DJCO annual meeting 2017— March 7, 2017
Daily Journal Corporation is an American publishing company, headquartered in Los Angeles, California. The group publishes newspapers and web sites covering legal affairs in California and Arizona and produces specialized information services. It also serves as a newspaper representative specializing in public notice advertising. Its largest publications are the Los Angeles Daily Journal and the San Francisco Daily Journal.
The Company operates through two segments: Traditional Business and Journal Technologies. The Company’s Traditional Business segment provides newspaper publishing and related services. The Journal Technologies segment supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments, and other justice agencies, including administrative law organizations, city and county governments and bar associations.
Charlie Munger, Warren Buffett’s longtime business partner, and Berkshire Hathaway Inc.’s vice chairman has been Chairman and a director of the Company since 1977. Mr. Munger is famous for breathing new life into this struggling newspaper company by investing the cash in its balance sheet into a handful of well-timed stock purchases during the depth of the financial crisis in 2009. Since then the DJCO annual meetings has attracted value investors and Buffett-Munger followers (“groupies” as Munger calls them) from all over the world. This year was no different.
The chart illustrates the returns of the stock portfolio of DJCO since 2009, which includes Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), U.S. Bancorp(NYSE:USB), and Posco, a company that manufactures and sells steel rolled products and plates in South Korea.
source: The Motley Fool
I have summarized my notes and key takeaways from this year meeting below. Mr. Munger was generous with his time and took questions from the audience for extended hours. I have provided links to the videos. Hope you find it useful. I would appreciate your feedback and comments.
The slow, boring, painful, complicated business is a sticky business, and it’s difficult for others to enter ( people who want easy gratification don’t come in )
Executives should get income similar to shareholders ( i.e., dividends not stock options)
Bigger faster aggressive is always not good, ethos is important
You should be good at judging people when you don’t know what they do
Q: What’s the value prop of Amex?
Munger: No one knows what will happen to payment systems ten years from now. I don’t know if IBM will sell that much of Watson, things are changing fast.
Best business is the work that’s already on your desk ( or portfolio)
Deferred gratification is important to become wealthy
Investing is harder now but no less interesting
If you are in this game (i.e. investing) and you are learning and putting effort, you will get better over time. The secret is that he kept expanding your playing field. The nice thing about investing is that you can keep learning. We are good at changing our mind when the data changes ( e.g., airlines or railroad )
On Index Funds: If everyone bought nothing but index fund it wouldn’t work. But a big index fund like s&p should do well, but a small index can be a problem (e.g nifty fifty ) , now indexes are 75% of the market. Beating index is a terrible problem. It’s hard to beat the indexes with huge sums of money. Returns in investment management business will go down
On Diversification: Costco Costco,BRK and Li Lu‘s fund in China.
On Incentives Wells Fargo
Wells Fargo (WFC) made a judgment error.There is nothing fundamentally wrong with an aggressive incentive system. The mistake was when the bad news came they were not quick to react or recognize the severity
Henry Singleton also had an aggressive incentive system, 3 out of 20 sub companies cheated the govt. What Wells Fargo did is not new to American business.
A final note on aggressive incentives: How do you know unless you try. But when things go wrong, you should be able to react quickly.
On Life Lessons & Success
Success = hard work + consistency + avoid stupidities + avoid bad company + good ethos
The good thing about doing dumb things is that you will not do it again.
Specialization is good for you but spend 10-20% of your time to know the big ideas in all disciplines. Problems are easy to solve when you can reach out to other disciplines
You will get few ideas that will make you rich in your life. When you find one act decisively.
The best way to get a good partner is to deserve one. Good people are hard to find.
On being a contrarian: When no one praises you, you can do it yourself
Life is a series of adversities and each one is an opportunity to behave well
We are too soon old and too late smart because we can’t get rid of our old ideas. If you keep talking about your ideas then you are pounding it in. It’s a dumb idea for someone who is young
Young people should shout less and learn more
Find something you are interested in and don’t pay attention to anything else. Play where you have some advantage. Of course, you can’t ignore ethics. But don’t get too caught up with too much ideology, be practical. Do something every day where you are coping with life.
On Energy, Oil & Fracking
Q: Is gas exploration good business?
Munger: It’s a peculiar way to make money, volume goes down while the price goes up. In my opinion, We should save it for future and use up others.
Exxon Mobile is not a good investment, rather a cash substitute.
On Policitcs & Trump
Trump is ‘not wrong on everything’ so ‘roll with it’. ( e.g. Tax reforms are good and Not touching social security is good )
India is grossly defective because they took the worst aspects of our culture, allowing a bunch of idiots to scream and stop everything. They’ve taken the worst aspects of democracy.
They have some companies that are strong, and the government helps them. But Chinese have a tendency to gamble and believe in luck that’s a national defect
China has a bright future, Intelligent Chinese should invest in China
Charlie Munger’s talk at the Daily Journal annual meeting 2017:
Charlie Munger – Informal chat with attendees after the annual meeting:
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