Hello, everyone, and welcome back to Yahoo Finance Live. I'm Alexis Christoforous, here with Karina Mitchell. Berkshire Hathaway's number two, Charlie Munger, about to speak at the Daily Journal's annual meeting in Los Angeles. Munger, of course, is the chairman of the board of the Daily Journal, and he'll also be taking shareholder questions. Karina, you know, normally, hundreds of investors from all over the country attend this meeting to hear Charlie. Yeah, absolutely, Alexis. This year, due to COVID, the meeting is being held at the Daily Journal's downtown offices in L.A. It's one of those rare appearances where you get to hear Munger speak candidly about the markets and the economy. Without further ado, let's go straight to L.A. to hear from Charlie Munger and Daily Journal President and CEO, Gerald Salzman. Gentlemen, thank you so much. Charlie, the floor is yours. Charlie, the floor is yours. The sole business of the meeting is to elect four directors. Munger, Conlin, Mary Jo Rodriguez, and John Frank. We have the proxies. We have the inspector of elections. We have everything here. That is now done. The Daily Journal's formal business is over. Now we're going to answer questions in the tradition that's common to both the Daily Journal and Berkshire Hathaway. You're on for the first question. CNBC, and I've been collecting shareholder questions. We'll go through as many as we can over this period. Charlie, Jerry, we wanted to start with questions that were very specific to the Daily Journal first. First question comes in from someone who asked to remain anonymous, but the first part of the question is: how does the Daily Journal plan to handle its investment portfolio after Charlie steps back? Charlie, I think you should answer that. Well, I'll handle it as long as we can, and when I'm gone or sufficiently impaired, we'll get somebody else to do it. The second part of that question is, what are the reasons for Jerry and Peter Kaufman leaving the board? Well, we are going to have to make changes in the future because our Jerry and I are so superannuated. Peter didn't wanna do it anymore, and that's all we have to say. The next question comes in from Sarah Anderson. Again, these succession questions, I did receive several of them, so I just wanted to follow up with this one. She asks: what is the current Daily Journal's management succession plan, and who will be in charge after Mr. Salzman's retirement? Well, our long-term plan is to replace both Jerry and I because he's 83 and I'm 98. Obviously we have a succession planning to do in the near future, and we'll do it as fast as we can. The next question that comes in is from someone who says he's a concerned shareholder. His name is Frankie Lam. He says, "I noticed that our company is using margin debts to purchase overseas securities, and the overseas security is not reported in the SEC filing. As a shareholder, am I entitled to know what overseas security we own on margin? Thank you for taking my question. Well, the practice at Daily Journal and Berkshire is the same. We disclose what we have to under the rules 'cause we don't want people to know what we're buying and selling. We tell everybody what we have to under the rules, and we keep it confidential until then. That's our system. This question comes in from Daniel Knig. He says, "I am a small retail shareholder from Austria, and I have basically only one question. In the latest 10-Q, our company stated that Journal Technologies serves 30 states in the United States. On the website and all the other older 10-Q and 10-Ks, it said that JT serves 42 states. I just wonder what is the reason for the decline. I'd appreciate any explanation." I'd appreciate any explanation. Jerry, you take that one. The reason for the decline, to a certain degree, is several years ago, we decided not to support a very old legacy system which had a number of smaller agencies in addition to a number of larger agencies. As we expected, many of the smaller agencies decided not to go to our main system, which we call eCourt, e-Systems, eProbation, eProsecutor, and eDefender. That's the reason, the decline in those numbers. By the way, other software companies avoid obsoleting a system because they lose some business. We want the customers to have the more modern system. A related follow-up question on that comes from Jim Mitchell in Costa Mesa. He says, "Who are your principal competitors in supplying software to court systems, and do you have a guess as to who has what market share? Well, Journal Technologies has the big share, and the rest is scattered. Now, I mean Tyler Technologies has the big market share. Jim Hall writes in and says, "Mr. Munger, I've been a shareholder of the Daily Journal for over 20 years and appreciate the quality of the management and the employees in developing the business. In the annual report, you noted that the prospects in software now seem especially interesting. Would you care to expound on that thought? Well, I'm glad to. What's interesting is that the courts of the world have been in the Stone Age, and there's no reason why lawyers should go down through heavy traffic and wait for some little motion. It should all be done on Zoom and so forth. The filing should be done electronically. So, what there is is a huge market for the automation of the courts, and it's early. That's the good news. It's a big market. The bad news is it's a slow, damn tough way to grind ahead in software because it's very bureaucratic. RFP, government bodies, and it's just a huge market, and it's intrinsically gonna be very slow to get done. That's the good news and bad news. We have a huge market, and it's gonna be slow and bureaucratic. Okay. The next question comes in from Tom Seymour. It's going to happen. to happen. There's no doubt about what's gonna happen. The courts are gonna get more efficient and get with the modern world. Also the district attorneys' offices and the probation offices. The next question comes from Tom Seymour. He writes in, "In January, Jeff Gundlach was quoted, 'China is uninvestable, in my opinion, at this point. I've never invested in China long or short.' Why is that? 'I don't trust the data. I don't trust the relationship between the United States and China anymore. I think that investments in China could be confiscated. I think there's a risk of that.' End quote. Obviously, with a significant percentage of the Daily Journal's marketable securities invested in BYD and Alibaba, you feel differently. Please explain why you are right. Well, of course, only the future knows who's gonna be right. China is a big, modern nation. It's got this huge population and this huge modernity that's come in the last 30 years. We invested some money in China because we could get more value in terms of the strength of the enterprise and the price of the security than we could get in the United States. Other people, including Sequoia, the leading venture capital firm in the United States, have made the same decision we have. I'm sympathetic to Gundlach. If he's nervous, he doesn't have to join us. Different folks have different opinions. I feel about Russia the way he feels about China. I don't invest in Russia, so I can't criticize Gundlach's point of view. It's just I reach a different conclusion. Okay. This question comes in from Bill Roberts. He says, "Charlie, you and Warren have been making concentrated investments since the 1950s. Many of these investments have led to gains, but even more impressively, none of them have led to significant losses. As far as I can tell, neither one of you has lost more than a few percentage points of equity on any single investment. Daily Journal has recently bet a large amount of its capital on Alibaba and foreign-traded stock. It's also taken on an additional $40 million in margin debt to make these investments. What makes you so sure that these investments won't lead to a substantial impairment of Daily Journal's equity capital, which would impact the company's ability to reinvest the resources needed to develop the company's software operating business? Well, of course, if you invest in marketable securities, you have the risk that they'll go down, you'll lose money instead of make it. If you hold a depreciating currency, that's losing purchasing power. On balance, we prefer the risks we have to those we're avoiding, and we don't mind a tiny little bit of margin debt. I got lots and lots of questions on Alibaba. That was the one question that I received more than any other, so I'll dig a little deeper through some of these. Someone named Vishal Patel from Toronto wrote in and said that, "As a Daily Journal owner, do we own local shares of Alibaba? Does that actually give us legal ownership of that business, or do we have a variable interest, and is that the same? Net-net, what do we own?" I did get a series of questions related to that same sort of thought. When you buy Alibaba, you do get a sort of a derivative. Assuming there's a reasonable honor among civilized nations, that risk doesn't seem all that big to me. Got a lot of questions just about the investing in China risks, and I'll ask this one from Ravi Mehta. He's interested in your take on China and Chinese stock exposure for the long term. He says it's becoming quite evident that Chinese companies could be banned from doing business in the Western world or maybe some of the Eastern countries too, because of the number of the following reasons. One, the security threat issues. Two, the potential conflict over Taiwan. Three, inability to meet Western accounting standards. And number four, human rights issues. Considering all of the risks mentioned above, why would anyone as smart as Munger or Buffett consider investing in China or any of the Chinese companies? Well, we did it for a very simple reason. We got more strength per dollar invested. In China, the companies we invest in are stronger relative to their competition and priced lower. That's why we're in China. This one came in from Waseem. He said, "Although the financials seem strong, do the political pressures from the Chinese