Friday, November 6, 2009

Berkshire Hathaway's Charlie Munger on Cap-and-Trade and When He Started Liking Trains (BRK.A; BNI)

I had planned to post this on Tuesday when word came out that Charlie and Warren were getting some new trains to play with.
Herewith a compilation of Charlieisms:

"Mr. Munger, welcome. You had some strong words on the proposed global warming policy solutions. Could you boil down your thinking for us?"
CM: "Monstrously Stupid Right Now...Almost Demented"
"That seems a bit harsh."
CM: "Think about it a little more and you will agree with me because you're smart and I'm right."
"At the annual meeting..."
CM: "I didn't set out in life to become the assistant leader of a cult."*
"At the annual meeting you shared some thoughts on alternative energy, what did you say?"
CM: Who knows, Warren was stepping all over my straight lines. Here's the Omaha World-Herald live-blog-
"Munger says harnessing the sun's power and changing sea water to fresh, other changes are for the better. Munger says he sees very good things for the future, including enough energy generation to solve a lot of other problems along with it."
*Whitney Tilson’s 2007 Wesco Annual Meeting Notes, Opening Remarks

And for the rail-curious, Mr. Tilson took down this note:
...Berkshire’s investment in railroads
Railroads – now that’s an example of changing our minds. Warren and I have hated railroads our entire life. They’re capital-intensive, heavily unionized, with some make-work rules, heavily regulated, and long competed with a comparative disadvantage vs. the trucking industry, which has a very efficient method of propulsion (diesel engines) and uses free public roads. Railroads have long been a terrible business and have been lousy for investors.

We did finally change our minds and invested. We threw out our paradigms, but did it too late. We should have done it two years ago, but we were too stupid to do it at the most ideal time. There’s a German saying: Man is too soon old and too late smart. We were too late smart. We finally realized that railroads now have a huge competitive advantage, with double stacked railcars, guided by computers, moving more and more production from China, etc. They have a big advantage over truckers in huge classes of business.

Bill Gates figured this out years before us – he invested in a Canadian railroad and made eight hundred percent. Maybe Gates should manage Berkshire’s money. [Laughter] This is a good example of how hard it is to change one’s mind and change entrenched thinking, but at last we did change.

The world changed and, way too slowly, we recognized this.
Here's Charlie at the '08 Wesco Annual Meeting:

...Q19: Forest from Ft. Worth Texas. Do you look at railroads from a replacement value standpoint?

Do you know what it would cost to replace Burlington Northern today? We are not going to build another transcontinental. And those assets are valuable, have utility. Now they want to raise diesel prices on trucks. Wish I was smart enough to identify this few years earlier. Avoiding the most extreme follies of man makes you better....