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BYD: Losing a good teacher and friend

author| Wang Lei Chumen

edit| Qin Zhangyong

Why is Charlie Munger great?

His wealth is far less than Buffett's. At every shareholder meeting, he often says,"I have nothing to add."

Under the halo of the stock god, he was more like a deputy and never thought of stealing the limelight.

But that didn't stop his fans at home from admiring him. Charlie Munger died in a California hospital on November 28th at the age of 99. After the news reached the other side of the ocean, the message commemorating Munger was also brushed.

Source: Berkshire Hathaway Inc. Unlike Buffett, Munger has far more fans in China than in the United States. His words are: "My fans are mainly Chinese and Indian nerds who have a great enthusiasm for self-improvement. "

On the one hand, he highly praised Confucius thought and thought he was the practitioner of Confucius thought in America. This fits well with the classic Confucian image that hard work and love of learning are the shortcuts to success.

From an investment perspective, Munger is also firmly optimistic about China's long-term development. He believes that China's economy has better prospects in the next 20 years than almost any other large economy, and China's leading enterprises are stronger and better than giants anywhere else.

In his last interview, Munger talked about the Chinese market and spoke highly of Wang Chuanfu, calling BYD a miracle."That guy (Wang Chuanfu) works 70 hours a week and has a very high IQ. "

As a legend in the investment world, Munger has also made a lot of contributions to the automobile industry. Next, let's talk about this legendary tycoon's views and cognition on the automobile industry.

01. Talk about BYD: The most successful investment In 2008, Buffett's Berkshire Hathaway Company officially spent US $230 million to buy 225 million BYD H shares at a price of HK $8 per share, with a total transaction volume of about HK $1.8 billion, equivalent to 10% of BYD's total share capital at that time.

This investment not only made BYD the focus of the world, but also made Berkshire rich afterwards. Charlie munger was the one who prompted buffett to buy byd shares.

Berkshire has invested in BYD for 15 years now, and although it began to reduce its holdings last year, Berkshire remains BYD's second-largest shareholder in H shares, and its investment in BYD has returned more than 20 times.

Munger has said more than once that investing in BYD was the most successful case of his investment career.

Earlier this year, Munger, 99, attended the Daily Journal's annual shareholder meeting and said in response to questions from investors around the world that their investment in BYD is now worth about $8 billion or 9 billion (about 54.6 billion yuan or 61.5 billion yuan), and no company has a better return on investment than BYD.

And such things don't happen all the time. Munger thinks it might happen once in a lifetime.

Two years after buying BYD, Munger mentioned BYD at a conference that he was very satisfied to find such a good company as BYD.

Over the years, there have always been people wondering why they chose BYD.

Munger didn't answer this question directly, but he praised BYD many times and Wang Chuanfu himself.

Munger said that under Wang Chuanfu's leadership, BYD started from scratch and became one of the major manufacturers of rechargeable lithium batteries in the world, then entered the field of mobile phone parts and built a huge enterprise empire. Then Wang Chuanfu entered the automobile industry.

"As far as I know, this is a zero-experience automobile enterprise, starting from scratch, with very little capital, quickly created China's best-selling single model."

Munger and Buffett were asked that BYD seemed more like a venture investment than a value investment. But Munger said in 2010 that he himself had little interest in venture capital, that he believed BYD could do it, and that he did not think he was doing venture capital. In his view, BYD was a company that could not succeed.

In the global competition for new energy electric vehicles, Munger believes that BYD is in a leading position because of outstanding leaders and unique domestic culture.

In Munger's eyes, Wang Chuanfu is more like a protagonist who has taken the inspirational "Big Male Owner" script. Peasant origin, through their own efforts to enter the university, step by step to today.

He believes that Wang Chuanfu is a genius and a workaholic who can do things that ordinary people cannot do. For example,"Wang Chuanfu can look at the parts of other automobile manufacturers and figure out how to manufacture them. "

02. Tesla: A 180-degree shift in attitude "Musk is a man who overestimates himself, but he is still a genius. "

Unlike BYD and Wang Chuanfu, Munger rarely discusses Tesla and Musk in public.

Perhaps it was because Munger was initially not optimistic about Tesla.

In February, Musk tweeted that he had lunch with Charlie Munger 14 years ago, in 2009, when Musk tried to pull an investment for his company and persuaded Munger to invest in Tesla, but Munger refused.

