And so how does one as a witness, or, in a certain way, one lives longer than the life of some of these companies sort of deal with change? Right so you could think about an investment portfolio that you create at a point in time will only outlive you for a certain amount of time.
And so how does one learn to deal with change? It’s a question that I always ask my students, and I would just… How does somebody who has to take the resources of very large numbers of people, deal with this change? Any thoughts on that matter?
CHARLIE MUNGER 00:38
Well, some people try to get on the cutting edge of change. So they’re destroying other people instead of being destroyed themselves. And those are the Googles and the Apples and so forth. Other people, like me, do some of that, joining things like Apple, and in some ways we just try and avoid big change that we think is likely to hurt us.
And so Berkshire, for instance, owns the Burlington Northern Railroad. You can hardly think of a more old fashioned business than a railroad business, but who in hell is ever going to create another trunk railroad? So it’s a very good asset for us. So we made that success not by conquering change, but by avoiding it.
Now Burlington Northern itself has been quite clever at adapting technology to their railroad. Imagine the good luck of being able to take an existing railroad and double deck all the trains and raise the heights of the tunnels and so forth, and all of a sudden you got twice the capacity at very little incremental cost, which is what that railroad has done.
So that's –
CHARLIE MUNGER 01:50
Everybody uses new technology, but it really helps to have a position that almost can’t be taken away by technology. How else are you going to carry goods from the port of Los Angeles to Chicago except on our railroad?
So it’s innovation within an economy that continues to follow certain sets of rules, rather than looking for the new economy, is that another way one could think about it?
CHARLIE MUNGER 02:21
There are different ways. All successful investment involves trying to get into something where it’s worth more than you’re paying. That’s what successful investment is. And there are a lot of different ways to find something that’s worth more than you’re paying.
You can look for it rather right on the cutting edge of technology, the way Sequoia does. The most remarkable investment firm in America is probably Sequoia. That venture capital firm, which absolutely fanatically stays right on the cutting edge of modern technology, they’ve made more money than anybody and they have the best investment record of anybody. It’s perfectly amazing what Sequoia has done.
3 ways to deal with change:
1. Be the change.
2. Join the change.
3. Join into things that change does not affect them.