Collection: Charlie Munger - #33 'Deceptive Modern World'


Video Link: https://youtu.be/49VdYMKQ2Ic


In this episode, Charlie Munger shared on how some people just seek out the weaknesses of people and take advantage and how by being honest leads to a better life and wealth?


In this episode, you’ll learn:

  • The misleading in the modern world.

  • How private equity mislead the buyers?

  • Why an honest way of living leads to a better life?

To check out all Collection: Charlie Munger <click here>

[Transcript]

CHARLIE MUNGER 00:08

If you take the modern world where people are trying to teach you how to come in and trade actively in stocks. Well I regard that as roughly equivalent to trying to induce a bunch of young people to start off on heroin. It is really stupid.


And when you’re already rich to make your money by encouraging people to get rich by trading? And then there are people on the TV, another wonderful place, and they say, “I have this book that will teach you how to make 300 percent a year. All you have to do is pay for shipping and I will mail it to you!” (Laughter)


How likely is it that a person who suddenly found a way to make 300 percent a year would be trying to sell books on the internet to you! (Laughter) It’s ridiculous. And yet I’ve described modern commerce. And the people who do this all day think they’re useful citizens.


The advertising agents who invent the lingo. In insurance they say, “Well” they say, “the two people who shifted from GEICO to the Glotz insurance company save four hundred dollars each.” But what they don’t tell is that there are only two such people in the whole United States and they were both nuts. But they mislead you on purpose. I get tired of it and I don’t think it’s right that we deliberately mislead people as much as we do.


Let me tell you another story that I think is an interesting one about the modern life, but this goes back to a different time. This man has this wonderful horse. And it’s just a marvellous horse. It’s got an easy gait, good looking, and everything. It just works wonderfully. But also occasionally it just gets so he’s dangerous and vicious and causes enormous damage and trouble and breaks arms and legs for his rider and so on. And he goes to vet and says, “What can I do about this horse?” And the vet says, “That’s a very easy problem and I’m glad to help you.” And he says, “What should I do?” And the man says, “The next time your horse is behaving well, sell it.” (Laughter)


Well, think about it immoral that is. And haven’t I just described what private equity has to do? (laughter) When private equity has to sell something that’s really troublesome, they hire an investment banker. And what does investment banker do? He makes a projection! I have never seen such expertise in my whole life, as is created in making projections in investment banking. There is no business so lousy that it can’t get a wonderful projection. But is that a great way to make a living to have phony projections and use it to make money out of people you look right into their eyes of? I would say no.


By and large Warren and I, we never tried to make money out – stupidity of our dumb buyers. We tried to make money by buying, and if we were selling horseshit we didn’t want to pretend it was a cure for arthritis. And I think it’s better to go through life our way instead of theirs.


I think it’s always been this way, I think there’s always been chicanery. Think of the carnivals, the carny operator. Think of how much trickery there is in a carny operation. People just seek out the weaknesses of their fellow man and take advantage. And you have to get wise enough so you avoid them all. And you can’t avoid them if they’re in your family. I have no solution to that one. (Laughter) But where you have a fair choice, there are just so many people that should be avoided.


My father had this best friend and client and he also had this other client who is a big blowhard and he was always working for the big blowhard and he wasn’t ever working for his wonderful client whom I admired. And I said, “Why do you do this?” And he said, “Charlie you idiot…” He says, “the big blowhard is an endless source of legal troubles. He’s always in trouble. Overreaching and misbehaving and so forth. Whereas Grant McFadden treats everybody right. The employees, the customers, everything. And if he gets involved with some psychotic he walks over there and makes a graceful exit immediately. A man like that doesn’t need a lawyer.”


My father was trying to teach me something and it really worked. I spent my whole life trying to be like Grant McFadden and I want to tell you it works. It really works. Peter Kaufman is always telling me if the crooks only knew how much money you could make by being honest, they’d all behave differently. Warren has a wonderful saying that I like, he says, “You take the high road. It’s never crowded.” (Laughter) And it’s worked.


Take the Daily Journal Corporation. We made quite a few millions of dollars out of the foreclosure boom because we published legal notices and we dominated the publication of foreclosure notices in the worst real estate depression in the history of modern times. And we could have raised our prices at the time and made more tens of millions of dollars. But we didn’t do it. You know what your fellow citizens are losing their damn houses in the worst recession…’Charlie Munger billionaire raises prices’. It would look lousy on the front page of the paper (if people read the story).


Should you do it? And the answer is no of course not. Warren always said it’s probably always a mistake to marry for money and it’s really stupid if you’re already rich. (Laughter) And it’s really stupid when you’re already rich to get a reputation of being a total nogoodnik.


Rick Guerin always loved the story about the guy who had been a total miscreant all his life, and (when) he died the minister said, “Now is the time in the funeral ceremony when somebody says something nice about the deceased.” And nobody came forward and nobody came forward and nobody came forward. Finally one guy stood up and he said, “Well” he said, “His brother was worse.” (Laughter) Well you can laugh but there are people like that. When Harry Cohn died here the saying was that everybody went to the funeral to make sure he was dead. (Laughter)


So there are a few simple truths that really work. And when it gets to this difficult business the Daily Journal is in, I wouldn’t say it is a real pleasure to be serving these courts and agencies. They need the automation. Other people are trying to take advantage of them in ways that we aren’t. And we’re struggling against the odds (being) a little tiny company. And we’re taking a lot of territory. It’s slow going but the prospects are good. And of course the nice thing about being rich is that it doesn’t matter if it’s a little slow.


And how do we get rich? Well we remembered Grandpa Ingham, and when one of the few opportunities came along we reached out and seized it. Think of how your life works?

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