Charlie Munger: ‘The Phone Is Not Ringing Off the Hook’ | Hacker News Reader

Charlie Munger: ‘The Phone Is Not Ringing Off the Hook’

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49 pointsyarapavan94 comments

This quote from Munger is what I find most interesting:

> I do think, sooner or later, we’ll have an economy back, which will be a moderate economy. It’s quite possible that never again—not again in a long time—will we have a level of employment again like we just lost. We may never get that back for all practical purposes. I don’t know.

There are roughly 2 ways this could go if what he says actually happens. One is that a lot more people are going to suffer economically because of a lack of employment. The other, which is what I'm hoping for but not expecting, is that we take this opportunity to acknowledge that Keynes was right, and we don't have to work as much as we do. If we can strengthen our social safety net so that being out of work does not necessarily imply falling deeply into poverty (not that being unemployed should necessarily be a great deal, just that folks shouldn't be losing their homes and their health insurance, and should still be able to lead a fairly basic life), then I think this whole crisis might have a silver lining.

> we take this opportunity to acknowledge that Keynes was right, and we don't have to work as much as we do.

That isn't what Kenyes said. He said that in a recession/depression the government should spend more than it takes in, and the rest of the time it should spend less. So, if that equates to working less during a recession, we're going to have to work more during the good times.

But as for working less in general: If we want all this stuff, we have to produce all this stuff. Printing money, or even government spending, doesn't make stuff magically appear. We still have to make it.

You're right about Keynes' general approach to handling a recession or depression, but OP is referring to Keynes' theory that people would be working only 15 hours a week by now: https://www.npr.org/2015/08/13/432122637/keynes-predicted-we...

Ah. Then Keynes did say that, and I was in error. But my criticism of the idea still stands, even if Keynes said it.

The question becomes, do we really want to have all this stuff? Then we have to work hard enough to produce all this stuff. Or, do we want to not work so hard? Then we're going to have less stuff to enjoy with our free time.

Keybes's mistake is ignoring that people have personal interest in acquiring more wealth, and businesses prefer the efficiency of fewer longer-hour workers in the absence of regulatory distortions like "health benefits required only if working 30+ hrs per week)

Keynes wrote a lot of things about economics, not just about government spending. Keynes also wrote about a possible 15 hour work week.

From http://www.econ.yale.edu/smith/econ116a/keynes1.pdf

“... What can we reasonably expect the level of our economic life to be a hundred years hence? What are the economic possibilities for our grandchildren?

...

All this means in the long run that mankind is solving its economic problem. I would predict that the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is to-day. There would be nothing surprising in this even in the light of our present knowledge. It would not be foolish to contemplate the possibility of afar greater progress still.

...

For many ages to come the old Adam will be so strong in us that everybody will need to do some work if he is to be contented. We shall do more things for ourselves than is usual with the rich to-day, only too glad to have small duties and tasks and routines. But beyond this, we shall endeavour to spread the bread thin on the butter-to make what work there is still to be done to be as widely shared as possible. Three-hour shifts or a fifteen-hour week may put off the problem for a great while. For three hours a day is quite enough to satisfy the old Adam in most of us!

...

Of course there will still be many people with intense, unsatisfied purposiveness who will blindly pursue wealth-unless they can find some plausible substitute. But the rest of us will no longer be under any obligation to applaud and encourage them. “

Among the many problems with that idea is that no one agrees on the definition of a "fairly basic life." One leader's definition will be different from another, so we're ever at the mercy of gaining/losing benefits at the whim of (at least in the US) a distant and isolated ruling class.

At this point, anything is an improvement. But, the minimum should certainly include the "basic needs" of physiological needs and at least partial fulfilment of safety needs, which are at the bottom of Maslow's heirarchy [0].

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[0]: https://www.simplypsychology.org/maslow.html

US can have state and local welfare systems, so not necessarily distant and isolated.

Countries with larger safety nets have basically similar levels of absolute poverty to the US (it is kind of tricky because most of those countries in the former are also far far smaller, and have very different population density/growth/migration patterns). And btw...yes, in other countries if you lose your job you can lose your house...this is true everywhere (and the US already has a public health system that is 50-75% of most of Europe)...that is kind of how mortgages and debt work. Saying that you wish you could just repudiate all your debt is very American (ironically, given that you seem to hold a non-American view of govt).

The most effective way to move people out of poverty is to create jobs. Whatever system you have, the only way it goes wrong (as it did for Europe through most of the 90/2000s) is when you cannot create jobs. There is no other option. America has got it 95% right.