government worry you, at all? Well, the Chinese government is worrying all the capitalists in the world way more than it used to, and of course, we don't like that. We wish that China and the United States got along better. If you stop to think about it, think about massively stupid both China and the United States have been to allow the existing tensions to arise. What bad is ever gonna happen to China or the United States if we two are close, if we make good friends out of the Chinese and vice versa, who in the hell is ever gonna bother us? Of course, we should make friends with China, and of course, we should learn to get along with people who have a different system of government. It. We like our government because we're used to it, and it has advantages of personal freedom. China could never have handled its life with a government like ours. They wouldn't be in the position they're in. They had to prevent 500 million or 600 million people from being born in China. They just measured the women's menstrual periods when they came to work and aborted those who weren't allowed to have children. You can't do that in the United States, and it really needed doing in China. They did what they had to do using their methods. I don't think we should be criticizing China which has terrible problems because they're not just like the United States. They do some things better than we do. They should like us, and we should like them. I'm totally. I think nothing is crazier than people who foment resentments on either side of that one. Another shareholder named Li, L-I, wrote in and said, "How do you think the Ukraine situation will be resolved, in your opinion? Well, I have no insight that's any better than anybody else on that one. Most of these things, in the days when both parties have huge numbers of hydrogen bombs, get resolved because the alternative is so awful that even an idiot can see that the question ought to be resolved. That's the way it's worked so far, and I hope it keeps working that way. We live in the Pax Atomica. We've gotten an absence of world wars for a long time because we have these nuclear weapons. It's been a blessing to humanity, but it does make you nervous every once in a while, and it's quite irresponsible when the leaders in the modern age get over tensions over border incidents and so forth. You said that we should partner up with China. Does it concern you to see Russia partnering up with China and that relationship getting a little cozier? It's hard to think of anything that's more stupid, and both sides are doing it. The political leaders on each side are trying to make points with their own constituencies by showing how tough they are. That is massively stupid on both sides. Another question came in on Alibaba, and I know that we've covered a lot of ground on this. I'll ask it because it's slightly different. This one comes from John Mooney in Marshfield, Massachusetts. He says, "Charlie, Alibaba is a top three holding for you. It sells at a steep discount to its U.S. peers. Best comparable is Amazon, which is triple Alibaba's PE. So what discount should U.S. investors seek when buying Chinese stocks, considering the political, regulatory, and especially the ownership structure risk? Oh, and considering the fortune Berkshire made on your BYD suggestion, why doesn't Buffett buy Alibaba? Well, Warren, like many other intelligent people, likes to invest where he's personally comfortable. For some reason, I'm more comfortable with the Chinese than he is. That's a minor difference. I have all kinds of places where I'm just like Warren. I have all kinds of things where I'm not comfortable, and I just don't go near them. I think an old guy is entitled to invest where he wants to invest in. What makes you uncomfortable? What do you not do? It's okay to have some things that you just don't wanna bother with. Like crypto. I got lots of questions on that. I don't think Alibaba is as entrenched as something like Apple and Alphabet. I think the internet is gonna be a very competitive place, even if you're a big internet retailer. Charlie, crypto was another question that I got a lot of. I'll ask this one from Carl Moscatello, who says, "Crypto is a $2 trillion asset class. Are you willing to admit you missed something? Well, I certainly didn't invest in crypto. I'm proud of the fact I've avoided it. It's like, you know, some venereal disease or something. I just regard it as beneath contempt. Some people think it's modernity, and they welcome a currency that's so useful in extortions and kidnappings and so on and so on, tax evasion. Of course, the envy, everybody has to create his own new currency, and I think that's crazy too, so. I'm not having it. I wish it had been banned immediately, and I admire the Chinese for banning it. I think they were right, and we've been wrong to allow them. Perhaps this is the appropriate follow-up then. This comes from Micah Mysak, who asks, "Mr. Munger, you've been warning of the evils of cryptocurrency in the past. How do you feel about the Federal Reserve preparing to launch a central bank digital currency? Do you think that this will be beneficial or harmful to the strength and resilience of our markets? No, no, the Federal Reserve could have a currency if they want one. That would be just. We've got a digital currency already. It's called a bank account. The banks are all integrated with the Federal Reserve System. We already have a digital currency. All right, let's talk about. I like digital currencies for the United States. the broader markets. This is another question from Tom Seymour, who sent in several that were pretty good. This one, he says, "Two years ago at this meeting, you said, 'I think there are lots of troubles coming. There's too much wretched excess.' Since that meeting, we have seen something like 860 SPACs, IPOs like Rivian and Robinhood, and the GameStop phenomenon. I can't imagine you've changed your mind. I wonder what your favorite story of wretched excess is from the last year. Well, certainly the great short squeeze in GameStop was wretched excess. Certainly, the Bitcoin thing is wretched excess. I would argue that venture capital is throwing too much money too fast and there's a considerable wretched excess in venture capital and other forms of private equity. We have a stock market which some people use like a gambling parlor. The transactions of the people who love the gambling parlor aspect of the business and those who wanna make long-term investments to take care of their old age and so forth. I mean, you muddle it in one market, and it goes out of control because the stock market becomes an ideal gambling parlor activity. I don't think that ought to have been allowed either. If I were the dictator of the world, I would have some kind of a tax on short-term gains that made the stock market very much less liquid and drove out this marriage of gambling parlor and legitimate capital de-development of the country. It's not a good marriage, and I think we need a divorce. How would a divorce work? Well, you'd have to have some kind of a rule that just made stocks way less liquid. We have all the real estate we want, all those shopping centers and auto agencies and so forth, without having a perfect liquid market. We would have a stock market that was way less liquid. When I was young, we had a stock market that was way less liquid, way fewer shares. When I was at the Harvard Law School, we seldom traded 1 million shares in a day. Now we trade billions. We don't need a stock market that liquid. What we're getting is wretched excess and danger for the country. Everybody loves it 'cause it's like a bunch of people get drunk at a party. They're having so much fun getting drunk that they don't think about the consequences. We don't need this wretched excess. It has bad consequences. You can argue that the wretched excesses of the twenties gave us the Great Depression, and the Great Depression gave us Hitler. This is serious stuff. We should. It's awfully hard. A lot of people like a drunken brawl. So far, those are the people that are winning. A lot of people are making money out of our brawl. Mark Lazzaro writes in with an additional question from Marcus. He said, "You mentioned we're in a big bubble. Can you elaborate on that? And how is this likely to play out? Well, I think eventually there'll be considerable trouble because of the wretched excess. That's the way it's usually worked in the past. When it's gonna come and how bad it will be, I can't tell you. Mike Branch from Buchanan, Michigan, writes in and he says, "Charts, technicals, momentum, and AI seem to dominate the market these days. Are old-school Benjamin Graham valuation methods dead? They'll never die. You can't. The idea of getting more value than you pay for, that's what investment is. If you wanna be successful, you have to get more value than you pay for. It's never gonna be obsolete. Now, you can get a whole body of people that don't even know what they're buying. They just quote quotations on the ticker. I don't think it's helpful to have. Think of the past crazy booms and how they worked out, the South Sea Bubble, the bubble in the late twenties, so on and so on. We've had this since the dawn of capitalism, we've had crazy bubbles. Leonard Makowski writes in. He says he's a mechanical engineer from Germany. He said the last year has been challenging for him because he started working full-time while raising a four-year-old, finishing his PhD, and supporting his wife for her state examination. He said it really helped him stay rational, humorous, and cheerful by listening to your interviews, speeches, and questions and answers on a daily basis. He wants to thank you for being such an insightful, generous, straightforward, and honest speaker. His question is, do you think it's likely that we will experience a major increase in interest rates in the upcoming decades, like for example, in the period between 1950 and 1980? Well, that of course is a very intelligent question and a very difficult question. When you print money on the scale what modern