Collection: Charlie Munger - #204 'Wretched Excess Has Bad Consequences'



[Transcript]

BECKY QUICK 00:00

This is another question from Tom Seymour, who sent in several that were pretty good.


This one he says, "two years ago at this meeting, you said: “I think there are lots of troubles coming. There’s too much wretched excess.” Since that meeting, we have seen something like 860 SPACs, IPOs like Rivian and Robinhood, and the GameStop phenomenon. I can’t imagine you’ve changed your mind. I wonder what your favorite story of wretched excess is from the last year?"


CHARLIE MUNGER 00:27

Well certainly, the great short squeeze in GameStop was wretched excess. Certainly, the Bitcoin thing is wretched excess. I would argue that venture capitalists are throwing too much money too fast. And there’s considerable wretched excess in venture capital and other forms of private equity.


And so – We have a stock market which some people use like a gambling parlor. And the transactions of the people who love the gambling parlor aspect of the business and those who want to make long-term investments, take care their old age, and so forth.


I mean model that in one market and it goes out of control because the stock market becomes an ideal gambling parlor activity. I don’t think that ought to have been allowed either.


If I were the dictator of the world, I would have some kind of attacks on short-term gains that made the stock market very much less liquid and drove out this marriage of gambling parlor and legitimate capital development of the country. It’s not a good marriage and I think we need a divorce.


BECKY QUICK 01:58

How would a divorce work?


CHARLIE MUNGER 02:00

Well, you’d have to have some kind of a rule that just made stocks way less liquid. We have all the real estate we want, all those shopping centers and auto agencies, and so forth, without having a perfect liquid market.


We could – we would have a stock market that was way less liquid. When I was young we had a stock market that was way less liquid, way fewer shares. When I was at Harvard Law School we seldom traded a million shares on a day and now we trade billions. We don’t need a stock market that liquid. What we’re getting is wretched excess and danger for the country.


And everybody loves it because it’s like a bunch of people get drunk at a party, they're having so much fun getting drunk that they don’t think about the consequences. We don’t need this wretched excess. It has bad consequences. You can argue that the wretched excesses of the 1920s gave us the Great Depression and the Great Depression gave us Hitler.


This is serious stuff, we should – but it's awfully hard – a lot of people like a drunken brawl and so far those are the people that are winning. And a lot of people are making money out of our brawl.


BECKY QUICK 03:24

Mark Lazaro writes in with an additional question –


CHARLIE MUNGER 03:27

(Inaudible).


BECKY QUICK 03:28

He said that you mentioned we’re in a big bubble. Can you elaborate on that and how is this likely to play out?


CHARLIE MUNGER 03:35

Well, I think eventually there will be considerable trouble because of the wretched excess. That’s the way it usually worked in the past. But when it’s gonna come and how bad it will be, I can’t tell you.


(Source: https://youtu.be/8RxLj9OVqLo)

 

[YAPSS Takeaway]

Wretched excess always has bad consequences.


"Everybody loves it because it’s like a bunch of people get drunk at a party, they're having so much fun getting drunk that they don’t think about the consequences. We don’t need this wretched excess. It has bad consequences. You can argue that the wretched excesses of the 1920s gave us the Great Depression and the Great Depression gave us Hitler." ~Charlie Munger

9 views0 comments