And the main issue in the US is: are people willing to accept significant intervention into their working life from the govt? Are people willing to accept living in a society that is run for large corporations (it is funny that most Americans think they live there already, not even close)? Can the US bring immigration down significantly? Can the economy still function with lower immigration? Can the US still function with high prices of basic goods? The answer to almost all of those questions is no. America has a system that suits America...that is why they have it (and btw, if you talk to social policy academics from the countries with higher social safety nets, they will tell you the same thing).

Maybe this is controversial now but it is far easier to suggest that we should tear everything down than work out how to make progress with something that is mostly working.

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Please don't post in the flamewar style to HN, regardless of how wrong someone is or you feel they are. It just makes the thread even worse.

Also, please stop posting smug putdowns of others. Those are usually examples of the thing they're complaining about, and unsurprisingly they evoke worse from the others, who take the unfairness in them as an excuse to lash back.

We've had to ask you this kind of thing several times before. If you'd please review https://news.ycombinator.com/newsguidelines.html and stick to the rules when posting here, we'd appreciate it.

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We've asked you before to stop using HN for ideological battle. It destroys the curious conversation that this site is supposed to exist for.

It also routinely ends up with poison like "How obtuse are you?" and, god help us, "you're a bootlicking shit". Since you're participating regularly here, I assume this is not the kind of place you want HN to be, so please don't make it so. The GP comment shouldn't have posted that smug and supercilious putdown, and you shouldn't be responding with even worse.

I don't want to ban you because you've also posted good comments like https://news.ycombinator.com/item?id=22123132 and https://news.ycombinator.com/item?id=21818850. Unfortunately those are mixed in with personal attacks, petty swipes, and political boilerplate, and at this point the bad stuff grossly outweighs the good. You're doing a lot more damage than you're adding value at this point, so means we're going to have to ban you if you don't fix it. Please fix it.

https://news.ycombinator.com/newsguidelines.html

We don’t have to work that hard for a comfortable life, and the gaudy material life the west has is not owed by laws of science or man. It’s taken as we can see by the bailout machinations

We don’t need grocery stores full of customized flavored drinks.

Fill them with raw ingredients and let people distract themselves inventing customization at home

Same with clothing stores. But we let a minority buy their way in, making us do the real creative work to prop them up

We extended government into our lives by creating corps and HR and letting the Corp owners then collude on the HR rules to our detriment in a society that claims to loath big government

And this community tacitly agrees with it by founding companies!

Americans go on about big government interference but that’s exactly what you defend by creating a market for one size fits all rules to filter into our lives at scale

Local communities can police themselves. We don’t need to curve our agency to what will get us a job

We need to get away from traditional values like “if I’m going to buy in, I expect a return on investment.”

Ok but many of us out here never invited you to play. Yet their demands of being rich are protected by all?

How’s that any different than them saying they shouldn’t have to spend money if they don’t want to?

I think the general public is open to the idea of taking care of folks who lost their jobs. The problem is drawing the line. If a taxi company goes bankrupt a lot of folks would expect the taxi drivers to start driving for Uber. If ESPN has to layoff some staff how long should they get help? Should they be expected to look for tangential jobs?

If helping some people that don't need it gets us to fix the issue for ones in need, who cares if a few people get extra help? Somehow, the Republican party, which uses this argument all the time, is fine with helping millionaires get millions in tax breaks when trying to help buttress the economy, then why do we care if some individual gets unneccessary food stamps? We have never just tried safety nets, because the conversations is too worried about what abuse COULD happen. But it's only about abuse by the little guy; no one cares about the tax loop holes being abused by people that don't need it in the first place.

I totally agree. Some of the same people who roll they eyes at homeless people asking for change and fire employees for a couple weeks of low productivity are the same people who are now taking free money from the government without any guilt.

Sometimes I wish we could pick a US state and turn it into this vision. Social safety net for all, free healthcare for all, no loopholes for the rich. There are so many people who would like to see how this plays out. And more importantly, the expectation of the outcome varies WILDLY from smart person to smart person. Personally, I believe this state would be bankrupt in a matter of years, companies that produce tax revenue would move elsewhere, and moral hazard for those who don't feel like working would rear its head in ways not seen since the USSR.

