Charlie Munger (Berkshire Hathaway Vice Chairman) – Interview re (Feb 2022)

Chapters

Abstract

The Evolving Investment Landscape: Munger’s Perspectives on Technology, Inflation, and Global Challenges



In the shifting sands of the global economy, Charlie Munger, the seasoned investor and vice chairman of Berkshire Hathaway, offers insights that span a range of critical issues. From Berkshire’s increasing embrace of technology, notably its investment in Activision Blizzard, to concerns about inflation, cryptocurrency, and the geopolitical complexities of the Russia-Ukraine conflict, Munger’s perspectives provide a comprehensive overview of today’s investment landscape. His viewpoints on Apple’s robust position, the dangers of short-term trading, and the ethical implications of wealth inequality and vaccination debates, further illuminate the multifaceted challenges and opportunities facing investors and societies alike.

Berkshire’s Tech Embrace and Activision Blizzard’s Significance:

Once averse to tech investments, Berkshire Hathaway, under Munger and Buffett’s guidance, now sees nearly half of its portfolio in tech, including significant stakes in Apple, Amazon, and Verizon. This shift, reluctantly adopted due to the evolving market landscape, is epitomized by the investment in Activision Blizzard. While not deeply engaged in this particular decision, Munger believes gaming is here to stay and appreciates the work of CEO Bobby Kotick, considering him one of the reasonable people in the industry.

Apple’s Dominance and Loyalty:

Munger reserves special praise for Apple, considering it one of the world’s strongest companies, buoyed by intense customer loyalty and exceptional management. This endorsement underscores the company’s unique market position and Berkshire’s confidence in its continued success.

Inflation: A Historical and Present Threat:

Drawing parallels with historical episodes like the Roman Republic and Weimar Germany, Munger highlights inflation as a grave long-term risk to democracies. He cautions against its potential to erode middle-class savings and precipitate social unrest, a scenario historically exploited by demagogues.

Federal Reserve’s Pandemic Response:

On the Federal Reserve’s response to COVID-19, Munger acknowledges the necessity of substantial money creation, albeit with reservations about its unintended consequences, such as labor shortages in various sectors.

Geopolitical Tensions and the Russia-Ukraine Conflict:

Regarding the Russia-Ukraine situation, Munger expresses concern over its unpredictability and the universal detriment it poses, advocating for a peaceful resolution to the conflict.

Cryptocurrency: A Harsh Critique:

Munger’s take on cryptocurrency is unequivocally negative. He condemns it as a tool for criminal activities and a threat to societal stability, advocating for a complete ban akin to China’s approach.

The Perils of Short-Term Trading:

Criticizing platforms like Robinhood, Munger warns against the dangers of short-term trading, equating it to gambling and detrimental to the economy’s health and the integrity of capital markets.

Investment Wisdom: Long-Term Focus:

Munger advises investors to prepare for currency devaluation over the next century and to invest in long-term, productive enterprises rather than succumb to short-term speculative trends.

Wealth Disparity and Societal Envy:

The pandemic’s amplification of the wealth gap, with the richest individuals significantly increasing their fortunes, is a concern for Munger. He suggests personal and societal efforts to mitigate envy, a natural but potentially destructive emotion.

Berkshire’s Strategic Shifts:

Berkshire Hathaway’s recent sale of healthcare stocks and investment in Chevron reflect a strategic focus on stability and safety, a response to the unpredictable nature of pharmaceutical successes and the broader market uncertainties.

Pandemics: Historical and Modern Responses:

Munger draws a parallel between the 1919 flu pandemic and COVID-19, noting the significant economic and societal impacts of both. He expresses frustration with the anti-vaccine sentiment, advocating for mandatory vaccinations based on their proven benefits and safety.

Canadian Trucker Protests and Corporate Governance:

The recent trucker protests in Canada receive Munger’s disapproval, marking a departure from the traditionally peaceful U.S.-Canada relations. Furthermore, he underscores the efficiency of Berkshire Hathaway’s governance, emphasizing the efficacy of remote communication and decision-making within the company.

Munger’s Views on Vaccinations:

Munger believes vaccinations should be mandatory. He emphasizes their safety and effectiveness, considering the anti-vaxxer movement a significant form of ignorance.

Munger’s Perspective on Canadian Truckers:

Munger disapproves of the Canadian trucker protests, expressing disappointment in the disruption caused. He highlights the historically peaceful relationship between the United States and Canada and views the protests as an aberration.

Berkshire Hathaway’s Annual Meeting:

The upcoming annual meeting will be held in person in Omaha, with Munger, Buffett, and Vice Chairman Greg Abel in attendance, emphasizing the importance of younger generation representation in leadership.

Buffett and Munger’s Communication:

Munger reveals that he and Buffett communicate more frequently over the phone than in person, citing the efficiency of conducting board meetings and making decisions through consent minutes and phone calls, a model that he believes the rest of the world is catching up to.

In conclusion, Charlie Munger’s broad-ranging insights offer a unique perspective on the current investment landscape, highlighting the challenges of adapting to technological advancements, the complexities of global geopolitics, the ethical considerations of wealth distribution, and the societal implications of health and economic policies. These reflections not only underscore the depth of Munger’s experience but also offer valuable lessons for investors and policymakers navigating an increasingly interconnected and dynamic world.

Notes by: WisdomWave