Not only did Munger reject Tesla, he believed Tesla was doomed, detailing to everyone at the table that day how he thought Tesla might fail.

Musk said he was heartbroken, but told Munger,"I agree with all the reasons you say, we may fail, but it's worth a try anyway." "Tesla's market value at that time was only about 200 million US dollars, 0.04% of its current market value.

Indeed, Tesla was teetering on the brink of death. According to Silicon Valley Iron Man, Tesla ran out of money in late 2008 before a passenger car went on the market, Musk borrowed money from all friends who might squeeze out a little money, completed a financing on Christmas Eve, and Tesla might have declared bankruptcy a few hours later.

Musk also admitted in a tweet in 2020,"Frankly, early on I thought there was more than a 90% chance SpaceX and Tesla were worth $0." "

Between value investors and growth investors, Munger is a typical value investor. So Munger's view of Tesla's decline at that time was not unreasonable, after all, the stability of investing in BYD was much higher than Tesla's.

Interestingly, 13 years later, Munger was asked in an interview with CNBC if he remembered the lunch. He replied,"I have forgotten it. It was a long time ago."

It was also in this interview that he gave Tesla a highly positive evaluation for the first time,"Tesla has made some real contributions. We haven't had a successful new car company in a long time, but Tesla has done it. Musk did something good that no one else could, and Tesla was a minor miracle. "

Munger, who once called himself a "collector of follies," made mistakes and corrected them. Tesla, apparently, has probably entered his "folly collection."

That is, since that CNBC interview, Munger's position on Tesla has changed a lot, and he no longer sings Tesla in public. However, he still maintains his attitude."Although he will not buy Tesla shares, he will not short Tesla. "

At this year's Berkshire Hathaway shareholders 'meeting, Munger gave his most objective evaluation of Musk during his lifetime."I think Elon Musk overestimates himself, but he is very talented. Even if he overestimates himself, he is still a very talented person. "

He also said,"We're just playing games, and he's doing big things, and he wouldn't have achieved so much if he hadn't worked for unreasonable extreme goals." Munger has made no secret of his appreciation for Musk, saying that he just chooses easy things to do and does not want to compete with Musk.

This practice is also in line with Munger's oft-warned passage-

When you're out of your zone of competence, you say,"this is so hard, I'll never understand it." I am doing very well in this respect. When I meet something I can't handle, I admit defeat.

03. Talk about the automobile industry: Reduce investment Charlie Munger. Although he is a top investment tycoon and has been involved in various industries, he has always been cautious about the automobile industry. And the auto industry has been relatively marginal in Berkshire Hathaway's portfolio.

Not only that, when BYD acquired Qinchuan Automobile Company to prepare for entering the automobile field, Munger also warned BYD to stay away from the "grave" automobile business."That is a grave for you, and why do you want to do this? "。

Munger recently appeared on the business podcast Acquired, where he spoke about his views on the auto industry and auto manufacturing.

Munger believes that it is very difficult to invest in the automobile industry now and to make high profits. No one knows who will be the final winner in the competition for new energy vehicles.

He believes that the emergence of electric vehicles has completely changed the entire automobile industry. It takes a lot of capital to enter the automobile industry. Car sales are also very different from before. There are also increasingly strong automobile unions."Let everything float in the air and hang in the air." Munger bluntly said that he even "doesn't look at the automobile industry."

Because of the disruptive innovation of new energy electric vehicles, Munger believes that today's automobile industry is not necessarily worth investing in compared to 50 years ago. "Maybe it's worth it for one or two really good EV companies, but certainly not for others," he said in the podcast. "

Asked about investing in Hyundai, Munger said they were smart, too. I lost some money but not much. I was stubborn and held out until I almost got my money back.

During more than five hours of Q & A at this year's Berkshire Hathaway shareholders 'meeting, topics related to the auto industry were repeatedly mentioned. Asked about investment opportunities in electric vehicles, buffett and charlie munger agreed that the auto industry is competitive and volatile.

Munger said that today's new energy electric vehicles have entered the market with great momentum, which is interesting, but if we want to deploy related assets now, there will be greater risks.

Buffett, his old partner, agrees, saying they know where Apple is going in five or 10 years, but they don't know what the auto industry is going to be like, so they spend less money on cars. Munger added,"yes, very little."

This article comes from Weixin Official Accounts: SuperEV-Lab (ID: SuperEV-Lab), author: Wang Lei Chumen

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