I'd love to see that experiment played out, but I suspect your "no loopholes for the rich" would cause them to flee to another state. States don't have the ability to tax anyone who is not a resident. On the federal level, this would not necessarily be so, since we can make it incredibly expensive for billionaires to renounce citizenship, by implementing a progressive "exit tax" that includes assets in the calculation.

Exactly. I think the country example would be similar to the state with billionaires leaving but more importantly, companies leaving due to the higher corporate tax rate that would be necessary to finance these social programs. Medtronic and Pfizer are good early examples of this phenomenon.

Scandinavian countries didn't bankrupt. Rather the opposite.

Scandinavian countries are an interesting example. For example, they heavily tax their middle class, are quite business-friendly and have no required minimum wage. But as you are alluding to, they do get away with a high GDP per capita despite a higher tax burden. I think the Scandinavian-modeled state would not look like what pro-social safety net Americans would expect. But again, would love to see the experiment played out.

The general public, maybe, but elected representatives certainly are not, at least going by their actions. Take a look at the pathetic levels of benefits UI provides, and the limited duration. If we were providing people with a reasonable percentage of their former income, along with support in finding a new job, all for as long as it took for them to find other employment, then I wouldn't have a problem. There are some practical issues in implementing this, but this is essentially what a real unemployment insurance scheme should be. The system we have now unduly punishes people who lose their jobs, and serves only to keep workers firmly under the thumb of employers.

Speculating on the future is difficult. However, I disagree with Munger on this point if we're to start manufacturing in the United States once again, we're going to have to retool our economy and retrain people who were in the services industry to work in an industrial capacity. That's going to take some time, and surely American-based firms will take advantage of automation, but there's still a substantial amount of manual labor in factories.

The whole idea that 'being social' equates to 'socialism', the bogeyman edition is what will stop for instance the United States from adopting a more social agenda. Free - or at least affordable - public healthcare, public transportation, internet access and access to things like clean water should be a basic standard of living for any country that does not want to be labelled 'third world'. Instead, that whole agenda has been hijacked by parties that make it seem as though being nice & normal to your fellow human beings is somehow a bad thing because once upon a time someone else had an ideology that shared the same prefix.

I think we focus too much on the "should"s and not enough on the mechanisms that make things like public healthcare, public transpo, etc. a reality. Obviously these standards of living cost money. Great. Which is why we have taxes. Great. And in order to have tax revenue, we need productive companies/citizens. Great. So we need to focus on keeping tax revenue high enough to afford healthcare for all including those who can't work or decide not to work. This means keeping the tax rate high enough (Democrats tend to emphasize this). This also means keeping the taxable base high (Republicans tend to emphasize this). These two things are a balance because if taxes are too high, the taxable base (companies/citizens) moves elsewhere. We've seen this at a country/company level and a state/citizen level recently. And if taxes are too low, we cannot afford to provide essential services. Saying that we "should" have this or that without consideration of the delicate balance of how we pay for it seems shortsighted to me. And I know people here are smart, so let's consider the full breadth of the topic and not oversimplify.

The USA is effectively 50 countries with different demographics, geography, culture, and needs. Trying to impose any “one size fits all” solution won’t work because it’s not appropriate for a significant number of them.

What's interesting though is that states that reject the notion of safety nets because "one size does not fit all" are doing the worst. Perhaps if they gave it a try, they might see that it does fit. But then we see that the problem is actually that of bought politicians.

The problem with this thinking is that the states are, for all practical purposes, not able to freely experiment with the things they need to. I agree that there is often no one-size-fits-all solution, but states can't always implement solutions that fit their needs, not because they aren't capable, but because of federal restrictions.

For example, the CA legislature was thinking about a single-payer healthcare bill for CA. Unfortunately, they can't do it on their own: they need special dispensation from the US Congress (and possibly the executive branch? I don't recall the details exactly) to use Medicare dollars in a way contrary to federal rules. That's unlikely to happen in the current political climate.

A cause of this deadlock is that federal taxes aren't optional. Even if CA wants to handle something for itself, it can't just tell all CA residents to stop paying that particular tax to the federal government. The state does get federal money, but it comes with strings attached. Yes, CA's taxes are already some of the highest in the nation, but I'd be fine with a (big) CA tax hike for statewide universal health care if it also meant that my federal taxes would be lower (and CA would be responsible for raising more of its budget on its own, being cut off from federal healthcare-related money). But that's just not how things work.

(Overall, I think this is a good thing: me paying into the nationwide Medicare pool means that states that would otherwise be going through budget shortfalls don't suffer. But it's ridiculous that the federal government is telling my state government what it can and can't do with what's effectively its own money, while I'm subsidizing healthcare for people in other states.)

