Exclusive: Charlie Munger discusses inflation and crypto with Yahoo Finance

Charlie Munger, Chairman of the Daily Journal and Vice Chairman of Berkshire Hathaway, sat down with Yahoo Finance Editor-In-Chief Andy Serwer for an exclusive wide-ranging interview on inflation, cryptocurrency, and the tech sector.

Video Transcript

ANDY SERWER: Joining me for a Yahoo Finance exclusive is Charlie Munger, chairman of the "Daily Journal" and Vice Chairman of Berkshire Hathaway. Charlie, nice to see you.

CHARLIE MUNGER: Nice to see you.

ANDY SERWER: So a recent SEC filing, Charlie, showed Berkshire Hathaway bought almost $1 billion worth of shares in Activision Blizzard before the buyout by Microsoft. Do you like that investment?

CHARLIE MUNGER: Well, I don't pay much attention to that one. But I think gaming is here to stay, if that's what you're talking about. And I like Bobby Kotick a lot. I consider him one of the reasonable people in that field. And I don't think he personally tolerated a lot of crazy misbehavior either.

ANDY SERWER: I want to broaden that out and ask you a little bit about technology, Charlie, because Warren often talks about understanding your circle of competence. And Berkshire has stayed away from tech for the most part. But you had investments, obviously, in Apple and Verizon, BYD, and Amazon, with Greg Abel, and Todd Combs, and Ted Wechsler at the helm. Tech is now about 45% of the portfolio. So is Berkshire shifting its strategy there?

CHARLIE MUNGER: Well, I think Warren and I have come to tech like some newborn infant that's dragged there. We've had to come, because reality has dragged us there. That's true all over America. Tech is here to stay.

ANDY SERWER: And Berkshire's biggest investment, Charlie, is in Apple. Do you expect Apple to continue to outperform other big tech stocks? And what's the future of Apple look like to you? You've got inflation, potential regulation, maybe potential headwinds like that.

CHARLIE MUNGER: Well, I think Apple is one of the strongest companies in the world. I judge the strength of the company based on how much the customers love it. And I've got zillions of friends who they'd almost part with their right arm before they'd part with their iPhone.

That's a hugely powerful position to be in. And I think Apple is one of the strong companies and will stay a strong company. And I think it's ungodly well-managed.

ANDY SERWER: I mentioned inflation, Charlie. And the stock market is down a bit this year, maybe because of inflation-- also the tensions in Russia and Ukraine, maybe we'll get to that in a second. But I want to ask you specifically about inflation. Are we looking at a prolonged decline in the markets because of inflation? Is inflation on the rise? And should we be concerned about it?

CHARLIE MUNGER: Well, let me take that in the reverse order. Inflation is a very serious subject. You can argue it's the way democracies die. When democracy dies in Latin America, inflation is a big part of it. So it's a huge danger.

Once you've got a populace that learns it can vote itself money, if you overdo it too much, you ruin your civilization a lot. And so, of course, it's a big long range danger. If you look at the Roman Republic, even after they went to a empire with an absolute ruler, they inflated the currency steadily for hundreds of years and eventually the whole damn Roman Empire collapsed. So it's the biggest long range danger we have probably, apart from nuclear war.

ANDY SERWER: Is it something investors need to be worried about, specifically when it comes to growth stocks right now?

CHARLIE MUNGER: Well, I think the safe consumption for an investor is that over the next 100 years, the currency is going to 0. That's my working hypothesis.

ANDY SERWER: Wow, well, that will be a different type of environment, won't it?

CHARLIE MUNGER: It's a very dangerous environment.

ANDY SERWER: And what about the fact--

CHARLIE MUNGER: What brought in Hitler was the combination-- what brought in Hitler was the combination of the Weimer inflation where they utterly destroyed the savings of the middle class in Germany, followed by the Great Depression. It was the one-two punch. And Hitler came in, crazy demagogue, with 40% of the votes and pretty soon we had a dictator hell bent for World War.

So the history is not pleasant. And Germany was a very advanced and civilized nation, the Germany that Hitler took over. I always say that the interesting thing about that was little Albert Einstein, a little Jewish boy, got his entire primary education with the insistence of the Catholic Church in Germany. Now, that is a very civilized nation.

So if you let your nation deteriorate too much, what you get is a Hitler. We proved it.

ANDY SERWER: Going back to inflation specifically, though, Charlie, do you think the Federal Reserve is doing the right thing now or not?

