Charlie Munger on Idiot Bubbles, Financial Crises, and Loud Failures || Q&A Transcript (2009)
"If sin and folly get punished," said Munger, "we’re in for a hell of a punishment."
In the midst of the Global Financial Crisis, the late Charlie Munger shared his unvarnished thoughts on the subject with Stanford Law School professor Joseph A. Grundfest. And, as I mentioned on Friday, he pulled no punches in the process.
I don’t typically transcribe any less than a full interview, but I’m making an exception on this one for two reasons: (1) The official video from Stanford itself focuses only on the GFC portion of their discussion; and (2) the full transcript published in Stanford Lawyer is more than a little iffy. While it contains more questions and answers than in the official video (and the below transcript), it seems to commit the cardinal sin of omitting portions of Charlie’s remarks and, in some cases, even changing his words.
I highlighted a couple of these discrepancies in the footnotes, but almost all of Charlie’s answers were edited, switched, combined, or otherwise changed in some manner. They don’t significantly alter the meaning — in one case, swapping the word “bonkers” for “insane” — but it is always worrying when the video footage does not match the printed transcript.
One of my main aims with these transcripts is to preserve the exact words and ideas of Warren Buffett, Charlie Munger, and others, so I transcribed his actual, verbatim answers from the official Stanford video of this interview.
And, please, if anyone has the full video — with Charlie’s comments on psychology in economics, Ponzi schemes, and China — send me a copy and I’ll transcribe that, too!
Charlie, you’ve often complained that accountants are the root of much evil and, also, even more folly. As we look at the current situation that we have in our financial markets, how much of the responsibility would you lay at the feet of the accounting profession?
Here, I am a voice in the wilderness. I would argue that a majority of the horrors we’ve faced would not have happened if the accounting profession were organized properly. In other words, they have a position from which if they behaved intelligently and correctly, they could prevent a huge amount of all that’s wrong with the system. And they fail utterly time after time after time. They are way too liberal in providing the kind of accounting the financial promoters want.
So, in other words —
They’ve sold out — and they do not even realize that they’ve sold out. Which, of course, is a common human psychological phenomenon. You squelch by denial what, if you recognized, would make you think ill of yourself or would interfere with your income. So, on a subconscious level without any malevolence, the accounting profession [is] behaving in a way that makes… Well, compared to what could reasonably be with intelligence and honor, the accounting profession is a sewer.