As sort of a meta-point, the USA is maybe more like 10 or 15 different countries. Sure, there's a lot of difference in needs, values, and attitudes between someone living in Wyoming vs. Baltimore, but the people who live in DC, Baltimore, San Francisco, and Chicago have a lot in common. As do people living in Wyoming and Montana. They're not the same, but they likely have enough in common for single solutions to many problems to apply equally, or equally enough. I'm encouraged by states in the same geographic area coordinating their COVID-19 response; it shows that states with similar needs can (and should!) band together to tackle common issues where the solutions are likely to be similar.

The issue with something like “free” healthcare is that proposed policies like Medicare for all only really talks about the demand side of the equation. It purports to expand the coverage without mentioning how we can pay doctors more so there is more of them, incentivize the private sector to produce (and profit from) top-notch drug treatments, reduce personnel and bureaucratic inefficiencies (which mind you implies layoffs which is the inverse of what government controlled sectors are associated with) etc.

In the absence of that missing supply side conversation, the proposals do start to resemble as forms of socialism i.e a simple redistribution and reversal to the mean with no major improvement to the overall system. Add assumed inefficiencies with government run systems, and you now have a more evenly distributed system but one that’s fundamentally worse in aggregate than the one before i.e. quite literally socialism of the 20th century that’s been tried and failed over and over again.

> It purports to expand the coverage without mentioning how we can pay doctors more so there is more of them

That part of it is actually not complicated: once you dismantle the private health insurance industry, you eliminate billions of dollars of waste and inefficiency that can now go toward actual care. Not saying that there won't be inefficiencies in a government-administrated system, but we actually already know what that looks like (Medicare).

Increasing the number of doctors is another issue, as private industry trade groups effectively set a cap on the number of doctors by limiting the number of teaching hospitals and medical school programs, and how many students they're allowed to take. (It's basically a doctor salary protection racket; limit the supply of doctors and the existing ones will make more money.)

Yes, we know what Medicare looks like.

We don't want "Medicare for all". Really.

Where is "access to clean water" (or frankly, anything on the list) not appropriate?

In rural communities, you're most often getting your water from a well. I grew up in an area like this, with a pumped well and septic system. There was no need for public water infrastructure because the density did not necessitate it, and the natural aquifer more than provided for those needs.

That's fine. Those people have "access to clean water". Any guarantee of such needs to take into account the various ways people obtain clean water, and make sure one exists. It might just be someone noting, "nice, they have a functioning well with plenty of capacity, good to go". If they don't then the government should fix that, either by running a public water system to that location, or drilling a well.

If that's "socialism", then I'm all for it. The idea that we shouldn't ensure that everyone has access to clean water in this age is ludicrous, and, frankly, reprehensible.

Wells and septic systems are often regulated by state and local zoning laws. So, houses are not sellable without these things, as it stands. The initial builder of a house pays for the installation. And then it passes to the next owner as part of the property. Property owners are ultimately responsible. Landlords are responsible for providing clean water in accordance with tenant-landlord law. In U.S. this problem has long been solved. Sometimes you get poor local management like Flint, MI that screws things up. But by and large, solved problem.

I think the charitable interpretation of the comment you're replying to is that we may need ~50 different implementations of "access to clean water," etc.

That presumes providing clean water is somebody else’s problem. It’s not.

Classic American culture is rooted in independence. I honestly don’t grasp the notion that “access to clean water” involves compelling others to make water clean & available cheap/free in large quantity; don’t ruin what water is commonly available, property rights apply, collect what flows/falls on your property ... otherwise it’s up to you to buy or acquire/purify for your own needs.

If an area does not have a suitable source, move. There is no right to live where you like and compel others to alleviate regional inadequacies.

“Access to clean water” is not appropriate where there isn’t any (which includes much of the US), or where water has been ruined beyond reasonable reclamation (Flint, Syracuse, etc).

The USA is a single country with what's effectively two demographics, and one-and-a-half breeds of politician.

"50 countries with different demographics geography culture and needs!" is a complete fabrication. Wyoming doesn't even have a million people in it; implying Wyoming is a country is like implying a go-kart is a jet.

