Charlie Munger Q&A Transcript || China Weekly on Stocks (2018)

"It’s basically a Confucian attitude," says Munger. "I think you have a moral duty to become as rational as you can."

On the afternoon of May 6, 2018, Charlie Munger — alongside Li Lu — met with a traveling delegation of Chinese media in Omaha for Berkshire Hathaway’s AGM. Charlie spoke at length about his admiration for the Chinese people and offered rare insights into his unique approach to both business and life.

Over the past few weeks, I transcribed (and lightly annotated) his remarks for posterity and future study.

Charlie spoke in English, but the questions (and Li Lu’s comments) were in Chinese. As a result, I’ve summarized many of the questions based on the translated captions that accompanied the video. I also used the translated captions for Li Lu’s segments.

Everything that Charlie said, though, has been transcribed by hand from the audio.

🚨 Questions from the interviewer¹ are in bold, Charlie’s comments are in plain text, and Li Lu² in italics.

A few more notes:

• Each transcript is done entirely by hand — with no AI or software assistance — so any and all mistakes are my own.

• I added footnotes with additional information at relevant points. Hopefully, these will prove useful to readers.

• The full transcript is available to all paid supporters.

Now, without further ado, here is the complete transcript of Charlie Munger’s Q&A…

---

---

Your investment theory has influenced a great number of professional investors. However, among domestic investors, there is still much misunderstanding and confusion over value investment. We hope this interview can provide some ideas and teach domestic investors some techniques to help solve their confusion.

We will help as much as we can. You ask questions and we’ll answer them.

How should investors set up the right investment philosophy — one focused on finding good opportunities and holding for the long term? Many people fail to be patient enough with their investments. How do you make your actions match up with your thoughts?

If you invest the way people gamble in casinos, you’re not going to do very well. It’s the long-term investment that works best. But if you like the action of investing — sometimes winning, sometimes losing — just like people like the action when they gamble in a casino, those people are not my people.

I like the long-term investors who figure out something that’s going to work over the long term and buy that. The sooner the Chinese people gamble less and invest patiently for the long term more, the sooner they will do better.

You’ve said that a person is either born with patience or not. Does that mean if I haven’t been born with this characteristic, that I cannot be a good investor?

The world is full of foolish gamblers and they will not do as well as the patient investors.

I think [patience] can be learned to some extent — and, to some extent, you’re born with it. There’s a saying in America, they go: “A long attention span.” They can keep their mind on a game or an activity for a long time until they’ve solved it.

The Chinese do have a long attention span — and that is a hugely desirable quality because you’re more likely to get the right answer if you think deeply and hard about a subject for a long time. It’s odd that a group of people who are so good at having a long attention span like to gamble so much, which is quite counterproductive.

You say that most of what investors see in the market are false phenomena, so how can we get to the truth?

A lot of people think there is such a thing as truth in the markets. That the market is going to tell you something just by bouncing around. That is not the way Berkshire Hathaway or Charlie Munger invests money.

We have a view as to what the intrinsic value³ is of what is being traded — and we only buy it when we think it’s worth more than we’re paying. We’re trying to make a long-term investment by waiting for something to be underpriced and then buying it. And we don’t give a damn about all of these gamblers in the market. To me, they are just so much froth. It’s a foolish way to spend your time if you want to get rich.

How long will it take the Chinese capital market — which has a history of only 30 years — to produce investment masters like you, Warren Buffett, and Li Lu?

The Chinese market is going to create a lot of successful investors. If you look at Hong Kong, which has been full of Chinese people enmeshed in a capitalist order with a good securities market, that is going to spread all over China and increase in respectability and size for decades ahead.

I anticipate that China’s securities markets and investing practices will get better and better for a long, long time. There will be fluctuations, to be sure, but the long-term trend will be toward more achievement, more respectability, and higher prices.

The Chinese who have gotten rich in Hong Kong over the last 50 years are not the short-term traders and the gamblers. It has been the long-term investors who sought out good long-term investments and stubbornly held them for long periods of time [who have gotten rich]. Just as that worked for the Chinese in Hong Kong, it will work for the Chinese on the mainland. It’s not the short-term gambling that’s good — it’s identifying the good long-term investment and sticking with it for a long time.

In your life, what is your most satisfactory investment and your most unsatisfactory investment?

My Berkshire Hathaway stock cost me $16 a share and it’s now selling for almost $300,000 a share. That’s been a very good investment. It took a long time. It was a long-term investment where I liked the people I was investing with and I liked the companies I was investing in — and I just sat there for more than 50 years. And, lo and behold, it has worked out very well. There are lots of stories like that.