nations are printing it, Japan, the United States, Europe, et cetera, we're getting into new territory in terms of size. The Japanese bought back not only a lot of their own debt, but a lot of their common stocks. So the Federal Reserve System, you can't imagine how much money printing Japan has done. They haven't had all that much inflation and they, it's still a very admirable civilization. In fact, you could argue that Japan is one of the more admirable civilizations in the whole world. In spite of all this very extreme government money printing they've done, they haven't had terrible consequences. Now, they've had 25 years of stasis with living standards not improving very much. I don't think that came from their macroeconomic policies. I think that came from the rise of tough competition for their export powerhouse from China and Korea. At any rate, it's weird what's happening, and nobody knows for sure how it's gonna work out. I think it's encouraging that Japan can print as much money as it has and remain as civilized and calm as admirable as it has. I hope to God, the United States has similar happy outcome. I think the Japanese are better adapted for stasis than we are. I think it's a duty-filled, civilized bunch of people. A lot of them older, not many young people, and they just suck it in and cope. In our country, we have terrible tensions. It's way harder to run a country which is not mono-ethnic like Japan. There's some professor at Harvard that has written extensively on this subject. It's way harder to run a nation like the United States with different ethnicities and groups and so forth than it is to run Japan. Japan is basically sort of a mono-ethnic civilization, which is proud of its ethnicity. Of course, they can cope with troubles better than some other people can. Charlie, Steve Kospel writes in- Look, we don't know where we're going. There's never been anything quite like what we're doing now. We do know from what's happened in other nations, if you try and print too much money, it eventually causes terrible trouble. We are closer to terrible trouble than we've been in the past, but it may still be a long way off. I certainly hope so. Me too. Steve Kospel writes in on this same subject. He says, "What are your current thoughts on the inflationary environment? And please compare and contrast it to the 1970s. When Volcker, after the 1970s, took the prime to 20% and the government was paying 15% on its government bonds, that was a horrible recession that lasted a long time and caused a lot of agony. I certainly hope we're not going there again. I think conditions that allowed Volcker to do that without any interference from the politicians were very unusual. I think in 20/20 hindsight, it was a good thing that he did it. I would not predict that our modern politicians will be as willing to permit a new Volcker to get that tough with the economy and bring on that kind of a recession. I think the new troubles are likely to be different from the old troubles. This is related. These are all- You may wish you had a Volcker. You may wish you had a Volcker-style recession instead of what you're gonna get. The troubles that come to us could be worse than what Volcker was dealing with, and harder to fix. Like what? Have you thought that out? Well, think of all the Latin American countries that print too much money. They get strong men and so forth. That's what Plato said happened in the early Greek city-state democracies. One person, one vote, a lot of legality, and you get demagogues, and the demagogues lather up the population, and pretty soon you don't have your democracy anymore. I don't think that was a crazy idea on Plato's part. I think that accurately describes what happened in Greece way back then, and it's happened again and again and again in Latin America. We don't wanna go there. At least I don't. Me neither. Me neither. Um- Yeah. Charlie, I'm gonna ask a couple more of these inflation questions because it's in a similar vein, but they're nuanced, and there's slightly different aspects. This is something from Simon Jacobs, who says, "Conventional economic theory argues that excessive monetary and fiscal stimulus over the last two years has triggered the highest inflation in 40 years. Do you broadly agree with this thesis, and more importantly, do you think there will be a high economic price to pay as the Fed attempts to bring inflation back under control?" I guess the reasons for it. Well, the first part. Do you think those are the main reasons for it? Yeah, I agree with it. We've done something pretty extreme, and we don't know how bad the troubles will be and whether we're gonna be like Japan or something a lot worse. What makes life interesting is we don't know how it's gonna work out. I think we do know we're flirting with serious trouble. I think we also know that some of our earlier fears were overblown. Japan is still existing as a civilized nation in spite of unbelievable excess by all former standards in terms of money printing. Think of how seductive it is. You have a bunch of interest-bearing debts, and you pay them off with checking accounts, which you're no longer paying interest. Think of how seductive that is for a bunch of legislators. You get rid of the interest payments, and the money supply goes up. It seems like heaven. Of course, when things get that seductive, they're likely to be overused. Steven Tedder from Atlanta writes in, he had similar concerns about inflation, but he takes it a step further. He says, "How will this all play out, and what's the best advice you have for individual investors to optimally deal with the negative impact of inflation other than owning quality equities? Well, it may be that you have to choose the least bad of a bunch of options. That frequently happens in human decision-making. The Mungers have Berkshire stock, Costco stock, Chinese stock, Li Lu, a little bit of Daily Journal stock, and a bunch of apartment houses. Do I think that's perfect? No. Do I think it's okay? Yes. I think the great lesson from the Mungers is you don't need all this damn diversification. That's plenty of. You're lucky if you've got four good assets. I think the finance professors and those that sell the idea that perfect diversification is professional investment. If you're trying to do better than average, you're lucky if you have four things to buy. To ask for 20 is really asking for egg in your beer. It's. Very few people can have enough brains to get 20 good investments. This question comes in from Naresh Desai in Singapore. He says, "Can you please ask Charlie Munger which part of Berkshire Hathaway bought the Activision stake, and if Berkshire had any inkling about the likely Microsoft bid for Activision Blizzard? I've got no comment about that except that I really like Bobby Kotick, who's one of the smartest business executives I know. I do think gaming is here to stay. But there again, I'm an old man. I don't like a bunch of addicted young males spending 40 hours a week playing games on the TV. It does not strike me as a good result for civilization. I don't like anything which is so addictive that you practically give up everything else to do it. Well, then you're gonna love this next question that comes from Muhammad Mia. He says, "Longtime admirer of Charlie Munger here. Could you please ask his views on the Metaverse and the recent acquisition of Activision Blizzard? Was this something that Charlie Munger had any input on? Does he think that there is value in the Metaverse, or is this something similar to the Bitcoin and cryptocurrency hype? Well, without any Metaverse, just the existing technology of games on the Internet, Activision Blizzard and a lot of other companies have gotten very large, and some of the games are kinda constructive and social, and others are very peculiar. Do you really want some guy 40 hours a week running a machine gun on his television set? I don't. But a lot of the games are harmless pleasure. It's just a different technique of doing it. I like the part of it's constructive, but I don't like it when people spend 40 hours a week being an artificial machine gunner. That's understandable. Cass writes in a question about antitrust. He says, "Recent appointees, Lina Khan, as Chair of the FTC, and Jonathan Kanter, as Assistant Attorney General of the Antitrust Division of the Justice Department, have each pledged to follow an aggressive approach to antitrust enforcement. Do you believe there's a need for new antitrust legislation and/or more stringent antitrust scrutiny with respect to the largest technology companies? Well, I think what's happened is so important and so tied up with national strength that I'm not trying to weaken the internet companies in the United States. I like the fact that we have strong national champions that are big, strong companies, and I think other nations are proud of their big, strong companies, too. I don't think bigness is bad in the end. I don't want the whole internet to be dominated by foreign companies. I want big, strong American companies that stand well in the world. I'm not as worried about antitrust aspects of the internet. Are you worried about the aspects of antitrust breaking it down, though? Well, there's no question about they're gonna get more attacks from the present administrators than they got from the previous ones. That doesn't worry me that much, no. I don't think it'll have that much practical consequence. There's another question that came in from David Cass. I'm gonna ask it 'cause I like it. He said, "Currently, Congress is considering legislation to address the trading and ownership of individual stocks by members of Congress. What are your views on this subject? I don't think we've had big, serious moral lapses in Congress. Maybe a fairly scattered minor amount of minor miscreancy, so I'm not much worried about it. John Van Eekhout wrote in several questions, all in one email, that he's just asking about U.S. energy independence, and I'll give you some of the questions. I won't ask every one of them. He says, "Charlie, in the past, you've stated