Santangel’S InveStor Forum
OctOber 25, 2012New YOrk citY
Charlie Munger atHarvard-Westlake School
January 19, 2010
[Tis conversation about the nancial crisis, moderated by Jim Gibson,took place at a undraising event or the Harvard-Westlake preparatory school, where Charlie Munger is a longtime trustee.]
Let’s just go through the list, briey. Academia ailed. Te proessors at ourgreatest universities [have] perectly asinine ideas -- rst, about ecientmarket theory. One o those peopleinuenced McKinsey [& Company]so much that McKinsey came to the Washington Post at the time it wasselling at one-th o what it wasplainly worth as a share o the totalenterprise, and said, ‘You can’t buy [the stock] in because, under ecientmarket theory, it can’t be worth a tho what people would pay or the wholecompany.’ O course, the kind o mindthat would keep a stupid idea like this when they have a act that would clearly reute it -- it clearly violates traditionso science and mental decency. Tey taught this drivel to our children ordecades and, by God, a lot o peoplethese other people i I just kind o work at it steadily or a long time,’ and thatis what I did.I think part o the popularity o Berkshire Hathaway is that we look likepeople who have ound a trick. It’s notbrilliance. It’s just avoiding stupidity. You say it is the same thing just stateddiferently -- well, maybe it is the samething just stated diferently. But youunderstand it better i you go at it the way we do, which is to identiy themain stupidities that do bright peoplein and then organize your patterns orthinking and developments, so youdon’t stumble into those stupidities. O course, this present situation involvesmassive cognitive ailure at a greatnumber o places dominated by very, very bright people, and that is quiteinteresting.
Charlie, why did so many smart peopleget it wrong?
Well, that is a marvelous question andit is such a marvelous question that Ihave devoted a big chunk o my lieto studying that exact question. It wasobvious to me or some reason, at anearly age, that a great many very brilliantand disciplined people made perectly screwy decisions that were disastrous --and that it happened, rankly, whereverI looked. I ound this extremely curious,and somehow early in lie I got the ideathat I would never be able to play chessblindolded against six Grandmastersand win. God just did not give CharlieMunger any such skill. But I said, ‘Ohmy gosh, I cannot be as asinine as all
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