The Spring 2009 issue of Stanford Lawyer contains an interview with Berkshire Hathaway Vice Chairman Charlie Munger. A streaming video has also been provided. Munger is a longtime donor to Stanford University, most recently funding new graduate school residences, and has often made himself available to the law school community. Let’s take a look at a few excerpts from the interview:
Culpability of the Accounting Profession
Question: As we look at the current situation, how much of the responsibility would you lay at the feet of the accounting profession?
Munger: I would argue that a majority of the horrors we face would not have happened if the accounting profession developed and enforced better accounting. They are way too liberal in providing the kind of accounting the financial promoters want. They’ve sold out, and they do not even realize that they’ve sold out.
Question: Can we fix the accounting profession?
Munger: Accounting is a big subject and there are huge forces in play. The entire momentum of existing thinking and existing custom is in a direction that allows these terrible follies to happen, and the terrible follies have terrible consequences. The economic crisis that we’re in now is, in its triggering circumstances, worse than anything that’s ever happened.
The Federal Reserve’s Balance Sheet Expansion
Question: The Federal Reserve is today buying assets that it wouldn’t have even considered looking at a year ago.
Munger: I think the problem is so extreme that nothing non-extreme has any chance of working. I like the fact that it is so willing to do things that have never been done before, because we have problems that we have never seen before. I am a right-wing Republican, and I like the fact that Obama has put into the White House Larry Summers, who is a ferociously smart human being and will try to do the right thing even if it offends some people. I think that’s a quality that we need right now.
President Obama and the Stimulus Plan
Question: What do you think of the job that President Obama is doing so far?
Munger: Given the circumstances, I think he’s doing very well indeed. I don’t want to trade him in at the moment for any other Democrat.
Question: Do you have any views on the fiscal side of things—the mix of fiscal stimulus, tax cuts, and the like?
Munger: We have to save the financial system, in spite of our revulsion about the way many of its denizens behave. We also need a huge spending stimulus from the federal government. We have a whole lot of things that are worth doing. By and large, the president does not plan to have people standing around holding shovels in the middle of some forest. He is talking about fixing infrastructure and so on. In the city of Los Angeles, where I live, the streets are a disgrace compared with the streets in Japan. Japan had so much fiscal stimulus that you can’t find a pothole on a side of a mountain.
The Importance of Avoiding Mistakes
Question: You’ve often said that one of the keys to your success has simply been to avoid making the garden-variety mistakes that you see other people make.
Munger: Warren and I have skills that could easily be taught to other people. One skill is knowing the edge of your own competency. It’s not a competency if you don’t know the edge of it. And Warren and I are better at tuning out the standard stupidities. We’ve left a lot of more talented and diligent people in the dust, just by working hard at eliminating standard error.
Career Advice for Young Lawyers
Question: So turn the clock back. Imagine that you’re a young law school graduate from a top law school, one of the top grads the same way you were several years ago, what advice would you give to a graduate looking at the world today?
Munger: Well, that’s easy. I would avoid fields where prosperity depended to a considerable extent on misbehavior. I would not go into a plaintiffs’ law firm. I would be afraid of what that would do to me. And I would want to work for people at a business that I admired, and I would take less money to do that.