that the U.S.A. should keep all oil and gas production domestic and let the rest of the world deplete the supplies of other exporters. Do you still believe that position has merit? What's your opinion of President Biden's position on oil and gas energy production here in the U.S.A., given that he's canceled the Keystone Pipeline and is curtailing drilling on Bureau of Land Management lands? Is this just a concession to the green progressives? Will we ever have a stable supply of renewable energy, given the issues of wind power we've seen in Europe? Do you believe there'll be enough renewable electrical generation capacity to offset the use of coal and petroleum to generate electricity? Well, that's a lot to talk about. There is no question about the fact that we've got a lot of renewable energy we can get from solar and wind, and it's gotten pretty efficient and competitive. I am in favor of conserving the hydrocarbons instead of using them up as fast as possible. I'm in favor of all this new generating capacity now that it's gotten so efficient from solar and wind. If there were no global warming problem, I would be in favor of exactly what the government is now doing, which is encouraging a hell of a lot more solar and wind. I think it would be smart to do that just to conserve the petroleum. The petroleum has enormous chemical uses in fertilizers and such chemistry and so on and so on, and it's precious stuff. I don't mind having a goodly part of it that remains in the ground. It's a good place to store it. I regard the petroleum reserves of the United States about the way I regard the black topsoil of Iowa. I regard it as a national treasure. Just as I'm not in favor of sending all the topsoil of Africa down and dumping it in the ocean, I'm not in favor of using up all the petroleum as fast as possible. I love the idea of conserving the natural resources. They're all gonna be used eventually. I'm in no hurry to use them up rapidly. That is a very unusual attitude, but it's mine. I'm very encouraged by how much energy we can get that is renewable from solar and wind with modern technology. We have a huge potential of getting renewable energy that way, and I think now that it's so efficient, we ought to go ahead and do it. Global warming, I'll be very surprised if global warming is gonna be as bad as people say it's gonna be. Why? The temperature of the Earth went up, what, one degree centigrade in about 200 years. It just. That's a hell of a lot of coal and oil was burned and so forth, and it was one degree. I'm just skeptical about whether it's as bad as these calamity howlers are saying. Got another question that came in from Tom Seymour, and this one is, Berkshire recently announced plans for an in-person annual meeting. What are yours and Warren's thoughts on COVID and Omicron, both here in the United States and around the world? In terms of the Berkshire meeting, will attendees be required to show proof of vaccination to enter the arena? Well, I'm not sure that's all even been decided. We're gonna make it a real meeting if we can, and that's the current plan. What about just your thoughts on COVID? My personal guess, and it's just a guess. My personal guess is it's gonna happen. The other part of that question was just your thoughts on COVID and Omicron here in the United States, where you think the same things stand, what we've been through. If we get lucky, it'll fade away to a minor problem. How much does it kill 30,000 people a year with flu every year in the United States? Suppose it were 60,000 and it included Omicron, you know. I think we'd get used to it. Okay. Kind of in relation to COVID, this question comes in from Katya Portnaya in Westwood, Massachusetts, who says, "The pandemic has made the difference between big business and small business more clear than ever. It also made it harder for, harder than ever for small businesses to thrive. All businesses were ordered closed in some states, yet Home Depot and Stop & Shop were allowed to operate. Do you think that we will ever see small businesses have a more even playing field, or is this a never-ending spiral down the rabbit hole until there's nothing but big business left? Well, I think we will have small businesses as far ahead as you can see. If you stop to think about it, every shopping center is full of small business. Now they're not as flourishing as they were a while ago, but we're not gonna get rid of small business in the United States. In a sense, we need a big business. It makes sense to have something like Apple and Google as big as they are and serving as well as they're doing. Just as I didn't mind AT&T when it ran the whole television network, I don't mind Apple or Google being a big company. I'm not. Russell. I'm not worried about having some big companies and a lot of small ones. I think that's our system. You think it's an uneven playing field right now? The Russell 2000 is more than 15% off its all-time high right now. It's had a pretty rough go, especially in recent months. Well, I'm... If you stop to think about it, my way in life was not predicting little short-term differences between the Russell Index and the Standard & Poor's Index. I don't have any opinion about which index is better at any given time. I never even think about it. I'm always just looking for something that's good enough to put Munger money in, or Berkshire money in, or Daily Journal money in. I figure that I want to swim as well as I can against the tides. I'm not trying to predict the tides. Paul Yanni from Toronto. I expect to be suffering in the. Oh, go ahead. Well, if you're gonna invest in stocks for the long term or real estate, of course, there are gonna be periods when there's a lot of agony and other periods when there's a boom. I think you just have to learn to live through them. As Kipling said, "Treat those two imposters just the same." You have to deal with daylight and night. Does that bother you very much? No. Sometimes it's night, and sometimes it's daylight. Sometimes it's a boom, sometimes it's a bust. I believe in doing as well as you can and keep going as long as they let you. Paul Yanni from Toronto, Canada, writes in and says, "Do the great tech franchises of our day, specifically Microsoft, Apple, and Alphabet, have the same long-term durability that Coca-Cola had 30-40 years ago? Well, of course, it's a lot easier to predict who flourished in the past because we know what happened in the past. Now I wanna compare what's gonna happen in the future. Of course, that's harder. It's very hard for me to imagine. Doesn't mean it couldn't happen, but it's. I would expect Microsoft and Apple and Alphabet to be strong 50 years from now, really strong, still strong. If you'd asked me when I was young what was gonna happen to the department stores that went broke, the newspapers which went broke, and so on and so on, I wouldn't have predicted that either. I think it's hard to predict how your world is gonna change if you're gonna talk about 70, 80, 90 years. Just think. Imagine, they wiped out the shareholders of General Motors, they wiped out the shareholders at Kodak. Who in the hell would have predicted that? This technological change can destroy a lot of people. I think it's hard to predict for sure in advance. The telephone company is still with us. It's just uses a different way of doing it. Some things remain and some vanish. Charlie, Jeffrey Malloy from San Francisco writes in. He says, "Much media attention's been focused on the large numbers of Americans who've resigned from their jobs over the last year. What do you make of this trend, and what advice would you give to CEOs seeking to retain their employees? Well, this is a very interesting thing that the pandemic has given us. An awful lot of people have gotten used to not being in the office except five days a week, and I think a lot of those people are never going back to five days a week. It's amazing the percentage of people in computer science that don't want to be in the office for a normal life. They wanna do a lot of it from locations that are more convenient to them. I think a lot of that's gonna remain forever. I don't think the average corporation is gonna fly its directors around so they can sit at the same table for every meeting of the year. Maybe they'll have two meetings where the directors are together. By the way, Berkshire's directors have done that forever. The Berkshire directors have met face to face twice a year forever and done everything else on the telephone or with consent minutes, and it's worked fine for Berkshire. I don't think we needed all these goddamn meetings and airplane flights. I think part of what's happening is quite constructive, that it'll make life simpler and cheaper and more efficient. I don't think we're going back for some kinds of work. Now, on the other hand, they made the welfare so liberal with just helicoptering this money out, it was just hell to even man your restaurant so you could serve the patrons. I think we probably overdid that a little. I think Lawrence Summers is quite possibly right that we overshot a little with some of the stimulus, and it would've been smarter with to do a little less. If you stop to think about it, what makes capitalism work is the fact that if you're an able-bodied young person, if you refuse to work, you suffer a fair amount of agony. It's because of that agony that this whole economic system works. The only effective economies that we've had that brought us modernity and the prosperity we now have, they imposed a lot of hardship on young people who didn't want to work. You take away all the hardship and say, you can stay home and get more than you'd get if you come to work, it's quite disruptive to an economic system like ours. The next time we do this, I don't think we ought to be quite so liberal. What about the last part of that question where he asks, what advice would you give to CEOs who are seeking to retain their employees? Well, every CEO I know is adapting somewhat to some people who work differently than they did in the past. I think some of these changes are