I don’t think culture is population dependent. Baltimore and Wyoming have roughly the same population but very different cultural attitudes, beliefs, ways of life etc. Its hard to make a case they should have the same policies and expect the same results

It's not so much population per se as the urban/rural divide. Baltimore is a city (arguably a megalopolis of Baltimore + Washington DC + Northern Virginia and nearby areas of Maryland). Wyoming, OTOH, is the 10th largest state geographically, the least populous, and literally has more cows than people [0, 1]. If I had to guess, I would say there probably hasn't been a significant number of cows in Baltimore in over 200 years.

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[0]: https://en.wikipedia.org/wiki/Wyoming

[1]: https://www.vox.com/2016/5/3/11504568/states-most-cows

I don’t necessarily disagree, my comment was largely based in response to the OP seeming to think population was major discriminator.

Even at the city level, I think its is too broad of a generalization. Berkeley and Baltimore have roughly the same population density but very distinct cultures

Malta has less than a million people. Is it not a country?

Well, that depends on what you mean by "country," I suppose. If your definition is "independent, sovereign state," then, of course it is. But, so is the Vatican, with its population of ~800 and land area of 0.17 square miles. For perspective, San Francisco has a land area of ~47 square miles.

There aren't many definition of a Country.

The Vatican is not in fact a country, but a city state (or a sovereign microstate) and it is an exception, not the norm.

It is anyway an independent state with sovereignty, it signs treatise with other states (like the Lateran treaty that binds it to Italy) has its own official language (Latin) its own calling code (+379) its own ISO 3166 code (VA) and its own Internet TLD (.va) so it more or less works as any other independent country out there.

And even though the actual resident population is very small, they have properties all over the World, they are in fact one of the most powerful countries in the World serving over 1.2 billions catholics (it's even 18th in the World for GDP per capita, even though the Vatican wealth is not really expressed by the GDP).

If you look at it that way, Vatican State is more of a country than Kansas will ever be.

Luxembourg has a population of 600 thousands people

Lichtenstein has 38 thousands citizens

There are 164 countries in the World with less than one million citizens and 159 with one million or more

https://en.m.wikipedia.org/wiki/List_of_countries_by_populat...

wyoming has more than ten times the population of lichtenstein and more than one thousand times the land area.

No it's not, and the US is far from the only country that has a diversity of culture. The Canadian maritime provinces are extremely different from Nunuvut or downtown Vancouver. Paris is significantly difference than Nice. Shanghai is significantly different than Xinjiang province.

This is yet another annoying expression of American exceptionalism. Of course, it only ever comes up when someone says, "Maybe we should stop people dying because they can't afford healthcare."

The US is probably one of the most culturally uniform countries of any significant size I can think of honestly.

I know. People have this idea that "socialism is when the government does stuff," if you'll excuse me in referencing a meme. They think Scandinavia is socialist because it has those things, but it is not: Norway, Sweden, Denmark, Finland, and Iceland are really social democracies. That is, they're capitalist countries with strong regulation and a social safety net.

I'm not entirely sure whether full on socialism will ever happen in the US short of total collapse and reconstruction, but we can certainly take steps toward social democracy. Unfortunately, the major parties in power don't want to do that, instead pushing forward their laissez-faire neoliberal agenda.

The real problem here is first past the post voting, and the way election law is structured to keep the 2 major parties in power. We need to get rid of first past the post and reform election law before we can make any real changes.

And, annoyingly, that requires those parties to lose at least one election so they are incentivized more strongly than ever before to cast the current system in concrete. It pretty much guarantees the see-saw two party system for the foreseeable future. Imagining how America would look under a coalition government is an interesting exercise.

The 'ism' is about control, not about benefit.

Philosophically I agree that we need a better system the benefits everyone, and I agree with the gist of your comment.

However saying we need socialism skips over the most important part of it -- the mechanism to achieve that. That's the hard part that we haven't quite figured out and need to discuss. The current narrative assumes that simply funnelling the money through government for redistribution fixes the problem. It doesn't. It makes things a lot worse.

Please don't take HN threads into generic ideological arguments. They're all the same, therefore tedious, therefore off topic here.

They also get dumber and nastier as they go along, so we end up with https://news.ycombinator.com/item?id=22904776 and https://news.ycombinator.com/item?id=22904923.

https://news.ycombinator.com/newsguidelines.html

How hard is this honestly...

Socialism -- Worker ownership of the means of production.

Socialism is not "when the government is big" or "when the government does things".

A big federal government is not socialism. Norway is not socialism. Heath care is not socialism. Unions are not socialism. China is not socialism (charitably it's a state-captialist government with the goal of achieving socialism, realistically it's an authoritarian state-capitalist government).

