Thursday, June 11, 2009

Munger on Investing, Money Mgmt, GM, and the Zero-Sum Game

Below are some miscellaneous quotes by Charlie Munger. These are all from the 2005 Wesco annual meeting:*

Investing at Berkshire
Our future prospects are way worse than what they used to be. But I'm 81; I've got bigger problems than diminished returns. (Laughter) - Charlie Munger

What the 15 best deals all have in common is that they all worked.
There were different models – See's Candies was different from Shaw Carpets. But both are good businesses that will generate durable returns for the grandchildren of people sitting in this room. - Charlie Munger


Money Management
It's my guess that something like 5% of GDP goes to money management and its attendant friction. I define it broadly – annuities, incentive pay, all trading, etc. Nobody else has used figures that high, but that's my guess. Worst of all, the people doing this are among the best and the brightest. Hundreds and thousands of engineers, etc. are going into hedge funds and investment banking. That is not an intelligent allocation of the brainpower of the civilization. - Charlie Munger

You're paying a manager a fortune and he has 85% of his assets invested parallel to the indexes. If you have such a system, you're being played for a sucker.

You have these fads in investment management. With so many bodies and minds and computers, I see figures of risk by asset class, but I don't have the faintest idea what they mean. They don't either, but they learned a fad, a way of thinking. If you learn a formula, you can run the numbers and print it up, but it doesn't mean anything. - Charlie Munger

General Motors
I regard GM as such a marvel of human achievement, but also an example of massive management failure. I can't be criticized if I eventually die – I delayed it as long as I could. GM delayed it as long as they could. They had a very tough hand to play, but I would argue that they blew it. - Charlie Munger

The Zero-Sum Game vs Investing
I do think that it's conceivable that some enormously talented person that studied economics and relative value of currencies and devoted his life to it and only bet occasionally, that such a man could do very well [investing in currencies]. It's not my line of talent.

I'd rather do something that's not such a zero-sum game. If I invest in equities – the businesses are growing; for example, Wrigley's will make more gum. It's automatically working for me, even if I do nothing. But if I invest in currencies, it's not working for me. - Charlie Munger


Check out some of Munger's other comments from the meeting. As always, he's often rather blunt and insightful.

Adam

* These comments are based upon notes taken by Whitney Tilson.
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