here forever. If your job in life is to get on a telephone and talk to other engineers all over the world while you solve problems, why do you have to do it from an office? The commutes get harder and harder with more traffic, and it's harder and harder to handle more traffic and more people. It may be a good thing that more people are gonna commute less. Denny Poland writes in with a question on compensation plans. He says, "There's many examples of public company executive compensation programs that produce misaligned outcomes for executives and for shareholders. What are some of the most important compensation-related changes investors and boards of directors could make to create a better alignment of interest between the shareholders and the management? Talking about what the economists call agency problems. If you're managing your own affairs, you're gonna be pretty efficient 'cause you're taking care of your own property. If you're working for somebody else, the truth of the matter is you care more about yourself and your future and your family than you care about the telephone company you're working for. Capitalism is efficient when the people who are making the decisions are doing it about their own property instead of just as hired employees of some, say, state-owned enterprise. That's just the way it is. It's just amazing to me how important it is to have a majority of the property of a civilization owned by somebody who's in charge of caring for it. That way the property is properly taken care of. When the Chinese went away from collectivist agriculture and let each peasant have his own plot of land and he got to keep the crop after his costs, the grain production went up 60% the first year. Now, who in the hell would want collectivist agriculture when it was that inefficient compared to capitalist agriculture? Well, the Chinese communists decided the hell with this communism when it comes to collectivist agriculture. They'd rather have the extra 60% of the grain production. they just changed the whole system. I greatly admire what they did. I think Deng Xiaoping is gonna go down as one of the greatest leaders that any nation ever had, because he had to give up his own ideology to do something else that worked better. You don't see the Catholic cardinals suddenly deciding there's no afterlife. that's what Deng Xiaoping did. He gave up his ideology, his communist ideology, in order to make the economy work better. Being an absolute ruler, he could arrange it. He brought that whole nation out of poverty and to prosperity and over the course of 30 years after he made the decision. That is a very admirable thing to have done. It was kind of a miracle. It's just amazing how well capitalism has served the communist Chinese. Deng Xiaoping said, called it communism with Chinese characteristics. He meant one-party government, but with most of the property in private hands and a fair amount of free enterprise. That's what he meant when he said communism with Chinese characteristics. I don't care what he calls it. He was right. It was a marvelous thing to have done for China. It worked wonderfully well. Of course, we shouldn't be trying to transfer more and more functions to the government. What they gave up on, we don't wanna go that way, I don't think. A shareholder named Rob writes in. He says, "How do you value Mr. Gensler and the SEC's role in protecting the integrity of the American financial system? Well, it's hard to fix. What happens, of course, is that people rationalize their own way of making a living. There's some moral compromise in most activity that people are in where they make a living, and particularly so in things like finance and wealth man-management and so forth. Of course, the people making the decisions care more about their own families than they care about the people whose money they're managing. That's just the way human beings are constructed. That means that when you hire somebody else to manage your money to take care of your old age, it's very hard to get the job done right. It's very difficult. Nowadays, every director in a big company gets $300,000 a year, and everybody thinks we've arranged all this wonderful independence. A man who needs $300,000 extra a year as a director is not an independent. The one thing you can guarantee is he'll try and stay a director. I don't think that's an ideal system, and yet I don't think there's anything easy to do about it. I just think it's hard to get things managed as well as they should be. In the early days of my life, I worked a little bit on the fringes of the motion picture industry, and I would say practically everyone sort of took advantage of the shareholders. That was just the culture. That is just deeply into human nature that people are gonna behave that way. Of course, it makes it hard to run a proper civilization. If you look at Berkshire and the Daily Journal, look at the Daily Journal Corporation. Charlie Munger, age 98. Jerry Salzman, age 83. Enormous delegations of powers to Jerry Salzman. As I say, the Berkshire Hathaway system of managing a subsidiary is just short of abdication. Look at how well it's worked. Of all the newspapers in the United States, most of them are going out of business. The Wall Street Journal will survive. The New York Times will survive. The digital newspaper of Thomson Reuters will survive. Most of the other newspapers are gonna go out of business. Yet, in that climate, this little Daily Journal Corporation is. One business is dying, and we have all this liquid wealth and marketable securities, and we got another business that we're trying to make into a respectable big business. It's quite an achievement. If there were 500 newspaper companies, there may be two or three that have had a result like that. Look at how old the people are that have done it. Neither Gary nor I ever took one penny out of the Daily Journal in all the years we worked here. No director's fee, no president's fees, no expenses, no nothing. Jerry's been a miracle wearing five, six different hats at once and so forth, doing everything, and very little cost. Berkshire has, like, 30 people in headquarters who aren't internal auditors. Look at how well Berkshire's done. It's hard to run a bureaucracy that doesn't get terrible slowness and terrible waste and terrible ponderousness. I don't know how to. It's a very serious problem. Just imagine. Think of the big bureaucracies that have died. U.S. Steel, Eastman Kodak, Federated Department Stores, Sears, Roebuck. Yet some things have come through and survived. In some cases, the whole business had to die, and they had to take the capital out, and we owned new businesses just to survive. That's what Berkshire did. Look at the three companies that Berkshire had. They all went out of business. Yet we wrung enough money out of them before they died. Berkshire now has more audited net worth on its balance sheet than any other corporation in the United States. Now, that's weird. We don't have this bureaucracy that other places have. There isn't anybody at headquarters to be bureaucratic. Just a little handful of people are running an empire. I don't think there's any chance that the rest of the world is gonna be like Berkshire. I think we were kind of a fluke that lasted for a while. The Daily Journal is a mini Berkshire. What are the chances that a little fleabit newspaper in Los Angeles would be as prosperous as it is after all this trouble, which is making all the other newspapers go broke? By the way, we're gonna miss these newspapers terribly. Each newspaper, all those local monopolies, was an independent bastion of power. The economic position was so impregnable, they were all monopolies, that and the ethos of the journalist was to try and tell it like it is. They were really a branch of the government. They called them the fourth estate, meaning the fourth branch of the government. It arose by accident. Now about 95% of the rest is gonna disappear and go away forever. What do we get in substitute? We get a bunch of people who attract an audience because they're crazy. I have my favorite crazies and you have your favorite crazies, and we get together and all become crazier as we hire people to tell us what we want to hear. This is no substitute for Walter Cronkite and all those great newspapers of yesteryear. We have suffered a huge loss here. It's nobody's fault. It's just the creative destruction of capitalism, but it's a terrible thing that's happened to our country. Having these new journalists come in and tell the nuts on each side, the right-wing nuts and the left nuts, only what they want to hear and slant all the facts so that they hear a lot of stuff that isn't so. This is not good for our republic, and I don't have the faintest idea what to do about it. I sometimes think maybe we should have a third party. In almost every state now, doesn't matter whether the Democrats or the Republicans are in charge, they rejigger all the maps, so everybody has a safe district. Now we get these permanent careerist people with their safe districts. The only fear they have is in the primary, they face a nut who might throw them out. Every 10 years or so, the nutty rightists and the nutty leftists get together, and maybe there are 10 sane people in the California Legislature. They throw them out. One group of nuts throws out the people in the middle, and so does the other. The one thing they can both agree on is they don't want any balanced, sensible people in the legislature. This is a very peculiar kind of government. This was not our ideal when we went to democracy, but it's what has happened, and it's getting worse and worse. It's quite serious, and I haven't the faintest idea what we're gonna do about it. That was in my question. It's not good. Fix it. That would be my question. How do you fix? Well, you could have a third party. We did that once before. We got rid of slavery. Maybe we'll get a third party. There are rump sessions. There are members of Congress who have some little organization. Maybe there's 40 of them, and they say, "We're the sane core." They're