Charlie Munger Interview

Very good interview with Charlie Munger by the Stanford Law School. Thanks goes to Pete.

The Federal Reserve is today buying assets that it wouldn't have even considered looking at a year ago.

I think the problem is so extreme that nothing non-extreme has any chance of working. I like the fact that it is so willing to do things that have never been done before, because we have problems that we have never seen before.

This shocked the heck out of me...not because I disagree, but because he said it.

So on a scale of 1 to 10, how big a mistake was it that they let Lehman Brothers go?

I don't think that was a mistake. You can't save everybody. That would have created unlimited revulsion in the body politic. I probably would have let Lehman go, too.

I think the money line was in response to this question. Loved it.

So in order to cure the lame leg, you would lean more toward an approach to economics that takes human nature into account?

If you totally divorce economics from psychology, you've gone a long way toward divorcing it from reality.

Undying truth

If you had to characterize a few mistakes that you see executives making, which ones jump out at you?

An extreme optimism based on an inflated self-appraisal is one. I think that many CEOs get carried away into folly. They haven't studied the past models of disaster enough and they're not risk-averse enough. One of the very interesting things about Berkshire Hathaway is how chicken it is, how cautious, how low is its leverage. But Warren and I would not have been comfortable with more risk, entrusted with other people's net worths. There was no reason for our financial institutions to stretch as much as they did, with the leverage, the shady people and the compromises.