroleum of the United States about the way I regard the black top soil of Iowa. I regard as a national trees treasure.”

A Federal Reserve central bank digital currency (CBDC) is unnecessary because the U.S. already has a digital currency in the form of bank accounts integrated with the Federal Reserve system; government money printing is the real concern, not the form it takes.

“The Federal Reserve could have a currency if they want one. That that would be just a We've got a digital currency already. It's called a bank account. The banks are all integrated with the Federal Reserve system. We already have a digital currency.”

Deng Xiaoping was one of the greatest leaders any nation ever had because he gave up his communist ideology when he realized capitalism with Chinese characteristics would work better; most ideological leaders couldn't do this, but Deng's pragmatism brought China out of poverty and into prosperity over 30 years.

“I greatly admire what they did. I think Ding Xiaoing is going to go down as one of the greatest leaders that any nation ever had because he had to give up his own ideology to do something else that worked better. You don't see the Catholic cardinals suddenly deciding there's no afterlife. But that's what Jenoping did. He gave up his ideology, his communist ideology in order to make the economy work better. and being an absolute ruler, he could he could arrange it and he brought that whole nation out of poverty and prosperity and over the course of 30 years after he made the decision. That is a very admirable thing to have done.”

Massive money printing by modern nations (Japan, U.S., Europe) is entering new territory in scale; Japan has printed more money than any other nation, avoided terrible inflation, and remained civilized, but conditions are weird and nobody knows how it will work out; the U.S. is less well-adapted to stasis than Japan.

“When you throw money, when you print money on the scale that modern nations are printing it, Japan, the United States, Europe, etc. We're getting into new territory in terms of size. The Japanese bought back not only a lot of their own debt, but a lot of their common stocks. to the Federal Reserve system. You can't imagine how much money printing Japan has done. They haven't had all that much inflation and they it's still a very admirable civilization. In fact, you you could argue that Japan is one of the more admirable civilizations in the whole world. And in spite of all this very extreme uh government money printing they've done and they haven't had terrible consequences.”

Excessive monetary and fiscal stimulus over the last two years triggered the highest inflation in 40 years; we've done something extreme and don't know how bad troubles will be—could be like Japan's stasis or much worse; we are flirting with serious trouble but some earlier fears were overblown.

“well the first part I agree with that we've done something we've done something pretty extreme and we don't know how bad the troubles will be, whether we're going to be like Japan or or something a lot worse. And what makes life interesting is we don't know how it's going to work out. I think we do know we're flirting with serious trouble. I think we also know that some of our earlier fears were were overblown.”

Global warming has raised Earth's temperature by about 1 degree Celsius over 200 years despite massive coal and oil burning; Munger is skeptical that global warming will be as bad as 'calamity howlers' claim.

“I'll be very surprised if global warming is going to be as bad as people say it's going to be. Why? The temperature of the earth went up what one degree centigrade in about 200 years. It it just that's a hell of a lot of just coal and oil was burned and so forth and it was one degree. I'm just skeptical about whether it's as bad as these calamity howlers are saying.”

Communism with Chinese characteristics means one-party government but with most property in private hands and fair amount of free enterprise; it's a marvelous economic system and shouldn't be criticized for not being Western democracy.

“Ding Joping said called it communism with Chinese characteristics. He means he he meant one party government but with most of the property in private hands and a fair amount of free enterprise. That's what he meant when he said communism with Chinese characteristics. I don't care what he calls it. He was right. It was a marvelous thing to have done for China and it it worked wonderfully well”

Berkshire and Daily Journal are exceptional anomalies in how well they've been managed with minimal bureaucracy; most other newspaper companies have gone out of business, but Daily Journal has a liquid wealth and marketable securities portfolio while developing a software business—a rare achievement among ~500 newspaper companies.

“If there were 500 newspaper companies, there are maybe two or three that have had a result like that. And and look at how old the people are that have done it. And neither Garren or I ever took one penny out of the Daily Journal in all the years we worked here. No director's fees, no president's fees, no expenses, no nothing.”

Berkshire headquarters has only ~30 people including internal auditors, yet manages a huge diversified company efficiently; most bureaucracies fail due to slowness, waste, and inefficiency; Berkshire proved it's possible to run an empire with minimal overhead.

