CHARLIE MUNGER 00:08
This business – Why does Li Lu succeed so mightily? Well partly he’s sort of a Chinese Warren Buffett. That really helps.
And partly he’s fishing in China. Not in this over-searched, over-populated, highly competitive American market, and there’s still pockets of ignorance and lassitude in China that gave him so unusual opportunities.
The first rule in fishing has always been fish where the fish are. And the second rule of fishing has always been ‘Don’t forget rule number one’. And Li Lu just went where the fishing was good and the rest of us are like cod fishermen who are trying to catch cod where the fish have been fished out. It doesn’t matter how much you work, when there’s that much competition.
Every little idea I see in the world some are going after. I sat once on an investment committee at the University of Michigan and in came one of their successful investors located in London.
And what had this investor done in London? He decided to invest in sub-Saharan Africa. And the only marginal securities were a few banks that traded in the Pink Sheets, so he would buy very tiny quantities of these banks.
And every time some poor person got tired of having their money in the mattress and put it in a bank he did a little better. And of course he made a lot of money. Nobody else was investing in little tiny banks in Africa. But the niche was soon filled.
What the hell do you do for an encore after you put your client’s money in a bunch of little tiny banks in sub-Saharan Africa? The niche gets filled quickly. How many wonderful niches are there going to be when some guy in London is buying all these tiny little bank stocks in Africa? It’s hard.