CHARLIE MUNGER: Well, of course, in a modern democracy in the age of Keynes, you're going to get big government reaction. The reaction this time was bigger than it's ever been before in the history of the United States. They just threw money at the problem.

And they were probably right to fear what was going to happen and to be quite liberal throwing money at it, but they probably overdid it a little. They threw so much money so fast, it's hard for the restaurants to get people to do the work. But I don't criticize it. It's hard to make these decisions under pressure.

ANDY SERWER: How concerned are you about Russia and Ukraine right now?

CHARLIE MUNGER: Well, of course, nobody likes it. No, of course I don't like it.

ANDY SERWER: But is it a big concern?

CHARLIE MUNGER: Does anybody like the trouble? I don't think Russia likes it. I don't think it's good for anybody.

ANDY SERWER: How do you see it playing out? How concerned should we be about it, though?

CHARLIE MUNGER: Well, there's room for optimism and there's room for pessimism. I don't have any magic ball that I can look into and tell you what's going to happen in Russia or the Ukraine.

ANDY SERWER: Shifting gears, Charlie, I want to ask you about cryptocurrency, which you have been very negative about calling it rat poison. And you hated the success of Bitcoin. But are you surprised that it's gotten even more mainstream since then?

CHARLIE MUNGER: Well, I'm not surprised. If you stop to think about it, it's an ideal currency if you want to commit extortion, or kidnapping, or have a protection racket or something. Why should a civilized government want an ideal, untraceable technology to come into the payment system run by a bunch of people who want to get rich quick for doing very little for civilization?

Of course I hate it. I don't think it's good that our country is going crazy over Bitcoin and its ilk. I think the Communist Chinese were wiser than we were. They just banned it.

ANDY SERWER: Any predictions on what's going to happen with crypto in the United States?

CHARLIE MUNGER: No. I mean, you let a bad genie out of a bottle, god knows what happens. I think it was a huge mistake to allow it at all. And the truth of the matter is our regulatory establishment, when they quit the government, they go out into this heavily promotional capitalism. And so it's very hard to get the government to make good, wise decisions about something like Bitcoin.

ANDY SERWER: Charlie, last year, Robinhood, the new broker dealer, issued a statement saying people are tired of the Warren Buffetts and Charlie Mungers of the world acting like they are the only oracles of investing. What's your response to that and where do you stand on day trading apps like Robinhood?

CHARLIE MUNGER: Well, I think if I were the benign dictator of the world, I would make it unfeasible to make short-term gains in securities. We now mix up a legitimate activity, capital raising for enterprises that need money to do their capitalistic function, with a gambling casino where people come in and gamble. And those two functions when they're mixed, as they are in a stock market or Bitcoin, create a speculative mess and a speculative orgy.

And it's dangerous for the republic. It isn't good to have a lot of people trying to get easy money for sure just from gambling. And the people that are preying on them, the salesmen and the market makers, they're not the most admirable people either. So no, I don't like it at all.

As I say, most old men don't, of course. And a lot of people think, well, Warren and Charlie don't understand it. Well, I think we do understand it. And we know it isn't good for our republic. And we can't do much about it.

So we spend our time on the matters we can do something on.


CHARLIE MUNGER: --wouldn't be any Bitcoin.

ANDY SERWER: Right. The wealth of the world's 10 richest people, Charlie, doubled from $700 billion to $1.5 trillion during the pandemic. Is that something to be concerned about? Should the ultra rich pay more taxes? And even if you are OK with it, aren't you concerned about the widening gap between the rich and poor?

CHARLIE MUNGER: Well, of course, it creates tension. And the reason it creates tension is that people are-- they're not really motivated by greed, they're motivated by envy. It's the nature of our species that we look around us at other people and are envious of them if they have more than we do. And that envy has always been a big problem. That's the reason the laws of Moses said you couldn't envy the neighbor's wife, you couldn't envy the neighbor's land, you couldn't even envy your neighbor's donkey, which wasn't much of a farm animal, by the way.

And the old Jews were having trouble with envy, and we're still having it. And so, of course, it'll never go away as long as you have human beings.

ANDY SERWER: Another--

CHARLIE MUNGER: My personal life, I have banished envy. And I recommend that banishment to everybody else.

ANDY SERWER: Fair enough. That same SEC document showed that Berkshire cut down its holdings in health care companies like Bristol-Myers Squibb, and then also that the company bought Chevron. Does that suggest that Berkshire is looking for the pandemic or thinks the pandemic is over, which is selling health care and buying a cyclical like that?

