Charlie Munger Explains Why Most Jobs Are A Waste Of Time
Well, if you got 30 people at headquarters and half of those are internal auditors, that is not the normal way of running a big company in America. And I what's interesting about it is obviously we lose some advantages from big size, but we also lose certain disadvantages from having a big bureaucracy within this meeting after meeting after meeting around headquarters. And net I think we've been way ahead with our low overhead diversified method and it also makes our company attracted to very able honorable people who ha who have companies. So generally speaking the existing system has worked wonderfully for us; I don't think we have the the the employment that could be cut effectively that a lot of other places have, and and I think our methods have worked so well we'd be very unlikely to change them.
I think at sub at headquarters you could say we have kind of subzerbased budgeting at and and we we hope that the example at headquarters is to a great extent emulated by our by it isn't just the cost reduction. I think the decisions get made better if you eliminate the bureaucracy. Oh yeah. I think a bureaucracy is sort of like a cancer and it functions sort of like a cancer. And so we're very anti-bureaucracy and I I think it's done us a lot a lot of good. In that case we're quite different from say Annheiser Bush at its peak at the time this newspaper came out in 1942.
The it was the government was peel appealing to the patriotism of everybody as kids. We went to school and we bought savings stamps to put in; well, they first called them US war bonds and they called them US defense bonds and then they called them US savings bonds but they were called war bonds then and you put up $18.75 and you got back $25 in 10 years and that's when I learned that that $4 for three uh in 10 years was 2.9% compounded. They had to put in small print that And even an 11year-old could understand that 2.9% compounded uh for 10 years was not a good investment. But we all we all bought them. It was it was you know it was part of the war effort basically. Uh and the government knew I mean you knew that significant inflation was coming from what was taking place in finance in World War II. We actually were on a massive Keynesian type behavior. Not because we elected to follow Canes, but because war forced us to have this huge deficit in our finances, which took our debt up to 120% of GDP and it was the great Keynesian experiment of all time. And we backed into it and it sent us on a wave of prosperity like we've never seen. So you get some accidental benefits sometimes. But the United States government then was urging every citizen to put their money into a fixed dollar investment at 2.9% compounded for 10 years. And and uh I think Treasury bonds have been unattractive ever since with the exception of the early 80s. That was something at at that time. I mean, you you really had a chance to buy you had a chance to invest your money by buying zero coupon Treasury bonds and in effect guarantee yourself that for 30 years you would get a a compounded return, you know, something like 14% for 30 years of your lifetime. Uh every now and then something really strange happens in markets and and the trick is to not only be prepared but to take action when it happens.
Main Speaker: Charlie, did you ever buy any war bonds or
Charlie: No. No, I never bought war bonds. No. Used to be like take me. I didn't have any money when I was in the war. That's a good reason not to buy long-term bonds. Uh, they're basically at these rates. It's almost ridiculous when you think about it because here the Federal Reserve Board is telling you we want 2% a year inflation and the very long bond is not much more than 3%. And of course, if you're an individual and you pay tax on it, uh you're going to have some income taxes to pay, and let's say it brings your after tax return down to 2.5%. So the Federal Reserve is telling you that they're going to do whatever's in their power to make sure that you don't get more than a half a percent a year uh of inflation adjusted income. And uh that seems to me a very I wouldn't go back to penny stocks since but I think I would stick with I would stick with productive businesses or productive certain other productive assets uh uh by far. But what the bond market does in the next year, you know, you've got trillions of dollars uh in the hands of people that are trying to guess which maturity would be the best to own and all that sort of thing. And we do not bring anything to that game that would allow us to think that we've got an edge.
Main Speaker: Charlie, well, really wasn't fair for our monetary authorities to reduce the savings rates paid mostly to our old people with savings accounts as much as they did, but they probably had to do it to fight the Great Recession appropriately. But it clearly wasn't fair and the conditions were weird. In my whole lifetime, it's only happened once that interest rates went down so low and stayed low for a long time and it was quite unfair to a lot of people and it benefited the people in this room enormously because it drove asset prices up, including the price of Berkshire Hathaway stock. So we're all a bunch of undeserving people and and I hope that we continue to be. So should be earning more money than it is now and will be and as you mentioned it's it's well on its way there but it but it is not earning it's not earning an an appropriate amount now based on the history of the company. I I was around when I was on the board of Gillette when Gillette bought Duracell and I I've seen what it uh does when it isn't managed to its full extent and I and I saw what Jim Kilts did with it at Gillette when when when he ran it and uh there were a lot more transition problems, uh, uh in the purchase.
Main Speaker: For one thing, there's a lot of rules connected with our swap of our stock and PNG for Duracell. There are a lot of things that you cannot do that made sense to do in that period of transition from PGA PNG's management to ours. But Duracell, uh the brand is strong, very strong. The product, the product line, uh is very strong. So, and we are making more money and will we should and I believe we will uh earn really what the property is capable of earning. We should be, we should be, we should be earning that relatively soon. But you're absolutely right that that it is from a profit standpoint is underperforming. We're making a lot of changes and some of those are involved in jurisdictions, uh, countries where it is really expensive to change in terms of of uh employment, uh, payments that have to be made if if a plant is changed or something of the sort. But, uh, I like the Duracell deal absolutely as well as as well as when we made it.
Main Speaker: Charlie, I like it better than you do. Now Duracell Duracell is a very very it's our kind of business and we it is