half Republican and half Democrats. The problem. I welcome anything like that. We may need a new party. This thing is getting so dysfunctional, and the people hate each other so much that it's just not constructive. How would you like to have your life as full of hatred as the average state legislature? They really don't like or trust each other at all. If you took my generation after World War II, we said, "Politics stop at the water edge," and we took our enemies. Japan had marched our soldiers to death in the Bataan Death March. Hitler had killed all the Jews and also slaughtered everybody. We made our best friends on Earth practically are the Germans and the Japanese. That was a real achievement. That can you imagine our legislators as now constituted doing anything like that? No. Well, with that cheerful thought, let's go on to some other question. All right. The next question comes from John Cox. He's in Cape Cod. He says, "Mr. Munger, how do you see the value proposition of college certificates and degrees for future students and the role of the federal government in terms of increasing Pell Grants, student loans, and student debt forgiveness? Well, that's another complicated subject. Of course, one of the glories of modern civilization is modern education. The American universities have been perfectly marvelous in their achievements, and modern technical civilization has been perfectly marvelous in its achievements. We owe a lot to all the free education we provided, and we probably ought to do more of it. However, the way we're constructed, other people will—we've had a lot of for-profit educators sort of pretended to educate the people who weren't really very educatable, and they send the bills to the federal government. There's been a fair amount of disreputable private education that kind of lures people in with dreams and cheats them. That's not a creditable part of the past. We're gonna end up with more public education. Once you start a social safety net, everybody wants more and more of it. The people who have the loans, they want the loans forgiven. It gets to be a big body of people clamoring for money. Benjamin Franklin was suspicious of this. He said, "When the citizens of a republic learn they can vote themselves money, the end of the republic is near." Well, it may not be as near as Benjamin Franklin thought, but it's probably closer. We're probably closer to the end than we were 200 years ago. It is not good when everybody wants to get their money by a whole lot of government help. The goal ought to be not to need any help, not to maximize this help from the government. While we're on the subject of college, this is a question that came in, I guess in regards to some of the controversy that was kicked up. It says, "What was it specifically that prompted the idea for windowless dorm rooms? Please walk us through this decision." I guess this is in regards to your design for student housing with no windows. Well, it's very simple there. Student housing with no windows. Nobody in his right mind would prefer a blank wall in a bedroom to a wall with a window in it. The reason you take the windows out is you're getting something else from the design considered as a whole. If you stop to think about it, a big cruise ship has a huge shortage of windows and bedrooms because too many of the staterooms are either on or below the waterline or they're on the wrong side of the ship. In the very nature of things, you get a shortage. You can't change the shape of the ship. You have to do without a lot of the windows to have a ship that's functional. That's required by the laws of hydrodynamics. We get the advantage of a big ship, but it means a lot of the staterooms can't have windows. Similarly, if you want a bunch of people who are educating each other to be conveniently close to one another, you get a shortage of windows, and in exchange you get a whole lot of people who are getting a lot of advantage from being near one another, and they have to do without a real window in the bedroom. It doesn't matter. The air can be as pure as you want it, and the light that comes in through an artificial window can mimic the spectrum of daylight perfectly. It's an easy trade-off. You pay $20,000 a week or something on a big cruise ship to have a stateroom with an artificial window. For a long time on a Disney cruise ship, they had two different kinds of windows of staterooms, one with a window and one without a window. They got a higher price in rent for the one with an artificial window than they got for a real one. In other words, they've reduced the disadvantage to zero. In fact, they made it an advantage. It's a game of trade-offs. That poor, pathetic architect who criticized me is just an ignoramus. He can't help himself. I guarantee the one thing about him, he's not fixable. Of course, you have to make trade-offs in architecture. Charlie, another question came in about Costco. Ami Patel from California. "You recently talked about bubbles and high valuations in your Sohn Conference talk. Is Costco a part of that? Costco has never traded at a higher price to sales or price to earnings multiple. How should new investors think about Costco given its record run? Well, that's a very good question, and I've always believed that nothing was worth an infinite price. At some, even an admirable place like Costco could get to a price where you would say that's too high. I would argue that if I were investing money for some sovereign wealth fund or some pension fund at a 30, 40, 50-year time horizon, I would buy Costco at the current price. I think it's that strong an enterprise and that admirable a place. Now, I'm not saying I would. I can't bring myself with my habits to pay these big prices, but I never even think about selling a share of Costco just because it's selling at a high price. If you stop to think about it, I bought at Christmastime a flannel shirt, a bunch of flannel shirts at Costco. They cost $7 each, more or less. It was a soft flannel, and it was better and so forth. Then I bought pants. I think they were Orvis pants, and I paid, like, $7. They stretch around my waist, and they're partly water resistant, what have you. Costco is gonna be an absolute titan on the Internet 'cause they got curated products that everybody trusts and huge purchasing power on a limited number of stocking units. I'm not worried about it. I—I'm not saying I'm buying Costco at this price, but I'm certainly not selling any. I think it's gonna be a big, powerful company as long as—as far ahead as you can see. I think it deserves that success. I think it has a good culture and a good moral ethos and so I wish everything else in America is working as well as Costco does. Think what a blessing that would be for us all. Michael Wichterly writes in and he says, "Can you please update us, Charlie, on your view of 3G Capital and zero-based budgeting? Has your thinking evolved over the last five years? Well, of course, if you have a very rich corporation, human nature what it is, it will get a lot of bureaucracy and a lot of excess cost in it and a lot of meetings and so forth. And there's huge waste in that. In fact, a lot of the extra meetings make you worse off, not better off. You're already spending a lot of extra money. It's not that you aren't getting as much as you're paying for. It's where, many places after they've wrung out 30% of the excess cost, they run better than they did before. In other words, getting rid of the people and changing things around, it runs better, not worse. There's a lot of overmanning in big, successful places. Of course, it's human nature that people kinda relax a little when they get prosperous and so forth. I know a corporation. I have a friend who was on a corporation with headquarters in Europe, and they would fly him from Los Angeles to Europe on a Concorde. It cost them $100,000 just to take one director to Los Angeles to Germany and back. I mean, the excess just creeps into these places. Of course, it isn't good. On the other hand, you can cut too much. There should be some mercy for people who are around a long time and have served well in the past. You don't necessarily want 100% perfect efficiency. You wouldn't want a rule that nobody could ever go to some overmanned place and cut out a lot of the fat. The director's table in the Heinz Corporation costs $600,000. The goddamn director's table. The director's table in Costco cost about $300. They're different places, different ethos. Of course, if you get fat like that, somebody like 3G comes along and says, "I want to buy you and cut you back to normal." Of course, it's possible to overcut, but my guess is there's a lot of fat in our successful places. There's a lot of fat. Think of the fat on the average rich family. Charlie. So- Another question from Mike Branch, who just asked. I don't think we want unlimited fat in these places. On the other hand, we don't want too much brutality and too much. It's complicated like everything else. This other question is, what impact has passive investing had on stock valuations? What kind of investing? Passive investing. Passive. Passive investing. Oh, huge. That's another thing that's coming. We have a new bunch of emperors, and they're the people who vote the shares in the index funds. Maybe we can make Larry Fink and the people at Vanguard pope. All of a sudden, we've had this enormous transfer of voting power to these passive index funds. That is going to change the world. I don't know what the consequences are gonna be, but I predict it will not be good. All right. There's another. I think the world of Larry Fink, but I'm not sure I want him to be my emperor. Here's another question that comes in. This is a tough one, too. This is from Charles Francis, who writes, "Please ask Charlie who will fill the gap of lending to global governments after quantitative easing ends. As an example, as FOMC paper matures and rolls off their balance sheet, where will the additional money needed to run governments come from? Who's the lender, and at what expected rate? Please remember, the FOMC