“Bergkshire has like 30 people in headquarters who aren't internal auditors. And look at how well Bergkshire's done. It's hard to run a bureaucracy that doesn't get terrible slowness and terrible waste and terrible pond...And yet we rung enough money out before they died. Bergkshire now has more audited net worth on its balance sheet than any other corporation in the United States.”

U.S. Steel, Eastman Kodak, Federated Department Stores, and Sears all died despite being major corporations; yet Berkshire succeeded by starting with three failing textile companies and extracting capital to build new businesses; most of the world won't be like Berkshire—it's a fluke.

“Just imagine think of the big bureaucracies that have died. US Steel, Eastman, Kodak, Federated Department Stores, Sears, Robu, and yet some things have come through and survived. And in some cases, the whole business had to die and they had to take the capital out and we owned a new businesses just to survive. That's what Bergkshire did. Look at the three companies that Bergkshire had. They all they all went out of business. And yet we rung enough money out before they died. Bergkshire now has more audited net worth on its balance sheet than any other corporation in the United States. Now that's weird...I don't think there's any chance that the rest of the world is going to be like Bergkshire. I think we were kind of a fluke that lasted for a while”

The director's table at Hines Corporation cost $600,000 versus $300 at Costco—they're different places with different ethos; when corporations get fat, firms like 3G come in wanting to buy and cut them back to normal; Munger's guess is there's a lot of fat in successful places.

“The director's table in the Hines Corporation cost $600,000. The goddamn director's table. The director's table in Costco cost about $300. They're different places, different ethos. And of course, if you get fat like that, somebody like 3G comes along and says, I want to buy you and cut you back to normal.”

Munger was in the middle of the Great Depression and was safer walking around Omaha in the evening than in his own neighborhood in Los Angeles after all the wealth and development; yet with 600% improvement in living standards, people are less happy, showing that safety and well-being don't correlate with happiness.

“It's weird for somebody my age because I was in the middle of the Great Depression. The hardship was unbelievable. I was safer walking around Omaha in the evening than I am in my own neighborhood in Los Angeles after all this great wealth and so forth.”

Berkshire's World Book Encyclopedia investment was a pride of Munger's because he grew up with it, it was a marvelous product, and Berkshire made $50 million/year pretax from it for many years; Bill Gates killed the business by bundling free encyclopedias with software.

“One of the investments that nobody ever talks about at Bergkshire is the World Book Encyclopedia. I grew up on it. You know, they used to sell it doortodoor and that thing was they had every word in the English language graded for comprehension and it had a vast amount of editorial input. So, it was easy for a child who wasn't necessarily a brilliant student to understand that encyclopedia. It was more understandable. And Bergkshire made $50 million a year pretext out of that business for years and years and years. And I was always so proud of it because I grew up with it and it helped me and so forth. And of course, I like the 50 million a year. And then a man named Bill Gates came along and he decided he's going to give away a free encyclopedia with every damn bit of software in his personal computer software.”

World Book Encyclopedia was a marvelous product that Berkshire still sells to libraries for a few million per year; the loss of World Book's $50M business wasn't good for civilization as TV programs are worse for children than encyclopedias.

“And of course, I like the 50 million a year. And then a man named Bill Gates came along and he decided he's going to give away a free encyclopedia with every damn bit of software in his personal computer software. And away went our $50 million a year. Now we still sell the encyclopedia to libraries. Maybe we make a few million a year doing that. But most of the wealth just went away and all that wonderful constructive product and it's still a marvelous product and it wasn't good that we lost what worldbook was doing for the civilization and I was so proud of World Book when when we but now it's just it's pretty well gone away in terms of its worldly significant and the money went with it...I don't think these TV programs that charm our children are as good as the World Book was for them. World Book helped me get ahead in life and and the people who aren't going to read the World Book and who are hanging in front of the TV set, they're not blessed, they're cursed.”

Munger and Buffett have been making concentrated investments since the 1950s and have avoided significant losses on any single investment, preferring risks of marketable securities to risks of depreciating currency; they don't mind a tiny bit of margin debt.

“if you invest in marketable securities, you have the risk that they'll go down and you'll lose money instead of make it. But the if you hold a depreciating currency, that's losing purchasing power. On balance, we prefer the risks we have to those we're avoiding. And we don't mind a tiny little bit of margin debt.”

Lee Kuan Yew of Singapore was the greatest governmental leader whose life overlapped Munger's; he taught Deng Xiaoping of China how to fix China; the Marshall Plan after WWII was a marvelous thing.

