Charlie Munger still isn't afraid to call it like he sees it.
The Berkshire Hathaway vice chairman and longtime business partner of Warren Buffett spent two hours on a recent morning chatting with this Wall Street Journal reporter in his home in Los Angeles. Seated in his library, the 99-year-old Munger mused on everything from index funds and cryptocurrency to how investing has changed.
Munger and Buffett, who are viewed as two of the best investors of all time, built Berkshire into a behemoth with a roughly $350 billion stock portfolio and $150 billion war chest. They will again be in the spotlight Saturday when Berkshire reports its third-quarter financial results.
Here is an edited selection of highlights from the interview:
Q: Do you think Berkshire Hathaway will make another big acquisition under you and Warren Buffett?
A: It's at least 50/50. Venture capital has made it so difficult for everybody. They keep bidding the prices up and up and up, and of course that makes the results go down, down and down.
Q: If you were starting out today as an investor, are there any things you would do differently than you did back in the 1960s?
A: Conditions were quite different then, and there were a lot of what we used to call loaded laggards.... There were two or three times as much in assets per-share value as there was in stock-market value per share. Ben Graham taught us all to buy that kind of stuff. It was underpriced, and hold it as long as it was underpriced, then sell it when the price got more normal and buy another undervalued asset. And you could do that for about four decades in the aftermath of the 1930s Great Depression. That's gone, all of that low-hanging fruit.
I think that the modern investor, to get ahead, almost has to get in a few stocks that are way above average.... They try and have a few Apples or Googles or so on, just to keep up, because they know that a significant percentage of all the gains that come to all the common stockholders combined is going to come from a few of these super competitors.
Q: If you were starting a business today, what would it be?
A: I like stock picking because it kind of reminds me of hunting and fishing. Any day you can have a new thing that might be interesting.... But I think fewer and fewer people are really needed in stock picking. Mostly it's charlatanism to charge 3 percentage points per year or something like that to manage somebody else's money.
Most people probably shouldn't do anything other than have index funds.... That is a perfectly rational thing to do for somebody who just doesn't want to think much about it and has no reason to think he has any advantage as a stock picker. Why should he try and pick his own stocks? He doesn't design his own electric motors and his egg beater.
Q: Do you ever worry that the success that you and Warren Buffett have enjoyed has contributed to the rise of the stock-picking profession?
A: Of course I worry about that. And I have tried not to be.... I'm not the guy that's using his money to buy a big yacht, who flies his own jet airplane so he can be in the Mediterranean in the season, and so on and so on.
I'm not being a big excessive spender. And I prefer my less-expensive way of life.... Who in the hell with my wealth lives in the same house he built 70 years ago?
Q: The price of bitcoin has been rocketing higher again. Is that something that concerns you?
A: Of course it concerns me. I have a lot of very simple fundamental ideas that I think every educated person ought to have. Those ideas include what Adam Smith taught everybody.... You've got a huge increase in what I would call civilization per capita. And it happened automatically just because people take better care of their own property than they take care of somebody else's property.... In order to get the Smithian results, you need a currency to facilitate exchanges. And to make the currency respected widely, the trick we've used is the sovereign issues it.
The only way to get from hunter-gathering to civilization that we know of that's ever worked is to have a strong currency. It can be seashells, it can be corn kernels, it can be a lot of things. It can be gold coins, it can be promises in banking systems like we have in the United States and England and so on.
When you start creating an artificial currency...you're throwing your stink ball into a recipe that's been around for a long time, that's worked very well for a lot of people.
Q: Government regulators have recently sued Amazon, claiming that it wields monopoly power, while Google is facing an antitrust case. In your opinion should the government break up any of the big U.S. tech companies?
A: I would not break them up. I don't consider it all that significant. They've got their little niches. Microsoft maybe has a nice niche, but it doesn't own the earth. I like these high-tech companies. I think capitalism should expect to get a few big winners by accident.
Q: Is there anything you've learned recently from the books you've read?
A: I think I learn a little something from...everything I've read. I think that one of the reasons I was as economically successful as I was in life is because I read so damn much all my life, starting when I was about six years old. I don't know how to get smart without reading a lot.
Q: You've spoken about the importance of psychology in investing. Is there a cognitive bias that you think is particularly significant in the markets today?
A: There are lots of cognitive biases that are very significant. One is the constant tendency to overrate your own intelligence and skills in deciding what to do and what not to do.