Maybe you use a big or authoritarian federal government to try to achieve socialism, but a big federal government is not necessary or sufficient for socialism.

Except you can't really have such a thing as a large group of people have an equal say in control of anything, c.f. democracy. It is the mechanics that are the issue.

If you are talking about workers being "shareholders" then that's still capitalism.

The reason government comes into play in socialism is because you still need decision makers and decision makers concentrate power. You have a democracy today that is basically turning into an oligarchy, and the belief is that by some magic if we transferred control of "means of production" to workers this would change.

Ok, divide Amazon's shares across its workers. What have you changed? Who comes up with the list of options for them to choose from? What happens to their stock aka "control" once they leave the company? There are a million tiny details which when you work through show you why it is not workable and at best you end up back here today.

The fundamental problem we are dealing with is allocation of resources, and the masses not being sufficiently informed to make decisions. Until you solve that problem every system you put in place corrupts, some worse than others and some with few mechanisms for correction and recovery.

> Except you can't really have such a thing as a large group of people have an equal say in control of anything, c.f. democracy. It is the mechanics that are the issue.

Sure, you might disagree that socialism is possible without big government, but that has nothing to do with the definition. My only point is that it doesn't inherently have anything to do with control. The problem with saying that socialism means big government is it associates it with decades of red-scare propaganda and makes all discussion impossible.

> If you are talking about workers being "shareholders" then that's still capitalism.

Not really, if the workers have ownership over the company and the capital, then they "own the means of production".

> The fundamental problem we are dealing with is allocation of resources, and the masses not being sufficiently informed to make decisions. Until you solve that problem every system you put in place corrupts, some worse than others and some with few mechanisms for correction and recovery.

Sure, resource allocation is hard, but "lets just let the rich/monarchs/the lizard people decide" is a cop-out.

For what it's worth, you should probably engage with some 'real' socialist literature beyond just sound bites from Twitter. Many of these questions are considered. Richard Wolff might be an interesting starting point.

> Sure, you might disagree that socialism is possible without big government, but that has nothing to do with the definition. My only point is that it doesn't inherently have anything to do with control. The problem with saying that socialism means big government is it associates it with decades of red-scare propaganda and makes all discussion impossible.

I didn't say that at all. You can review my comments. But the point is that socialism doesn't distribute power, it concentrates it because "society" is never in control of anything. They'll elect representatives and they will be in charge. It is something that would work, provided human nature didn't exist.

> Not really, if the workers have ownership over the company and the capital, then they "own the means of production".

Shareholders have control over capital and have ownership.

> Sure, resource allocation is hard, but "lets just let the rich/monarchs/the lizard people decide" is a cop-out.

That's not what anyone is saying and that's not what is happening today.

There may be some who have a philosophical difference about "many" being in charge versus a "few". But just because I believe that in plurality of power it doesn't mean I believe socialism is the best way to get there.

I am not going by Twitter here. I have read a lot on the subject. Most of what I see uses socialism as a shorthand for "common good" and capitalism as shorthand for "greed". It is incorrect.

As an analogy, imagine if we're taking about ethics and morality and how to have a better and just world. If this was 100 years ago in the west, "Christianity" would be shorthand for morality and "Atheism" synonymous with evil, greed, and depravity. We've moved beyond that today and realized that neither of those will necessarily lead to a more moral or just world, and that ethics and morality are nuanced topics with a lot of details to be worked out. Simply being Christian doesn't make you one or the other, although hard to prove that to an average American in 1895. Furthermore, of the two, one is more static, dogmatic, and leads to corruption. I view the socialism and capitalism debate in the same vein.

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I have a pessimistic view about this aspect of the future and I think your first option is vastly more likely. We have too many people who have their entire self worth wrapped up in their employment, too many people who look down on the very concept of being unemployed (i.e. "Protestant work ethic"), and in the USA, racial divisions complicating the matter tremendously.

The best I can hope for is a reduction in the number of people who open a conversation with a stranger with "So, what do you do for a living?" as if that's the most important or interesting question to ask someone.

I think the challenge here is the government is probably offering better terms than can be expected from Buffet. If someone is offering me free money, and someone will give me money if I give them control of my company guess which one I'm calling first.

I wonder if that means Berkshire's recent bond offering was a mistake: https://www.fool.com/investing/2020/04/12/this-warren-buffet...

