Buffett and Munger on Success, Toxicity and Elon Musk | Kanebridge News
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Buffett and Munger on Success, Toxicity and Elon Musk

The Berkshire Hathaway CEO, with business partner Charlie Munger, spent hours this weekend discussing life and career choices

By CHIP CUTTER
Tue, May 9, 2023 8:39amGrey Clock 3 min

The question was a philosophical one: How should you avoid major mistakes in business and life?

Warren Buffett, the 92-year-old chairman and chief executive of Berkshire Hathaway, paused briefly.

“You should write your obituary and then try to figure out how to live up to it,” Mr. Buffett said. “It’s not that complicated.”

At Berkshire’s annual shareholder meeting on Saturday, an event that draws thousands to Omaha, Neb., each spring, Mr. Buffett and his longtime business partner, Charlie Munger, spent hours weighing in on topics as varied as the recent banking turmoil to artificial intelligence and the future of the U.S. As is typical at such gatherings, the executives also doled out plenty of advice on management practices, career choices and how to enjoy a good life.

In prior years, Mr. Munger has heaped scorn on consultants, compensation specialists and what he described as make-work activities inside U.S. companies. This weekend, he directed his ire at wealth managers.

“Having a huge proportion of the young and brilliant people all going into wealth management is a crazy development in terms of its natural consequences for American civilisation,” Mr. Munger said. “We don’t need as many wealth managers as we have.”

He added: “I don’t think a bunch of bankers, all of whom are trying to get rich, leads to good things.”

Mr. Buffett, for his part, said he wanted to see greater accountability inside banks, saying that the recent crisis in the industry illustrated why executives and board members should face consequences if a business encounters problems.

“If the CEO gets the bank in trouble, both the CEO and the directors should suffer,” Mr. Buffett said. “You’ve got to have the penalties hit the people that cause the problems, and if they took risks that they shouldn’t have, it needs to fall on them if you’re going to change how people are going to behave in the future.”

Over hours of questions from investors and others, the two billionaires often peppered their answers with recommendations on how to navigate business. Mr. Buffett advised that people pay attention to how others might try to manipulate them.

He also encouraged those in attendance to resist the temptation to criticise or vilify others.

“I’ve never known anybody that was basically kind that died without friends,” Mr. Buffett said. “And I’ve known plenty of people with money that have died without friends.”

Mr. Munger said that success comes from steering clear of toxic people.

“The great lesson of life is get them the hell out of your life—and do it fast,” Mr. Munger said.

When hiring some of his top leaders over the years, Mr. Buffett said he has tried to suss out someone’s talents and not focus on whether they attended a prestigious institution.

“I have never looked at where anybody went to school in terms of hiring,” Mr. Buffett said. “If somebody mails me a résumé or something, I don’t care where they went to school.”

One of Mr. Buffett’s top lieutenants, Ajit Jain, studied at Harvard Business School, “but he isn’t Ajit because he went to those schools,” Mr. Buffett said.

Mr. Buffett graduated from the University of Nebraska-Lincoln and later studied under the legendary value investor Benjamin Graham at Columbia University. Mr. Munger, who is 99 years old, studied mathematics at the University of Michigan and meteorology at the California Institute of Technology, and went on to earn a law degree from Harvard University.

On artificial intelligence, Mr. Buffett said he had been impressed at generative AI’s abilities to summarise legal opinions and potentially take on other tasks, though he said he also worried about its potential consequences. “It can do all kinds of things, and when something can do all kinds of things, I get a little bit worried because I know we won’t be able to uninvent it,” Mr. Buffett said.

Mr. Munger said he was skeptical of some of the hype around artificial intelligence. “I think old-fashioned intelligence works pretty well,” he said.

Near the end of the meeting, an audience member asked the two billionaires to weigh in on Elon Musk, the SpaceX and Tesla CEO who took control of the social-media platform Twitter last year.

Mr. Buffett called Mr. Musk a “brilliant, brilliant guy,” who had a much different approach in dreaming about the future than the Berkshire executives. Mr. Buffett has often said he takes a hands-off approach to managing Berkshire’s subsidiaries, which range from the insurer Geico to the restaurant chain Dairy Queen. Mr. Musk is known for weighing in on the details at his companies.

“He would not have achieved what he has in life if he hadn’t tried for unreasonably extreme objectives,” Mr. Munger said of Mr. Musk. “He likes taking on the impossible job and doing it. We’re different: Warren and I are looking for the easy job.”

Mr. Buffett said he didn’t want to compete against Mr. Musk, to which Mr. Munger added: “We don’t want that much failure.”

Mr. Musk tweeted Saturday that he appreciated the “kind words from Warren & Charlie.”



