Thursday, December 10, 2009

$ 2 Million -----> $ 2 Trillion

The following are excerpts from Charlie Munger's Turning $ 2 Million into $ 2 Trillion.

It is 1884 in Atlanta. You are brought, along with twenty others like you, before a rich and eccentric Atlanta citizen named Glotz.

Effectively, it is an explanation of psychological factors and other forces that helped to make the Coca-Cola Company what it is.

Glotz offers to invest $2 million, yet take only half the equity, for a Glotz charitable foundation, in a new corporation organized to go into the non-alcoholic beverage business and remain in that business only, forever. Glotz wants to use a name that has somehow charmed him: Coca-Cola.

The other half of the new corporation's equity will go to the man who most plausibly demonstrates that his business plan will cause Glotz's foundation to be worth a trillion dollars 150 years later, in the money of that later time, 2034, despite paying out a large part of its earnings each year as a dividend. This will make the whole new corporation worth $2 trillion, even after paying out many billions of dollars in dividends.

You have fifteen minutes to make your pitch. What do you say to Glotz?

And here is my solution, my pitch to Glotz, using only the helpful notions and what every bright college sophomore should know.

Check out the full post to see Charlie's approach.

Adam

Munger: Practical Thought About Practical Thought?

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