Munger, Vice Chairman of Berkshire Hathaway and Warren Buffett's long-term business partner, recently spent two hours chatting with reporters from The Wall Street Journal at his home in Los Angeles. 99 year old Munger sat in his study, contemplating various issues such as index funds, cryptocurrencies, and even changes in investment methods.
Munger and Buffett are considered among the best investors in history, turning Berkshire into a giant with a stock portfolio of approximately $350 billion and a capital of $150 billion.
Q: Do you think Berkshire Hathaway will make another large-scale acquisition under your and Buffett's leadership?
Answer: There is at least a 50% chance. Venture capital has created difficulties for everyone. They raised the price higher and higher, but of course, the result was getting worse.
Q: If you were an investor who only started investing today, would you adopt a different approach from the 1960s?
Answer: The situation at that time was very different, with many of what we used to call "lagging stocks"... the asset value per share was two or three times the value of the stock per share. Ben Graham taught us to buy such stocks. This is an undervalued stock that is held for as long as it is undervalued, and then sold when the price is relatively normal before buying another undervalued asset. You could have done this for 40 years after the Great Depression of the 1930s. Now, all these easy to make trades have disappeared.
I believe that in order for modern investors to succeed, they almost have to hold a few stocks that are far above average... They will try to buy some stocks of Apple or Google because they know that a large portion of the total earnings of all common stock owners will come from these few super competitors.
Q: If you start a business today, what would you do?
Answer: I enjoy stock picking because it reminds me of hunting and fishing. You will encounter a potentially interesting new thing at any time. But I think there are fewer and fewer people who really need to be used in stock selection. In most cases, charging 3 percentage points or similar fees annually to manage others' funds is somewhat exaggerated.
Most people should not invest in any other assets except index funds. For those who are unwilling to bother and have no reason to believe that they have any advantage in stock selection, this is completely reasonable. Why did he try to choose stocks on his own? He doesn't even know how to design his own electric motor or egg beater.
Q: Have you ever been concerned that the success you and Buffett have achieved has driven the rise of the stock picking profession?
Answer: Of course I am concerned about this. I have been working hard not to cause such an impact... I am not the kind of person who uses my own money to buy a big yacht, nor am I the kind of person who goes on vacation in the Mediterranean with my own jet plane. I will not do such things.
I am not a person who spends recklessly. I prefer my less expensive lifestyle... with my wealth, who would still live in the house I built 70 years ago?
Q: The price of Bitcoin has skyrocketed again. Are you worried about this?
Answer: Of course I'm worried. I have many very simple basic concepts, and I believe that every educated person should have them. These concepts include what Adam Smith taught everyone... I call a significant increase in per capita civilization. And the reason why all of this naturally happens is simply that people love their own property more than others... In order to achieve Smith like results, you need a currency to promote exchange. In order to make this currency widely respected, the trick we use is for sovereign countries to issue currency.
As far as we know, the only way from hunting and gathering to civilization is to have a powerful currency. It can be a shell, it can be corn kernels, it can be many things. It can be a gold coin, a promise from the banking system, just like what we have in the United States and the United Kingdom, and so on.
When you start creating an artificial currency... you are throwing your stink ball into a formula that has been around for a long time and has been effective for many people.
Q: Government regulatory agencies have recently sued Amazon, claiming that it has monopoly power, while Google also faces antitrust cases. In your opinion, should the government split up any major US technology company?
Answer: I won't split them. I don't think it's that serious. They have their own niche market. Microsoft may have a good niche, but it doesn't have a global grasp. I like these high-tech companies. I think capitalism should expect several big winners to happen by chance.
Q: Have you learned anything from the books you have read recently?
Answer: I think I started from I have learned a little from everything I have read. I think one of the reasons why I have been so successful financially in my life is that I have had a particularly large reading volume since I was around six years old. If I don't read a lot, I don't know how to become smart.
Q: You once talked about the importance of psychology in investment. Do you think there are any cognitive biases that are particularly significant in today's market?
Answer: There are many cognitive biases that are very significant. One of them is that people often tend to overestimate their intelligence and skills when deciding what to do and what not to do.