Munger @ Daily Journal AGM: Part 1

Buying stocks in frenzy
In fact, what a lot of shareholders actually do is crowd in buying stocks on frenzy - frequently on credit - because they see that they're going up. And, of course, that's a very dangerous way to invest. I think that shareholders should be more sensible and not crowd into stocks and buy them just because they're going up and they like to gamble.

New brokerages luring amateurs
Well, it's most egregious in the momentum trading by novice investors lured in by new types of brokerage operations like Robinhood. I think all of this activity is regrettable. I think civilisation would do better without it.

You'll remember that when the first big bubble came, which was the South Sea bubble in England back in the 1700s, it created such havoc eventually when it blew up that England didn't allow hardly any public trading and securities of any companies for decades thereafter. It just created the most unholy mess.

So, human greed and the aggression of the brokerage community create these bubbles from time to time. And I think wise people should just stay out of them.

Is value investing old-fashioned? What about passive investing?
Value Investing will never go out of style. Because value investing - the way I conceive it - is always wanting to get more value than you pay for when you buy a stock. That approach will never go out of style.

Some people think that value investing is you chase companies that have a lot of cash and they're in a lousy business or something. I don't define that as value investing. I think all good investing is value investing. It's just that some people look for value in strong companies and some look for value in weak companies. Every value investor tries to get more value than he pays for.

What is interesting is that in wealth management, a lot of people think that if they have a hundred stocks, they're investing more professionally than they are if they have four or five. I regard this as insanity. Absolute insanity.

I find it much easier to find four or five investments where I have a pretty reasonable chance of being right that they're way above average. I think it's much easier to find five than it is to find a hundred.

I call it deworsification - which I copied from somebody. I'm way more comfortable owning two or three stocks which I think I know something about and where I think I have an advantage.

Wisdom behind holding banking stocks
Well, I think all stocks can fluctuate. I do think banking run intelligently is a very good business. But, a very wise man said on an earlier occasion: The trouble with banking is that we have more banks than we have bankers.

The kind of executives who have a Buffett-like mindset and never get in trouble are a minority group, not a majority group. It's hard to run a bank intelligently. There's a lot of temptation to do dumb things which will make the earnings next quarter go up but are bad for the long term. And some bankers yield to the temptations. It's difficult, but it's not impossible investing in bank stocks successfully.

Future of banking/Bitcoin
Well, I don't think I know exactly what the future of banking is and I don't think I know how the payment system will evolve. I do think that a properly run bank is a great contributor to civilisation and that the central banks of the world like controlling their own banking system and their own money supplies.

So, I don't think Bitcoin is going to end up as the medium of exchange for the world. It's too volatile to serve well as a medium of exchange. It's really kind of an artificial substitute for gold, and since I never buy any gold, I never buy any Bitcoin. I recommend that other people follow my practice. Bitcoin reminds me of what Oscar Wilde said about fox hunting. He said it was the pursuit of the uneatable by the unspeakable.

How to learn about business
...The Harvard Business School, when it started out way early, they started out with a history of the business. They'd take you through the building of the canals and the building of the railroads and so on and so on. You saw the ebb and flow of industry and the creative destruction of the economic changes and so on. It was a background that helped everybody. And, of course, what I'm saying is that if I were teaching business, I would start the way Harvard Business School did a long time ago.

I think they stopped because if you taught that course, you'd be stealing the best cases from the individual professors of marketing and so on and so on. And I just think it was academically inconvenient for them. But, of course, you should start out by studying the history of capitalism, how it worked, and why before you start studying business. And they don't do that very well - I'm talking about the business schools.

If you stop to think about it, business success long term is a lot like biology. And in biology, what happens is the individuals all die, and eventually, so do all the species. Capitalism is almost as brutal as that. Think of what's died in my lifetime. Just think of the things that were once prosperous that are now in failure or gone. Whoever dreamed when I was young that Kodak and General Motors would go bankrupt. You know, it's just, it's incredible what's happened in terms of the destruction. Of course, that history is useful to know.

Munger's method of learning
I think I had the right temperament. When people gave me a good idea and I could see it was a good idea, I quickly mastered it and started using it for the rest of my life. You'd say that everybody does that in their education but I don't think everybody does. It's such a simple idea.

Without the method of learning, you're like a one-legged man in an ass-kicking contest. It's just not going to work.