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Munger @ Daily Journal AGM: Part 2

Charlie Munger, a long-time associate of Warren Buffett, is also the chairman of Daily Journal. Here are his most insightful answers at the Q&A session in Daily Journal's annual general meeting.

Munger @ Daily Journal AGM: Part 2

For the first part of this article, see Munger @ Daily Journal AGM: Part 1

How to really put psychology to work
What prevents the wide use of helpful psychological insight is the fact that psychology gets really useful when you integrate it with all other knowledge. But they don't teach that in the psychology department because the academic system rewards little experiments that develop more insight into psychological tendencies instead of synthesising what's already been discovered with the rest of knowledge. The psychology professors don't know all that much about the rest of knowledge and they have no incentive to master it. If you don't have to master the rest of the knowledge, you can't synthesise it with psychology. That's an interesting example of self-learning.

When I saw that psychology was necessary and I didn't have it, I didn't just learn the little tendencies well enough to get A's in psychology. I learned those tendencies well enough to synthesise them with the rest of knowledge. And that's the right way to do it. But show me a psychology department that knows how to do that. It's one of the most ignorant professions in the world.

How to be a better thinker
Well, I do have a tip. At times in my life, I have put myself to a standard that I think has helped me: I think I'm not really equipped to comment on this subject until I can state the arguments against my conclusion better than the people on the other side. If you do that all the time; if you're looking for disconfirming evidence and putting yourself on a grill, that's a good way to help remove ignorance.

What happens is that every human being tends to believe way more than he should in what he's worked hard to find out or where he's announced publicly that he already believes. In other words, when we shout our knowledge out, we're really pounding it out. We're not enlarging it. And, I was always aware of that and so I've accepted these damned annual meetings. I've been pretty quiet.

The biggest investment lie currently
Well, commission-free trading is a very good candidate for that if you want to emphasise disgusting-wise. Commission-free trading is not free.

Chess and investing
What I think is interesting about chess is, to some extent, you can't learn it unless you have a certain natural gift. And even if you have a natural gift, you can't be good at it unless you start playing at a very young age and get huge experience. So, it's a very interesting competitive field.

I think people have the theory that any intelligent hardworking person can get to be a great investor. I think any intelligent person can get to be pretty good as an investor and avoid certain obvious traps. But I don't think everybody can be a great investor or a great chess player.

I knew a man once, Henry Singleton, who was not a chess champion. But he could play chess blindfolded at just below the Grandmaster level. But Henry was a genius. And there aren't many people that can do that. And if you can't do that, you're not going to win the great chess championships of the world and you're not going to do as well in business as Henry Singleton did.

I think some of these things are very difficult and I think, by and large, it's a mistake to hire investment management - to hire armies of people to make conclusions. You're better off concentrating your decision power on one person...and then choose the right person.

I don't think it's easy for ordinary people to become great investors.

The future of oil & gas
...I think the oil and gas industry will be here for a long, long time. As a matter of fact, it will be here for a long, long time if we stop using many hydrocarbons in transportation.

The hydrocarbons are also needed as chemical feedstocks. I don't think that hydrocarbons are going. I'm not saying that oil and gas is going to be a wonderful business but I don't think it's going away. I don't think it's like the newspaper business.

How important is a company's culture?
It's quite important - part of the success of a company like Costco. It's been amazing that one little company starting up not that many decades ago could become as big as Costco did [and] as fast as Costco did. Part of the reason for that was cultural. They have created a strong culture of fanaticism about cost, quality, efficiency, and honour. All the good things. And, of course, it's all worked. Culture is very important.

Secrets of a happy life
A happy life is very simple.

The first rule of a happy life is low expectations. That's one you can easily arrange. If you have unrealistic expectations, you're going to be miserable all your life. I was good at having low expectations and that helped me.

Also, when you get reverses, if you just suck it in and cope, that helps if you don't just fretfully stew yourself into a lot of misery.

There are certain behavioural rules. Rose Blumpkin had quite an effect on the Berkshire culture. She created a business with like 500 depression dollars that became a huge business. You know what her mottoes were? Always tell the truth and never lie to anybody about anything.

Those are pretty good rules and they're pretty simple.

A lot of the good rules of life are like that. They're just very simple. Do it right the first time. That's a really good rule.

Lessons from the pandemic
...What you've learned in the pandemic is that we can do with a lot less travel and a lot more Zooming.

When the pandemic is over, I don't think we're going back to just the way things were. I think we're into a lot less travel and a lot more Zooming. I think the world is going to be quite different.

A lot of the people who are doing this remote work - a lot are going to work three days a week in the office and two days a week at home. A lot of things are going to change. I expect that and I welcome it.