has also municipal debt. What's the solution? Is he talking about China or the United States? United States, I think he's talking specifically. Can you tell? United States, I think he's talking specifically. That's a big problem because the government has been living by land sales, and of course, they've had a boom. They're having to shrink that sector a little. It's, it's creating an awkward problem. In the United States, we have a hugely strong economy and a hugely strong technical civilization, and that's not going away. The knowledge and so forth. You can't believe what a modern factory looks like when you fill it with robots. That's coming more and more and more, and it's coming to China, too, for that matter. Those trends are inevitable. I don't know how it's all gonna play out, but I think it does create adjustment problems. If you have a fine unionized job, and they replace you with a robot, you've got a difficult problem. If you've got a company like Kodak and they invent something new that obsolesces your product, you have a problem, too, and you solve that by dying. A lot of people don't like that solution. I don't much care for it myself. All right, this question comes in from Peter North from Woolwich, Maine. He says, prior to the pandemic, it seemed like the U.S. was getting used to borrowing and running revenue deficits of close to 20%. There are all kinds of reasons for this through multiple administrations of either party. Now we're marching closer to the well-known demographic storm that will drive deficits still higher. He estimates that we are currently running about a 33% total deficit if you include unfunded future Social Security and Medicare obligations. Meantime, we're headed to higher interest rate costs on top of our $30 trillion in debt. Today, interest comprises 6% of our spending and the potential to double or triple interest expense is only gonna make the problem worse. How can we get the public, companies, and politicians to recognize the seriousness of this problem and begin to take action? Well, because all those problems are real, and because it's so tempting to get rid of your debt by just giving a guy a non-interest-bearing checking account where you used to have to pay him interest every month, not only do we have a serious problem, but the solution to it that is the easiest for the politicians and for the Federal Reserve, too, for that matter, is just to print more money and solve the temporary problems that way. That, of course, is gonna have some long-term dangers. We know what happened in Germany when the Weimar Republic just kept printing money. The whole thing blew up, and that was a contributor to the rise of Hitler. All this stuff is dangerous and serious, and we don't want to have a bunch of politicians just doing whatever is easy on the theory that it didn't hurt us last time, so we can double it and do it one more time, and then we double it again and so forth. We know what happens on that everlasting doubling. You will have a very different government if you keep doing that enough. You're flirting with danger somewhere, unless there's some discipline in the process. I don't regard Japan as in some terrible danger. They've done a huge amount of this and gotten by with it. I don't think we'll be as good at handling our problems as Japan is. Frank Wang from Houston writes in and says, if taxes were not an issue, what are your thoughts on going to cash today and waiting for better opportunities to deploy that cash over the next 12 months? Is it a sensible idea in your mind? In my whole adult life, I've never hoarded cash waiting for better conditions. I've just invested in the best thing I guess I could find, and I don't think I'm gonna change now. The Daily Journal's used up its cash. Now, Berkshire has excess cash, quite a bit of excess cash. It's not doing that because it knows things. It knows how to time investments. It just can't find anything it can stand buying. We don't have a solution to your problem. We're just coping with it as I've described. VJV writes in on that very point. Given the valuation and market correction in early 2020, why is Berkshire not picking up or adding any new companies to its profile? Is the management getting too conservative with M&A? Of course, kudos to the team in picking up Apple shares a couple of years back. That's paying off for sure. No. The reason we're not buying is we can't buy anything at prices we're willing to pay. It's just that simple. Other people are bidding the price up. A lot of the buying is not by people who really plan to own them. A lot of it is fee-driven buying. Private equity buys things so they can have more fees by having more things under management. Of course, it's a lot easier to buy something you use somebody else's money. We're using our own money, or at least that's the way we think of it. But we're not. By the way, it's not a tragedy that Berkshire has some surplus money they're not investing. You can argue that the little old Daily Journal, what a good thing it was we had $30 million extra coming in from a foreclosure boom, and that we invested it shrewdly. It gives us a lot of flexibility. By the way, that piled up money helps us in wooing these governmental bodies we're selling the software to. We look more responsible with the extra wealth, and we are more responsible with the extra wealth. If the shareholders who are worried about the future because it looks complicated and difficult and they're hazarding, I wanna say to them what my old torts professor said to me, Charlie. He'd say, "Charlie, tell me what your problem is, and I'll try and make it more difficult for you." He did me a favor by treating me that way. I'm just repeating his favor to you. When you're thinking the thoughts you're at least you're thinking in the right direction. You're worried about the right things, all you people that are worried about the inflation and the future of the Republic and so forth. Mickey and Michael Fontanet wrote in seeking advice for a 22-year-old. Invest in growth or monthly income from dividends. They say they have a 22-year-old brilliant young neighbor. He's achieved an internship at Tesla and GE and is currently a student at Purdue. He takes advantage of his 37 years, his neighbor's 37 years in the oil field. The neighbor takes advantage of his tech savvy and Reddit and the meme crowd. His inclination is to advise him to continually slow drip into monthly income and dividend investing as opposed to swinging for the fences in AI and growth stocks. What would you advise, sir? Well, I don't think I have a one-size-fits-all investment for. I think some people are gifted enough so they can invest in hard-to-value difficult things. Other people, I think, would be very wise to have more modest ambitions in terms of what they choose to deal with. I think you have to figure out your level of skill or the level of skill your advisor has, and that should enter the equation. To everyone who finds the current investment climate hard and difficult and somewhat confusing, I would say welcome to adult life. You're thinking the right way. Of course it is hard. It's going to be way harder for the group that's graduating from college now. For them to get rich and stay rich and so forth, it's gonna be way harder for them than it was for my generation. Think what it costs to own a house in a desirable neighborhood in a city like Los Angeles. I think we'll probably end up with higher income taxes, too, and so on. No, I think the investment world is plenty hard. In my lifetime, 98 years, it was the ideal time to own a diversified portfolio of common stocks that updated a little by adding the new ones that came in, like the Apple and the Alphabet and so forth. I'd say the people got maybe 10% or 11%, if you did that very intelligently before inflation and maybe 9% after it, 8% or 9%. That was a marvelous return. Now, no other generation in the history of the world ever got returns like that. I don't think the future is gonna give the guy graduating from college this year nearly that easy an investment opportunity. I think it's gonna be way harder. This question comes in from Steve, who says, "What worries you most about our economy and stock market? And on the other hand, what makes you optimistic? Well, you have to be optimistic about the competency of our technical civilization. But there again, it's an interesting thing. If you take the last 100 years, 1922 to 2022, most of modernity came in in that 100 years. In the previous 100 years, that got another big chunk of modernity. Before that, things were pretty much the same for the previous thousands of years. Life was pretty brutal and short and limited and what have you. No printing press, no air conditioning, no modern medicine, no. I don't think we're going to get things that were in what I call the real human needs. Think of what it meant to get. Say first you got the steam engine, the steamship, the railroad, and a little bit of improvement with farming and a little bit of improvement in plumbing. That's what you got in the 100 years that ended in 1922. The next 100 years gave us widely distributed electricity, modern medicine, modern fire drills, the automobile, the airplane, the records, the movies, the air conditioning in the South. Think what a blessing it was if you wanted five children, I mean, if you wanted six children. If you wanted three children, you had to have six 'cause three died in infancy. That was our ancestors. Think of the agony of watching half your children die. It just, it's amazing how much achievement there's been in civilization in these last 200 years, and most of it in the last 100 years. The trouble with it is that the basic needs are pretty well filled. In the United States, the principal problem of the poor people is they're too fat. That is a very different place from what happened in the past. The past, they were on the edge of starving. What happens is, it's really interesting with all this enormous increase in living standards and freedom and diminishment of racial inequities and all the huge progress that