Charlie Munger on how business should be taught

in the book about charlie damn right by janet lowe charlie talks about his view on teaching finance he says that he would use the histories of a hundred or so companies that did something right or wrong as a basis for teaching the course could each of you and sense this concern charlie could each of you we'll start with charlie give us an example or two from either category right moves or wrong moves i predict charlie's going to talk about costco go ahead charlie well costco of course is a [Laughter] a business that became the best in the world in its category and it did it with an extreme meritocracy and an extreme ethical duty self-imposed to take all its cost advantages as fast as it could accumulate them and pass them on to the customers and of course that created ferocious customer loyalty and and it's been a wonderful business to watch and of course strange things happen when you when you do that and do that long enough costco has one store in korea that will do over 400 million in sales this year these are figures that can't exist in retailing but of course they do and so that's an example of of somebody having the right managerial system the right personnel solution the right ethics the right diligence and etc etc that is quite rare if you if once or twice in a lifetime you're associated with such a business you're a very lucky person and the more normal business is a business like say general motors which became the most successful business of its kind in the world and wiped out its common shareholders what last year that is a very interesting story in of a line type figures that took people through the entire history of general motors and i would try and relate the changes in the graph and in the data to what happened in the business and to some extent they faced a really difficult problem heavily unionized business combined with great success and very tough competitors who came up from asia and elsewhere and to some extent from europe and that is a real problem which of course to prevent wealth from killing you your success turning into a disadvantage is a big problem in business and so all these wonderful lessons in those in those graphs i don't know why people don't do it the graphs don't even exist that i would use to teach i can't imagine anybody being dumb enough not to have the kind of graphs i yearn for but as far as i know there's no business in the school in the country that's yearning for these graphs partly the reason they don't want it is if you taught a history of business this way you'd be trampling on the territories of all the little professors and sub-disciplines you'd be stealing some of their best cases and and bureaucracies even academic bureaucracies people protect their own turf and of course a lot of that happened in general motors it's a i really think the world that's the way it should be taught harvard business school once taught it much that way and they stopped and i'd like to make a case study as to why they stopped i think i can success i think i can successfully guess it's a course in history of business trampled on the territory of barons of other disciplines like the baron of marketing the baron of finance the baron of whatever and uh it's an ibm is an interesting case i mean just one after another that are utterly fascinating and i don't think they're properly taught at all because nobody wants to do the full sweep charlie and i were on a plane recently that was hijacked with what was hijacked i'm telling about our experience on that hijacked plane when the hijackers picked us out as the two dirty capitalists that they really had to execute and but they were they were a little abashed about it they didn't really have anything against us so they said that each of us would be given one request before they shot us and they turned to charlie and they said what would you like as your request charlie said i would like to give once more my speech on the virtues of costco with illustrations and the hijacker said well that sounds pretty reasonable to me and he turned to me and said and what would you like mr buffett and i said shoot me [Laughter] first

Channel: Ralph Khattar

Views: 31,287

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Id: 64BUSPSc6bw

Length: 5min 48sec (348 seconds)

Published: Mon Oct 19 2020