“I would argue that the greatest governmental leader whose life overlap mine was Lee Kuanu of Singapore. And I would argue that he was the one that taught Ding Chaoping of China how to fix China the way Singapore fixed itself. And so it was a huge achievement. So I've seen some remarkable I think the Marshall Plan that my country did after World War II was a marvelous thing”

Modern stock market liquidity is vastly higher than when Munger was young at Harvard Law School (when daily volume was ~1 million shares vs. billions today), and this excessive liquidity creates wretched excess and danger for the country, analogous to a drunken party where people don't think about consequences.

“We have all the real estate we want, all the shopping centers and auto agencies and so forth, without having a perfect liquid market. We could we would have a stock market that was way less liquid. When I was young, we had a stock market that was way one way less liquid, way fewer shares. When I was at the Harvard Law School, we seldom traded a million shares in a day. Now we trade billions. We don't need a stock market that liquid. What we're getting is wretched excess and danger for the country. And everybody loves it because it's like a bunch of people get drunk at a party. They're having so much fun getting drunk that they don't think about the consequences.”

Munger and Buffett have been surrounded by wonderful people in work lives and haven't had dumb bureaucracy like other places; they've managed to cope with problems and opportunities well; it's all been built on old-fashioned virtue and getting the day's work done.

“it's been a it's been a privilege to do it and a privilege to be here and so forth and and we haven't had a dumb bureaucracy like a lot of other places and we've managed to cope pretty well with the problems that came to us and the opportunities too and so we've been blessed and it's all old-fashioned virtue. It's Jerry and I don't have any secrets. We tend to get the day's work done and be as rational as we can and coping with whatever we have to cope with”

Japan experienced 25 years of economic stasis with living standards not improving, but this came from tough competition from China and Korea for Japanese exports, not from Japan's macroeconomic policies or money printing.

“Now they've had 25 years of stasis with living standards not improving very much. I don't think that came from their macroeconomic policies. I think that came from the rise of tough competition for their export powerhouse from from China and Korea.”

Berkshire Hathaway directors have met face-to-face twice a year and handled everything else by phone or consent minutes, and it worked fine; unnecessary in-person meetings and director flights are wasteful and the pandemic reduction in corporate travel is constructive.

“Bergkshire's directors have met face to face twice a year forever and done everything else on the telephone or with consent minutes and it's worked fine for Berkshire. I don't think we needed all these goddamn meetings and airplane flights. So I think part of what's happening is quite constructive that it'll get make life simpler and cheaper and more efficient.”

Nobody in his right mind would prefer windowless bedrooms to ones with windows, but cruise ships require windowless staterooms due to hydro­dynamic constraints; similarly, student housing with no windows enables convenient proximity for students learning from each other; Disney cruise ships proved artificial windows have equal or higher resale value than real windows.

“Nobody in his right mind would prefer a blank wall in a bedroom to a bowl with a window in it. The reason you take the windows out is you're getting something else from the design considered as a hole. If you stop to think about it, a big cruise ship has a huge shortage of windows and bedrooms because too many of the stateaterooms are either on below the water line or they're on the wrong side of the aisle. And so in the very nature of things, you get a shortage. You can't change the shape of the ship...Similarly, if you want a bunch of people who are educating each other to to be conveniently close to one another, you get a shortage of windows.”

Munger has never hoarded cash waiting for better investment conditions; he invests in the best thing he can find; Berkshire holds excess cash not because it times investments, but because it can't find anything it likes at prices it'll pay.

“In my whole adult life, I've never hoarded cash waiting for better conditions. I've just invested in the best thing I could find. And I don't think I'm going to change now. And the Daily Journal's used up its cash. Now, Bergkshire has excess cash, quite a bit of excess cash, but it's not doing that because it knows thinks it knows how to time investments. it he just can't find anything it can stand by.”

China is a big modern nation with a huge population and modernity that has come in the last 30 years; we invested in China because we could get more value in terms of the strength of the enterprise and the price of the security than we could get in the United States, the same decision other sophisticated investors like Sequoia have made.

“China is a big modern nation. It's got this huge population and this huge modernity that's come in the last 30 years. And we invested some money in China because we could get more value in terms of the strength of the enterprise and the price of the security than we could get in the United States. Other people, including Sequoia, the leading venture capital firm in the United States, have made the same decision we have.”