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China’s EV Juggernaut Is a Warning for the West

Competitive pressure and creativity have made Chinese-designed and -built electric cars formidable competitors

By GREG IP
Thu, Jun 8, 2023 4 min

China rocked the auto world twice this year. First, its electric vehicles stunned Western rivals at the Shanghai auto show with their quality, features and price. Then came reports that in the first quarter of 2023 it dethroned Japan as the world’s largest auto exporter.

How is China in contention to lead the world’s most lucrative and prestigious consumer goods market, one long dominated by American, European, Japanese and South Korean nameplates? The answer is a unique combination of industrial policy, protectionism and homegrown competitive dynamism. Western policy makers and business leaders are better prepared for the first two than the third.

Start with industrial policy—the use of government resources to help favoured sectors. China has practiced industrial policy for decades. While it’s finding increased favour even in the U.S., the concept remains controversial. Governments have a poor record of identifying winning technologies and often end up subsidising inferior and wasteful capacity, including in China.

But in the case of EVs, Chinese industrial policy had a couple of things going for it. First, governments around the world saw climate change as an enduring threat that would require decade-long interventions to transition away from fossil fuels. China bet correctly that in transportation, the transition would favour electric vehicles.

In 2009, China started handing out generous subsidies to buyers of EVs. Public procurement of taxis and buses was targeted to electric vehicles, rechargers were subsidised, and provincial governments stumped up capital for lithium mining and refining for EV batteries. In 2020 NIO, at the time an aspiring challenger to Tesla, avoided bankruptcy thanks to a government-led bailout.

While industrial policy guaranteed a demand for EVs, protectionism ensured those EVs would be made in China, by Chinese companies. To qualify for subsidies, cars had to be domestically made, although foreign brands did qualify. They also had to have batteries made by Chinese companies, giving Chinese national champions like Contemporary Amperex Technology and BYD an advantage over then-market leaders from Japan and South Korea.

To sell in China, foreign automakers had to abide by conditions intended to upgrade the local industry’s skills. State-owned Guangzhou Automobile Group developed the manufacturing know-how necessary to become a player in EVs thanks to joint ventures with Toyota and Honda, said Gregor Sebastian, an analyst at Germany’s Mercator Institute for China Studies.

Despite all that government support, sales of EVs remained weak until 2019, when China let Tesla open a wholly owned factory in Shanghai. “It took this catalyst…to boost interest and increase the level of competitiveness of the local Chinese makers,” said Tu Le, managing director of Sino Auto Insights, a research service specialising in the Chinese auto industry.

Back in 2011 Pony Ma, the founder of Tencent, explained what set Chinese capitalism apart from its American counterpart. “In America, when you bring an idea to market you usually have several months before competition pops up, allowing you to capture significant market share,” he said, according to Fast Company, a technology magazine. “In China, you can have hundreds of competitors within the first hours of going live. Ideas are not important in China—execution is.”

Thanks to that competition and focus on execution, the EV industry went from a niche industrial-policy project to a sprawling ecosystem of predominantly private companies. Much of this happened below the Western radar while China was cut off from the world because of Covid-19 restrictions.

When Western auto executives flew in for April’s Shanghai auto show, “they saw a sea of green plates, a sea of Chinese brands,” said Le, referring to the green license plates assigned to clean-energy vehicles in China. “They hear the sounds of the door closing, sit inside and look at the quality of the materials, the fabric or the plastic on the console, that’s the other holy s— moment—they’ve caught up to us.”

Manufacturers of gasoline cars are product-oriented, whereas EV manufacturers, like tech companies, are user-oriented, Le said. Chinese EVs feature at least two, often three, display screens, one suitable for watching movies from the back seat, multiple lidars (laser-based sensors) for driver assistance, and even a microphone for karaoke (quickly copied by Tesla). Meanwhile, Chinese suppliers such as CATL have gone from laggard to leader.

Chinese dominance of EVs isn’t preordained. The low barriers to entry exploited by Chinese brands also open the door to future non-Chinese competitors. Nor does China’s success in EVs necessarily translate to other sectors where industrial policy matters less and creativity, privacy and deeply woven technological capability—such as software, cloud computing and semiconductors—matter more.

Still, the threat to Western auto market share posed by Chinese EVs is one for which Western policy makers have no obvious answer. “You can shut off your own market and to a certain extent that will shield production for your domestic needs,” said Sebastian. “The question really is, what are you going to do for the global south, countries that are still very happily trading with China?”

Western companies themselves are likely to respond by deepening their presence in China—not to sell cars, but for proximity to the most sophisticated customers and suppliers. Jörg Wuttke, the past president of the European Union Chamber of Commerce in China, calls China a “fitness centre.” Even as conditions there become steadily more difficult, Western multinationals “have to be there. It keeps you fit.”

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