Tuesday, June 7, 2016

Berkshire 2016 Meeting: Charlie Munger Highlights - Part I

The following are excerpts of comments made by Charlie Munger at the 2016 Berkshire Hathaway (BRKa) shareholder meeting:

On Ignorance
"...looking back, I don't regret that I didn't make more money or become better known, or any of those things. I do regret that I didn't wise up as fast as I could have — but there's a blessing in that, too. Now that I'm 92, I still have a lot of ignorance left to work on."

So, for those who are a bit younger than Mr. Munger (and also similarly did not "wise up" as fast as they'd have liked), I guess this way of thinking potentially offers an even bigger opportunity for them. Well, at least it possibly could for the person who hasn't become convinced they already have most things figured out and, as a result, focus their efforts on confirming it.

"If others examined themselves attentively, as I do, they would find themselves, as I do, full of inanity and nonsense. Get rid of it I cannot without getting rid of myself. We are all steeped in it, one as much as another; but those who are aware of it are a little better off -- though I don't know." - Michel de Montaigne

To me, it's through the "though I don't know" that Montaigne adds a crucial element of healthy doubt (though I, as well, certainly don't know!); much like Munger, it seems a humble recognition that no matter how long and hard one attempts to better understand the world, the work is ultimately incomplete, and to a great extent this comes down to inherent limitations of the human mind.

And those who might be very smart and capable aren't exempt from it; the question is whether they think they are, in fact, entirely or mostly exempt. In other words, individuals convinced they already don't have much "ignorance left to work on" seem rather guaranteed to possess a whole lot more of it than they realize.

On Retailing & the Internet
"...I would say that we failed so thoroughly in retailing when we were young, that we pretty well avoided the worst troubles when we were old. I think net Berkshire has been helped by the Internet. The help at GEICO has been enormous and it's contributed greatly to the huge increase in market share. Our biggest retailers are so strong that they'll be among the last people to have troubles from Amazon."

What comes across loud and clear during the meeting is how much Jeff Bezos and Amazon comes into play in their thinking when it comes to retail businesses (and, who knows, maybe one day even some of their other businesses).

On the Health Effects of Carbonated Soft Drinks
"...every person has to have about eight or ten glasses of water every day to stay alive...and it improves life to add a little extra flavor to your water -- a little stimulation, and a few calories if you want to eat that way. There are huge benefits to humanity in that and it's worth having some disadvantages. We ought to almost have a law...where these people shouldn't be allowed to cite the defect without also citing the advantage. It's immature and stupid."

Munger says those who choose to look at only the downside without also weighing the benefits are making an "inexcusable" error.

On Microeconomics vs Macroeconomics
"Well, there could hardly be anything more important [than microeconomics]...Business and microeconomics are sort of the same term. Microeconomics is what we do and macroeconomics is what we put up with."

Considering how little Berkshire relies on macro factors in their investment decision-making it's notable, as a contrast, just how much time and energy is expended by a whole bunch of market participants -- as well as the many economists, consultants, and analysts who advise and opine -- on macro-oriented forms of analysis.

"It's kind of a snare and a delusion to outguess macroeconomic cycles...very few people do it successfully and some of them do it by accident." - Charlie Munger at the University of Michigan

Here's a comprehensive transcript of what was said at the Berkshire meeting by both Warren Buffett and Charlie Munger.

Also, here's a transcript focused specifically on what Charlie had to say.

Adam

Long position in BRKb established at much lower than recent prices
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