When you buy Alibaba ADR shares, you get a derivative with some legal ownership risk, but assuming reasonable honor among civilized nations, that risk doesn't seem all that big.

“When you buy Alibaba, you do get a sort of a derivative, but assuming there's a reasonable honor among civilized nations, uh, that risk doesn't seem all that big to me.”

Bigness in internet companies (U.S. tech champions) is not inherently bad; Munger prefers strong American tech companies to foreign dominance; he's not worried about antitrust enforcement against tech firms and doesn't think it will have much practical consequence.

“I think what's happened is so important and so tied up with national strength that I'm not trying to weaken the internet companies of the United States. I like the fact that we have strong national champions that are big strong companies and I think other nations are proud of their big strong companies too. So I don't think bigness is bad in the end. I think each I don't want the whole internet to be dominated by foreign companies. I want big strong American companies that stand well in the world.”

Government has been living by land sales and needs to shrink that sector; this creates an awkward problem as FOMC balance sheet shrinks; however, U.S. has a hugely strong economy and technical civilization that's not going away; robots are coming to factories, creating adjustment problems for workers.

“That's a big problem because the government has been living by land sales and of course they've had a boom. They're having to shrink that sector a little. So it's it's creating an awkward problem. In the United States, we have a hugely strong economy in a hugely strong technical civilization and that's not going away and the knowledge and so forth. And you can't believe what a modern factory looks like when you fill it with robots. And that's coming more and more and more.”

Cryptocurrency is beneath contempt, useful primarily for extortion, kidnapping, tax evasion, and currency speculation; it should have been banned immediately, and Munger admires China for banning it while criticizing Western governments for allowing it.

“I certainly didn't invest in crypto. I'm proud of the fact I've avoided it. It's like, you know, some venerial disease or something. I just regard it as beneath contempt. Some people think it's modernity and they welcome a currency that's so useful in extortions and kidnappings and so on and so on, tax evasion and and it and of course the envy everybody has to create his own new currency and I think that's crazy too. So, I'm I'm not having any I wish it had been banned immediately and I admire the Chinese for banning it. I think they were right and we we've been wrong to allow it.”

Daily Journal's accumulated surplus wealth from foreclosure boom provided flexibility and helps it appear more responsible to governmental bodies it sells software to; piled-up money helps in wooing these clients.

“And by the way, that piled up money helps us in wooing these governmental bodies we're selling the software to. We look more responsible with the extra wealth. And we are more responsible with the extra wealth.”

Munger's portfolio includes Berkshire Hathaway stock, Costco stock, Chinese stock through Li Lu, a little Daily Journal stock, and apartment houses; they don't believe in perfect diversification—you're lucky if you have four good assets to buy.

“the mongers have Bergkshire stock, Costco stock, Chinese stock through Leelu, uh a little bit of Daily Journal stock, and a bunch of apartment houses. Do I think that's perfect? No. Do I think it's okay? Yes. I think the great lesson from the mongers is you don't need all this damn diversification. That's plenty of You're lucky if you've got four good assets. I think the finance professors and the that sell the idea that perfect diversification is professional investment. If you're trying to do better than average, you're lucky if you have four things to buy.”

Costco has never traded at higher price-to-sales or price-to-earnings multiples; Munger would buy Costco at current prices for a 30-50 year sovereign wealth fund investment; Costco will be an absolute titan on the internet due to curated products people trust and huge purchasing power on limited stocking units.

“Costco has never traded at a higher price to sales or price to earnings multiple. How should new investors think about Costco given its record run? Well, that's a very good question and I've always believed that nothing was worth an infinite price. So at some even an admirable place like Costco could get to a price where you would say that's too high. But I would argue that if I were investing money for some sovereign wealth fund or some pension fund and 30 40 50 year time horizon I would buy Costco at the current price. Costco is going to be an absolute titan on the internet because they got curated products that everybody trusts and huge purchasing power on a limited number of stocking units.”

Bobby Kotick is one of the smartest business executives Munger knows; gaming is here to stay, but Munger doesn't like the addiction aspect where addicted young males spend 40+ hours a week playing games.

“I've got no comment about that except that I really like Bobby Kotek who's one of the smartest business executives I know and I do think gaming is here to stay. And but there again, I'm an old man. I don't like a bunch of addicted young males spending 40 hours a week playing games on the TV.”