Full transcript of “Charlie Munger: Avoid These Awful People Who Will Wreck Your Life And Career”. Click a timestamp to open the video at that moment. Need another video? Use the YouTube transcript generator.
0:00 But there's so many wonderful people out there and there's so many awful people out there and there are certain and there's signs frequently like flags particularly over the awful people and generally speaking those people are to be avoided. It just the amount of misery you bring into your life by trusting some awful person and the amount of felicity that you can bring in by making the right business associations. Look around this room and there's some wonderful people who have created some wonderful businesses and their customers can trust them, the employees can trust them, uh the problems can trust them to to to be fairly faced and reasonably solved.
0:46 Those are the kind of people you want to and and people will take their promises seriously. Uh I uh had some experience recently with a company and they have their brand on a particular product and somebody invented a better product in the same field and they're taking their brand off their their product. If it isn't the best, they don't want their brand on it. Uh people who think like that frequently do very well in business and and the flags are flying. I mean the it's like they got a sign in the chest that just says jerk jerk jerk and then Yeah. And then you think you're going to buy the business and they aren't going to be a jerk, you know, anymore. I mean it
1:34 right. Opportunity cost is a is a huge filter in life. If you've got two suitors who are really eager to have you and one is way the hell better than the other, you do not have to spend much time with the other. And uh and that's the way we filter stock buying opportunities. Our ideas are so simple people keep asking us for mysteries when all we have is the most elementary idea. Yeah. The first first filter we probably put it through is whether we think whe and we know instantly I whether it's a business we're going to understand and whether it's a business that
2:22 if it passes through that it's whether a company can have a sustainable edge you know and that gets rid of a very significant percentage of the things people have they always want to tell you some story or anything and I'm sure they regard regard me and Charlie as very arbitrary in terms of, you know, in middle of the first sentence saying, "Well, you know, we appreciate the call, but we're not interested." I mean, they, you know, they just think if they explain something enough, I get letters on this all the time. And but we we really can tell in the middle of the first sentence usually whether those two factors exist. And if we can't understand it, obviously, it's not going to have we can't make a decision as to whether it has a sustainable edge. And if we can't
3:08 understand it, we very often can come to the conclusion that that it's not the kind of business where it will have a sustainable edge. So 98% of the conversations we can we can end, you know, in the middle of somebody's first sentence, which of course goes over very big with the caller. But and then sometimes if you're talking about an entire business, we can tell by we can tell by who we're dealing with whether a deal is ever going to work out or not. I mean, it's it uh if there's an auction going on, we don't want to we have no interest in talking about it. And and uh uh it it just isn't going to, you know, it isn't going to work. If someone is interested in essentially doing that with their business, you
3:54 know, they're going to sit down and want to renegotiate everything with us all over again after the deal is done and we're going to have to buy the business two or three times before we get through it. You just you just see all these things coming and uh uh on the other hand, we've had, you know, terrific experience basically with the people we we have associated with. So, it works. It's efficient. you know, we don't want to listen to stories all day and uh we don't read brokerage reports or anything of this sort. It's just it there just there's other things to do with your time. Charlie, yeah, another filter that Warren was alluding to is this concept of the quality person. And of course, most people define quality person as somebody very much like themselves.
4:40 Yeah, but identical actually is the word we were searching for. You have both talked today about the shrinking universe of stocks you could purchase, less margin of safety than ever and a higher opportunity cost. And you've also talked about looking to uh potentially purchase your great companies that you already have at reasonable prices. And so I wonder if by talking so positively about some of your stocks, in particular Disney, um such as in the 95 annual report when you talked about actually um telling everyone that you were buying more shares on the open market and again at the 97 meeting uh at their meeting when you talked about uh maybe not selling the shares. Those were both opportunities maybe when Disney may
5:27 have dropped because of such things as increased debt or even people's concerned about the oitz compensation package. And I just wonder if uh that may hurt your ability to buy these great companies at reasonable prices by talking so positively about them when in fact maybe you could buy them at lower prices when people get irrational. Yeah. You're saying that which I probably agree with that if we would say the world is going to hell at Coke or Disney or Gillette, we might be better off in terms of being able to buy more stock. Uh, you know, I got asked a question at Disney and I answered it and that that's my general approach that I think it's I think it's usually a bad mistake to to to sell your interest in wonderful businesses. I don't think people find them that often and I think they they
6:13 get hung up if they've sold them at X that they want to buy them back at 90% of X or 85% of X. So, they'll never go back in at 105% of X. I just I I think on balance if you are in a business that you understand and you think it's a really outstanding business that the presumption should be that you just hold it and don't worry and if it goes down 25% in price or 30% in price if you have more money available buy more and if you don't you know so what just look at the business and and judge how it's doing. uh uh but there's no question I mean we don't we try not to talk very much about about the businesses except maybe to use them as an illustration in a teaching mode or something of this sort we're not touting anything and I did try to stick those precautions in when I do talk about them as being
6:59 wonderful businesses so people don't take it as a unqualified buy recommendation or something of the sort but we're not we we won't try and put any spin on any on when we're talking about business generally we may not talk about them at all. Uh, you know, if we're buying something, we're we're we might be that particularly if no one knows that we've been in that stock at all, we might be somewhat uh quiet about the fact, but uh um we don't we don't want to we don't want to talk down something in order to buy it. trying I always Jerry Newman as I understand it didn't like Ben Graham giving all these courses explaining what Newman and Graham were doing and uh but Graham's attitude was
7:45 that he was a professor first and if he made just slightly less money by being very accurate in what he taught well so be it and I think it's fair to say that Warren has assimilated a bit of that ethos and uh I think it's all to the good and if it costs us a tiny little bit of money from time to time, they're probably compensating benefits. And if there aren't, it's probably the right way to behave anyway. Charlie, if you were in a less charitable mood, I point out I didn't behave that way till I got rich. Actually, I I used to teach a course at at what was then the University of Omaha, and we used all these current examples, but and things were so cheap there, but nobody paid any attention.