has come, people are less happy about the state of affairs than they were when things were way tougher. That has a very simple explanation. The world is not driven by greed, it's driven by envy. The fact that everybody's five times better off than they used to be, they take it for granted. All they think about is somebody else is having more now, and it's not fair that he should have it and they don't. That's the reason that God came down and told Moses that you couldn't envy your neighbor's wife or even his donkey. I mean, even the old Jews were having trouble with envy, and so it's built into the nature of things. It's weird for somebody my age because I was in the middle of the Great Depression when the hardship was unbelievable. I was safer walking around Omaha in the evening than I am in my own neighborhood in Los Angeles after all this great wealth and so forth. I have no way of doing anything about it. I can't change the fact that a lot of people are very unhappy and feel very abused after everything's improved by about 600% because there's still somebody else who has more. I have conquered envy in my own life. I don't envy anybody. I don't give a damn what somebody else has. Other people are driven crazy by it. Other people play to the envy in order to advance their own political careers. We have whole networks now that are that they wanna pour gasoline on the flames of envy. I like the religion of the old Jews. I like the people who are against envy, not the people who are trying to profit from it. If you stop to think of the pretentious expenditures of the rich, who in the hell needs a Rolex watch so you can get mugged for it? You know I mean, it's yet everybody wants to have a pretentious expenditure, and that helps drive demand in our modern capitalist society. My advice to the young people is don't go there. The hell with the pretentious expenditure. I don't think there's much happiness in it. Uh- It does drive the civilization we actually have. Jerry Miller It drives the dissatisfaction. Oh, go ahead. Steven Pinker of Harvard is one of our smart modern academics. He constantly points out how everything's gotten way, way the hell better. The general feeling about how fair it is has gotten way more hostile. As it gets better and better, people are less and less satisfied. That is weird, but that's what's happened. Jerry Miller from Hobart, Wisconsin, writes in, and he's looking back at your journey through life with Warren Buffett. He says, "What's the toughest moment you've shared with Warren, and of course, what's the very best memory you've shared during your life with him? You two seem like you are brothers by a different mother. May God continue to bestow His blessings on you. Together, you're one of the United States of America's greatest treasures, and individually, you ain't too bad either. Well, God is about to give a different kind of a blessing on Warren and me. He's gonna give us whatever afterlife there is. Of course, nobody knows anything about that. It's been a great run, Warren and I. Warren and I have had a great run, and one of the really great things about it is that we've been surrounded by wonderful people, the people we've shared in our work lives and what Jerry and I have done. This little business has been a pleasure, hasn't it, Jerry? Yes, sir. It's been a privilege to do it and a privilege to be here and so forth. We haven't had a dumb bureaucracy like a lot of other places. We've managed to cope pretty well with the problems that came to us and the opportunities too. We've been blessed. It's all old-fashioned virtue. Jerry and I don't have any secrets. We tend to get the day's work done and be as rational as we can in coping with whatever we have to cope with. That will always work for people who get good at them. Warren and I have been very fortunate and, of course, there are lessons you can learn from our. There are so many people that live surrounded by tyranny. There are a lot of bosses in the world that are absolutely impossible to be under. They're really psychotic, and you really can't do anything about it in many, many cases. Warren and I haven't had those problems. That's a blessing. Charlie, another viewer writes in, Kumar. He says, "You seem extremely happy and content. What's your secret to lead a happy life? Well, I always say the same thing. Realistic expectations, which is low expectations. If you have unreasonable demands on life, you're like a bird that's trying to destroy himself by bashing his wings on the edge of the cage, and you really can't get out of the cage. It's stupid. You want to have reasonable expectations and take life's results good and bad as they happen, with a certain amount of stoicism. There'll never be any shortage of good people in the world. All you gotta do is seek them out and get as many of them as possible into your life and keep the rest the hell out. Got a couple of questions left. This one comes from Wes Roddy in Miami, Florida. He says, "In your storied investor career, which investment did you like the most and why? And which one was a dog? Well, that's rather interesting. One of the investments that nobody ever talks about at Berkshire is the World Book Encyclopedia. I grew up on it. You know, they used to sell it door to door. That thing was they had every word in the English language graded for comprehension and a vast amount of editorial input. It was easy for a child who wasn't necessarily a brilliant student to understand that encyclopedia. It was more understandable. Berkshire made $50 million a year pre-tax out of that business for years and years and years. I was always so proud of it because I grew up with it and it helped me and so forth. Of course, I liked the $50 million a year. Then a man named Bill Gates came along, and he decided he's gonna give away a free encyclopedia with every damn bit of software in his personal computer software. Away went our $50 million a year. Now, we still sell the encyclopedia to libraries. Maybe we make a few million a year doing that. Most of the wealth just went away and all that wonderful constructive product. It's still a marvelous product. It wasn't good that we lost what World Book was doing for the civilization. I was so proud of World Book when we. Now it's just, it's pretty well gone away in terms of its worldly significance, and the money went with it. That's just the way capitalism works. It just has destruction. Some of the things you lose, you're really gonna miss, and you're not gonna replace them. I don't think these TV programs that charm our children are as good as the World Book was for them. World Book helped me get ahead in life. The people who aren't gonna read the World Book and who are hanging in front of the TV set, they're not blessed, they're cursed. Now, there are advantages, too, in to their having a television. Charlie, a final question for you. This one comes from Matt McAllister. By the way, I'm not weeping any tears that I don't have my World Book anymore. I've adjusted. I miss it, but I. This last question comes from Matt McAllister, and he says, first of all, he wants to thank you for sharing your wisdom so graciously and generously. He says, "Of the five people or so you most admire, could you please name a few so that we might become more familiar with and potentially learn from these individuals? Well, I don't have any one person that I admire. I would argue that the greatest governmental leader whose life overlapped mine was Lee Kuan Yew of Singapore. I would argue that he was the one that taught Deng Xiaoping of China how to fix China the way Singapore had fixed itself. It was a huge achievement. I've seen some remarkable. I think the Marshall Plan that my country did after World War II was a marvelous thing, and that was a credit to the human race. I've seen a lot that I'm proud of. On the other hand, I see a lot now that I'm not proud of. I don't like this crazy hatred in our party system. I don't see anything wrong with having a good-sized government safety net that goes up as GDP ca. I think we'd be crazy to be as rich as we are without a good governmental safety net. By the way, you know where that came from? Otto von Bismarck. Hmm. He was the Iron Chancellor of Germany, exercising the unlimited power of a German king. That's who gave us some of Social Security and so forth. Nobody thinks of Otto Bismarck as a great hero of democratic capitalism, but he really was. Shows how complicated life is. Strange things happen. My hero, Otto Bismarck. I've never seen Otto Bismarck's picture on an American wall. He should be there. Well, Becky, have you had enough? Yes. Charlie, wanna thank you very much for your time today. Jerry, thank you, too. Thank everybody for all the questions today. Appreciate everybody coming to the Daily Journal meeting today. This thing happened. Daily Journal meeting today. It isn't that we want to be the guru for the world or something. We used to know all the shareholders, and we felt they only come in once a year. We ought to at least stand here and answer questions. They started asking these odd questions, and we kept answering it. There was a market for it. We kept doing it. Warren and I are artificial, accidental gurus, and it. I used to be sort of bothered by it because I don't ordinarily make this many pronouncements. I've gotten used to it, and I hope you people have, too. We have. All right. I guess we're through. We are. I wanna thank everybody for coming, and we should send it back over to Corina at Yahoo Finance. Gentlemen, thank you, and thanks to everybody else out there, too. Okay. All right. Thank you so much. You've been watching Yahoo Finance's special coverage of the Daily Journal's annual meeting held in Los Angeles. If you missed any part of what was a riveting discussion, you can catch a full recap of the event at yahoofinance.com. A great conversation, Alexis. Always a treat to hear the candid remarks there from Charlie Munger. One of the key takeaways for me, a key to a happy life, have low expectations. Stick with us. Lots more Yahoo Finance Live to come right after this.