Berkshire has always held a ton of cash for just such an occasion. They can just buy up equity on the open market and take substantial control of a company. But, did they need even more money?

It's Yen-denominated debt-- mostly useful to Berkshire so they can make Yen-denominated investments without currency risk. It's at less than 1% a year, which costs virtually nothing given the options it opens up for Berkshire. And you'll note that that debt makes up less than 1% of its total cash position, it's really just there so Berkshire can buy something quickly in Yen if an opportunity shows up.

oh man. nothing you have said make any kind of sense.

if they have yen-denominated debt, then they have added currency risk

if it is 1% of their cash position, they can just use some cash and buy yens and have those yens available.

if they have hedged the bond currency risk, then they might as well have hedged it after buying yens in the open market

if it's 1% interest, it is still probably more than the interest they earn on their cash position.

just saying...

(MAYBE, maybe, its a tax issue)

You're coming at this from a "hedging" perspective-- Instead, think in terms of what the bond gives him-- a lot of Yen. That's opportunities to invest. The increased "risk" in this sense is miniscule-- since the cost of the oppurtunity is less than 1% Yen a year, even a 200% rise in Yen/USD only actually costs Berkshire 2%.

And, my bet is Buffett knows of some companies he could deploy that Yen in right now to cover the interest anyway. He's just lying in wait for better oppurtunities.

Now, there could be some other thing going on-- but taxes-wise in general U.S. companies issue US-denominated bonds to repatriate funds so I'm sure where you're going with that. My bet would be if it's not just for the opportunity, it may for their re-insurance reserves.

This doesn't make any sense. Issuers don't need to pre-fund acquisitions before making offers so BRK wouldn't need any JPY before acting and in the event of an acquisition closing, they would easily be able to issuer in any currency on earth. Don't know the name well at all but BRK issued in JPY last year as well so I'm guessing they have some recurring JPY liabilities.

What doesn't make sense to you? They're "buying" Yen and paying extraordinarily low long-term rates. Berkshire can't get USD that cheaply. If they had a cash crunch, they could exchange the Yen for USD. If things are well, they can buy Yen-denominated companies with an enormously low cost of capital and without factoring in the exchange rate.

BRK issues regularly at the insurance company level. I wouldn't overthink it. Even with the recently issued USD bonds much wider, they're still yielding around the same at issue with rates much lower. Strong issuers like BRK should be taking advantage of much lower rates and extreme demand for investment grade bonds right now to refinance higher coupon debt.

It was the right decision at the time. It's unlikely anyone could've predicted the Federal Reserve and the Treasury Dept would've stepped in with unlimited support before the recent self-imposed economic collapse.

They announced their intention to offer bonds in late March, well after it was generally known that the government intended to step in.

I don't believe it was until early April when the full force of support was evident.

https://news.ycombinator.com/item?id=22822869

The recent Fed announcements mostly served to reopen the high yield primary market and the investment grade markets were wide open well before that; especially for a strong issuer like BRK.

>Berkshire has always held a ton of cash for just such an occasion.

Perhaps the occasion hasn't presented itself yet...

The US government as considered taking equity stakes, too.

https://www.marketplace.org/2020/03/20/covid19-financial-bai...

The US government is receiving warrants as part of the airline bailouts. In the case of AAL, they could potentially dilute existing shareholders by 10%. Ridiculously generous terms on everything considering the alternative.

https://archive.is/eAFo7

Is there any workaround to view this? I get 403.

Edit: Nevermind, the workaround is to set default DNS to something other than cloudflare. Oddly I didn't expect that I was on 1.1.1.1 as I'm on Ubuntu but dual boot Win10, with windows already set to 8.8.8.8/8.8.4.4 and default Xfinity DHCP on linux (never got around to setting it on linux). Now I'm wondering whether xfinity DHCP or Ubuntu sets 1.1.1.1, and whether thats actually going directly to cloudflare or passing through xfinity DNS on the way to cloudflare. Some digging ahead.

This now returns a 403 Forbidden, probably related to the ongoing problems between archive.is and Cloudflare.

Are there alternatives to archive.is?

curious FF / Safari through up security warnings for archive.is and archive.today. going at them from a roundabout way gives me a CloudFlare DNS error page. this's been going on the last week or so. wonder what the problem is?

Don't know about the FF thing but here's the CloudFlare thing straight from their CEO--

https://news.ycombinator.com/item?id=19828702

that explains the trouble I'm having. i have my local network resolving to 1.1.1.1. Or was it 9.9.9.9? Or 8.8.8.8?

i'll have to dig into this a bit more. thanks!

it's always dns :-)

I didn't see anything on iPhone Safari.

