When the Newspaper Died, the Philosopher Spoke Freely
Reading Notes · The Way of Munger — Part 4
Reading Notes · The Way of Munger — Part 4
Nothing here is financial advice. I own no position in Daily Journal Corporation or any company discussed. These are reading notes — a record of ideas I found worth sitting with.
There's a version of Charlie Munger that most people know: the laconic, self-deprecating sidekick at Berkshire Hathaway's annual circus in Omaha, doling out one-liners while Warren Buffett handles the main act. But after Wesco Financial was folded into Berkshire in 2011, Munger found a different stage. The Daily Journal Corporation's shareholder meeting — a modest affair by comparison, held in Los Angeles — became something else entirely. Without the obligation to report quarterly numbers on a sprawling insurance and railroad conglomerate, Munger could wander.
And wander he did.
Reading the Daily Journal meeting transcripts from 2014 through 2018, I kept thinking: this is what it looks like when a man in his nineties no longer feels the need to be careful. The remarks get longer. The digressions are the point. He'll start on accounting fraud and end up at Weimar Germany. The audience is smaller and hungrier, full of people who drove hours specifically to hear him think out loud. He obliges them.
A Newspaper That Knew It Was Dying
The Daily Journal Corporation is, at its core, an uncomfortable business to own. For decades it ran a near-monopoly in legal newspaper publishing in California — the kind of franchise that prints court notices and foreclosure filings, the sort of publication nobody reads but everyone in the legal system must use. High margins, captive audience, no real competition. A classic Munger-style moat.
Except the internet started filling that moat with cement around 2008, and the legal notice business began its long, inevitable decline.
Munger's response was to double down on a software pivot. Journal Technologies — the subsidiary attempting to sell court management software to government agencies — became the main strategic bet. He was relentlessly honest about what it was: a slow, grinding venture capital wager. Government software procurement is notoriously difficult. Sales cycles run years. Contracts require endless customization. The margins are nothing like a newspaper monopoly.
At the 2016 meeting, he described the transition plainly: they were taking a profitable but shrinking asset and betting it on a business that might work or might not. He compared the software division to "crawling over broken glass." He didn't dress it up. If you owned Daily Journal stock hoping it was a mini-Berkshire, he told you directly that you were taking on more uncertainty than you probably realized — and that the stock price at any given moment reflected some amount of speculation about whether the crawling would eventually lead somewhere good.
I found this kind of candor genuinely unusual. Most executives in a declining business talk about "transformation" as if it's a controlled process. Munger just called it a bet and told shareholders to decide for themselves whether they liked the odds.
The Portfolio: Few Bets, Heavy Conviction
Meanwhile, the Daily Journal's investment portfolio was doing something interesting. Munger had taken a modest cash pile and concentrated it into a small number of positions — Wells Fargo most prominently, along with BYD and a handful of others. The portfolio was not diversified in any conventional sense.
His reasoning for Wells Fargo during this period is worth understanding. He bought heavily during the financial crisis when the stock was trading around $8 per share. His thesis wasn't complicated: Wells Fargo was a competently run bank with a strong deposit franchise and a culture that was — at that point — more conservative than its competitors. He held the position for years, watching it appreciate substantially.
The BYD investment is a different story and a more interesting one. Berkshire had acquired a 10% stake in 2008 for $230 million. For the first five years, the stock went essentially nowhere. Then it surged dramatically, eventually trading at a P/E of nearly 200x. Munger's view on BYD was never a pure financial analysis — it was a bet on a specific kind of founder, Wang Chuanfu, whose engineering intensity reminded Munger of a younger Thomas Edison. He was willing to sit through the flat years because the quality of the management gave him genuine confidence.
What strikes me about both positions is how little they resemble modern portfolio construction advice. A financial advisor would never build you a concentrated portfolio of a few large-cap positions and tell you to wait five to ten years through drawdowns. The math of diversification is real — broad diversification does reduce variance. But Munger's counter-argument is equally real: if you genuinely understand a business and its management, additional diversification beyond a handful of great ideas is mostly noise dressed up as prudence.
I'm not sure I have the psychological makeup to do what he did — watching a position go sideways for five years requires a specific kind of equanimity. But as a framework for thinking about conviction, it's worth taking seriously.
Tech Giants and the Art of Honest Admission
One of the most interesting threads across the 2014–2018 meetings is Munger's evolving posture toward technology companies.
He missed Amazon. He missed Google. He missed Apple until Berkshire finally bought it in 2016. His explanations for these misses are not defensive — he doesn't rationalize them as "outside my circle of competence" in a way that sounds like an excuse. He just says he didn't understand them well enough to bet heavily, and then he moves on. The "too hard" pile is not a mark of shame; it's intellectual hygiene.
What's interesting is how he talks about the ones he did eventually come around on. Apple, by 2017-2018, he viewed not primarily as a technology company but as a consumer brand with extraordinary pricing power and customer lock-in — the kind of economics he'd understood for decades in other industries. The reframe wasn't about learning new technology; it was about recognizing that the old frameworks applied once you understood what the product actually was in customers' lives.
