And what about the transformation to retail? So you said department stores are gone, but there seems to be at work a quite massive transformation of retail.
Are we going to go back to old town Pasadena, for example, or is the shift to online retail more permanent?
CHARLIE MUNGER 00:17
Well, I don’t think retailing is going to go away after it’s been around for thousands of years, but certainly it’s been a very difficult place to make money, because of what the internet has done.
I recently had a friend send me a blue blazer made in China, bought on the Chinese internet, and it cost $42 delivered. And it may not have been a perfect blazer, but it was an amazing blazer for $42. The person who created that blazer gave some little factory an order for 100,000 at once, and those had been pre-sold using the internet.
And so it’s the most extreme kind of kill all our competitors of selling I’ve ever seen. Of course, retailing hasn’t coped with something like that. How good is it for Brooks Brothers when somebody can deliver a thing with the internet from China for $42? It didn’t look like that bad a blazer to me either.
Retailing has gotten very tough, and I think this online stuff is here to stay, and we’ll get more and more efficient.
So that could be actually good for the consumer, but more difficult for certain sets of investors, in particular, commercial real estate.
CHARLIE MUNGER 01:53
[Inaudible] these changes are always bad for some investors and good for others, but when they’re bad, they’re very bad in the full brunt of the changes that are coming in terms of this online shopping.
Well but there's also –
CHARLIE MUNGER 02:15
I am a director at Costco, and in the last reporting period, their online sales were up 86% over the same quarter last year. Now, that is a significant development. Is it good for other retailers? No. It’s good for Costco, but it isn’t good for them.
But how much of their brick and mortar stores, how much of this is people who would have shopped at Costco in the departments in the stores-
CHARLIE MUNGER 02:46
Mortar stores are already doing well, but their brick and mortar stores have been enormously destructive because of their low prices and efficiency to other retailers. And now they’re doing all this internet thing.
The last thing I would want to do in retail is compete with Costco.