CHARLIE MUNGER: Well, we have a lot of float other people's money. So were there an absolute safe way to get 5% instead of 1% or less, of course we'd take the 5%. And we feel pretty safe with Chevron and very high grade people, admirable culture, engineering safety, decency, terribly smart CEO. So naturally, we feel good about Chevron.

The other companies we don't know that much about. You can argue they were income substitutes.

ANDY SERWER: What about the pandemic, though, Charlie?

CHARLIE MUNGER: I don't see how from the outside you judge which pharmacy is going to invent the new drugs that have the patents in the last 20 years. If I were buying in a, pharmacy I'd buy four or five of them. And I think you'll find that's what Berkshire did. I don't think Berkshire knows which drugs are going to succeed in the future.

ANDY SERWER: What is your take, then, on the pandemic, though, Charlie? Does it look like it's winding down to you? And what does that mean for our economy and society?

CHARLIE MUNGER: Well, to some extent, it's terra incognito. The 1919 flu, which killed half of 1% of all the people in America, bang, and we didn't stop the economy at all. We just let them die and buried them.

And we had to do that because it was still in the middle of a war and our troops were in Europe and so forth. This one was totally different. And nobody had any experience with anything on this scale before.

And nobody alive can remember what happened in 1919. So we've been doing the best we can with it. I have been appalled by the fear of vaccination in a big chunk of the nation. Speaking for myself, I couldn't wait to be vaccinated. And I think the risks of being vaccinated are way less than the risk of not being vaccinated.

So it's really massively stupid not to welcome vaccination. And we probably have 30% of the people in the country that think vaccination is evil and coming after them like the hobgoblins. And it's not good that there's that much ignorance left.

ANDY SERWER: Should we have mandatory vaccines then, Charlie?

CHARLIE MUNGER: Well, if I were running the world, of course it would be mandatory. When I was in World War II's army, they didn't ask me if I wanted a vaccination. They vaccinated me, and it didn't hurt me or anybody else in that world. We all just submitted to whatever the government told us to submit to.

And it was no big deal. And so I don't like big chunks of the country going crazy. And I would argue that the anti-vaxxers are somewhat crazy. It isn't zero risk in vaccination, it's just that it's so much safer to be vaccinated than not vaccinated, and it's so much more considerate to your fellow citizens.

So it's a massive kind of ignorance that 30% of the people have. And of course, it isn't good.

ANDY SERWER: What do you think about those truckers up in Canada, Charlie?

CHARLIE MUNGER: Well, when have you ever seen me out in the streets rioting or shutting down a bridge? By and large, I don't like it. Of course I don't like it.

ANDY SERWER: Finally, Charlie--

CHARLIE MUNGER: One of the glories of our civilization has been the relationship with Canada. Think of how peaceful and sensible the relations between the United States and Canada have been for 200 years. I've been very proud of that border for a long, long time.

And all of a sudden, we've got the truckers of Canada having some kind of a riot. It's ridiculous-- and shutting down a big international bridge. That's the kind of thing I expect to happen in France, where they strike against nuclear plants and so on.

I never expected that to happen in the United States and Canada. And I don't think it's good that it did happen.

ANDY SERWER: Finally, Charlie, I want to ask you a little bit about the annual meeting coming up. It sounds like you and Warren have decided to have it in-person in Omaha. You guys will both be there, I take it? And who else will join you on the stage?

CHARLIE MUNGER: Well, Greg will join us. Greg has been a perfect jewel at Berkshire. And it's high time we had somebody younger.

ANDY SERWER: And finally, when was the last time you saw Warren in-person? And what did you guys talk about?

CHARLIE MUNGER: Well, we talk on the phone more than we talk in-person. It's amazing thing what you can do on a telephone. You can argue that Berkshire has been around on the telephone all of its existence, in its modern incarnation.

The directors of Berkshire meet face to face twice a year. They've always used consent minutes and phone calls to do their work. And it's been more efficient and cheaper. And it hasn't hurt us at all. So the rest of the world is just coming to what Berkshire has been doing for years and years. And my attitude is, come on in. The water's fine.

ANDY SERWER: Come on in. The water's fine. Let's leave it at that. Charlie Munger, thank you so much for joining us. Charlie Munger, we'll see you in Omaha-- the Chairman of the "Daily Journal" and Vice Chairman of Berkshire Hathaway.