On Amazon, he was more rueful. Bezos building a business that was losing money at scale for years while constructing distribution infrastructure at enormous cost — that model was genuinely foreign to him, and he said so. He didn't pretend he'd seen it coming.
There's something useful here for anyone trying to apply Munger's frameworks to the current AI wave. The lesson isn't "stay in your circle of competence and avoid new things." The lesson is: understand what business you're actually analyzing before you apply a framework to it. An AI infrastructure company might look like a tech company but operate like a utility. A consumer AI product might look like software but actually be a habit-formation business. The frameworks don't change; the mapping from business reality to framework requires actual understanding.
China, Seen from Pasadena
Munger's views on China became more pronounced during this period, and more pointed. He praised China's economic development with a directness that made American audiences visibly uncomfortable. He cited the lifting of hundreds of millions of people out of poverty as one of the greatest achievements in human history. He called Li Lu — the investor who introduced Berkshire to BYD — the "Chinese Warren Buffett."
He also took direct aim at Piketty's Capital in the Twenty-First Century, calling the economist "foolish" for criticizing the wealth inequality that emerged from China's industrialization. His argument: the inequality Piketty complained about was the byproduct of people getting rich by lifting others out of poverty. Getting angry at that outcome seemed, to Munger, like complaining that a rising tide made some boats rise faster than others.
I want to be careful here, because Munger's China views are easy to either dismiss as naive or weaponize for political arguments he wasn't making. What he was actually doing, I think, was applying the same framework he used for businesses: looking at fundamentals rather than narratives. China had high savings rates, a work ethic he found exceptional, leadership that was willing to make long-term bets, and a track record of rapid pragmatic adaptation. Whether you agree with his conclusions or not, the reasoning was consistent with how he evaluated everything else.
He was also clear-eyed about the risks. He acknowledged that the political system created uncertainty that was difficult to quantify. He just thought most Western investors were so anchored to their own political categories that they couldn't see the underlying economic reality clearly.
Ninety Years of Looking Backward
What I find most affecting about the 2014–2018 transcripts is how often someone in the audience asks Munger about mortality, and how cheerfully he answers.
His formula for a happy life hasn't changed since at least the 1990s: lower your expectations to match reality, eradicate envy and self-pity (both of which, he notes, provide zero pleasure and only make you miserable), read constantly, practice deferred gratification, and surround yourself with people who don't require you to be vigilant. He'd given versions of this answer at Wesco meetings for thirty years.
But there's something different in the Daily Journal version. He's in his nineties. He's watched friends and colleagues die. When he talks about the costs of envy, it doesn't sound like advice — it sounds like a survivor report. He figured out what the toxic emotional patterns actually cost, ran the experiment for nine decades, and here's what he found.
His humor gets sharper too, not softer. He's less diplomatic about institutions he thinks are corrupt or foolish. Academic finance departments teaching CAPM as gospel get compared to people teaching "bullshit." EBITDA is "bullshit earnings." Bitcoin, at various points, is "noxious poison," "venereal disease," and "anti-social." He has the freedom of someone who genuinely does not care what the Bloomberg terminal says about him.
The investment lesson buried in all of this is: Munger's equanimity about markets isn't a technique or a discipline he's performing. It comes from having genuinely settled, over a very long time, what he cares about and what he doesn't. The concentration strategy, the long holding periods, the indifference to quarterly results — these aren't courage exactly. They're the natural consequence of caring more about being right over ten years than being comfortable over ten months.
What I Actually Took Away
I've now read four parts of The Way of Munger, and I keep coming back to the same uncomfortable question: how much of his framework is actually teachable, and how much depends on the specific personality it came from?
The mental models are real and useful. Inversion works. Opportunity cost as a filter is genuinely clarifying. Building a latticework of thinking tools from multiple disciplines is better than hammering everything with economics.
But the concentration strategy — the willingness to put meaningful money in three or four ideas and ignore the noise for years — that requires a psychological constitution I'm honestly not sure most people have. Including me. Watching a position drop 50% and feeling genuinely fine about it because your thesis is intact is not something you can talk yourself into. Munger seems to have actually felt fine. He says so repeatedly and in enough contexts that I believe him.
The practical adaptation might be something like: move toward concentration, not all the way there. Understand the businesses you own well enough that a 30% drawdown doesn't feel like a crisis. Build the frameworks. Do the reading. Be honest about what you actually understand versus what you've convinced yourself you understand.
The rest — the equanimity, the disregard for appearances, the ability to sit with a flat position for five years and keep reading — that probably takes longer than a book to develop.
Part 5 of this series will cover Munger's remarks from 2019 through 2022 — the final years, including his views on COVID, the meme stock era, and his undiminished opinions on nearly everything.
These reading notes reflect my personal understanding of the material. Nothing here is investment advice, and I may have misunderstood or misrepresented Munger's arguments despite my best efforts. Read the primary sources.
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