Are you working remote on a company VPN?

No amount of govt money will ever cause inflation again. The tools for govt intervention (the Fed rate, quantitative easing through the purchase of Tbills,etc) may have been effective in the time when the world was simpler (Remember 'It's a Wonderful Life' with James Stewart?). But loans from banks do not drive the economy any more. In fact many businesses look to VCs, and angels. Loans are for chumps. So what DO these tools do? Where does the money go? It goes to places that will generate the highest ROI - other financial opportunities and investments removed from the real world. In fact, I would interpret that skyrocketing stock market as evidence of too much money chasing too few equities. There may be 'inflation' of equities prices, bond prices, REIT prices, etc. But unless the money gets into the hands of the people who need a house or need a job or need food, it won't help the economy. Adam Smith's laws and the 'invisible hand' of the market assumes a continuous distribution of currency transacted by rational agents with equal access. Instead the world is quantized and now a large fraction of the population are below the threshold where these interventions are meaningful.

Yes. The system is inherently unproductive. Pumping more money into it like giving a sedentary person more calories and expect their physique to end up like an athlete's.

But you can also pump that money into the hands of people and have the same problem. If you give everyone 10K you haven't change affordability. If you give everyone 10K you haven't changed relative food prices. There are more fundamental problems to be solved.

Exactly this. Just Fed/Treasury crediting $1B to every billionaire in the states won't help the economy; it just helps this rich to chase after financial assets (stocks), real estate (mega mansions), arts/paintings (picasso, van gough, etc), mega yachts, names on buildings, etc.

The stock market is at its most expensive on a forward p/e basis. There is nothing about this supposed recession that has made stocks cheap for a firm like Berkshire to scoop up.

Value investing has been replaced by government support. Big companies like airlines are not allowed to "get cheap" anymore. From Berkshire Hathaway alone, there are hundreds of billions of dollars of private money waiting to step in during times like these. Instead, we will "bail out" aggressively managed companies and encourage all big companies to be more aggressive going forwards. Because they have a government backstop preventing them from failure. This will lead to more bailouts in the future, the burden of which falls to all American taxpayers. We are deviating from the incentives that make capitalism such an effective force.

A counterpoint and a reason for hope: After the 08 crisis, the big banks were required to keep aside a lot more money in reserves, agree to periodic stress tests by regulators, and forgo certain risky activities(proprietary trading).

Now regulators/management are pretty confident that the banking sector is robust and a 08 like crisis cannot happen again.

I spent two years studying US regional banks and I can tell you that what you're saying is factually correct. 08 effectively nationalized the big banks. "Too big to fail" means any bank over a certain asset size will be rescued by the government if it gets into trouble. Basically, bankers get the upside if loans go well, taxpayers get the downside if they don't. The worst kind of nationalization. But the 08 regulations were so stringent that it would be very hard for banks to fail. Like you said. However, since that time, politicians decided that the regulations of 08 were too constricting to banks and were hurting small and medium biz growth. So a bipartisan coalition in Congress lifted the regulations for all banks <$250Bn asset size. Deregulation. So now, these bankers are free to chase profits without the chains from 08 and if their banks end up failing, we will still bail them out. The worst of both worlds.

Keep in mind, this is a totally unprecedented government mandated shut down to the economy, not the result of overly aggressive fiscal management.

Yes, this is the 2nd totally unprecedented economic "black swan" in the past 12 years. But I agree with you. The cause may always be different, but the problem lies in the principle. We are bailing out airlines because we cannot "afford" to let airlines fail. We bailed out banks in 08 because we could not "afford" to let big banks fail. There are actually airlines that don't need bailout money just as there were big banks that didn't need TARP money after 08. Some would call these companies "better managed". If we don't rescue the failing companies, they would then have to accept terrible terms from value investors like Munger and their equity would be worth a lot less than the equity at the "better managed" companies. This is proper incentive alignment. Having the government step in and protect the equity of failing companies will always result in misaligned incentives. By the way, employees at the failing companies fare pretty much the same whether the government or Munger steps in.

Great points all around. Also consider that those 'better managed' companies are effectively penalized for NOT rewarding their investors in the past, when they could have instead paid out dividends or buybacks and hope for a government savior if things get bad fingers crossed

https://archive.md/eAFo7

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