![What I Learned Growing Up In The Great Depression - Charlie Munger | Michigan Ross 2017【Ep.224】](http://www.yapss.com/cdn/shop/articles/Collection_Charlie_Munger_224.png?v=1713076357&width=1100)
What I Learned Growing Up In The Great Depression - Charlie Munger | Michigan Ross 2017【Ep.224】
[Transcript]
SCOTT DERUE: I'd like to go back to your early childhood in Omaha, Nebraska. So you were raised in Omaha, and what are some of the moments in your experience in Omaha that you really find memorable that shaped you and who you are today and how you think? Can you talk a little bit about growing up in Omaha?
CHARLIE MUNGER: Well yes, I really liked Omaha. It was a size where I knew a lot of the people, no matter what they did – Actually I wasn't lost in a great metropolis. And I was very fortunate in my nature of my parents, and my parents friends, and I was fortunate in the public schools I attended were pretty remarkable by the standards of the time.
And of course, most of my schooling was in the Great Depression, but that means I'm one of the very few people that's still alive who deeply remembers the Great Depression. That's been very helpful to me. It was so extreme that people like you have just no idea what the hell was like. (Laughter)
It was really there was just nobody had any money. The rich people didn't have any money. People would come and beg for a meal at the door, and we had a hobo jungle not very far from my grandfather's house. And I was forbidden to walk through a good amount, so I walked through it all the time. (Laughter)
And I was safer in that hobo jungle the depths of the 30s when people are starving, practically, than I am walking around my own neighborhood now in Los Angeles at night. The world has changed on that. You'd think the crime would be less [now], but the crime was pretty low in those days.
So anyway, I saw I had a very unusual bunch of experiences, to go through civilization in various phases including the greatest recession. Well, I say it's one of the greatest recessions and 600 years in the English-speaking world – it was really something. And it was very interesting to watch and also to watch it fixed, and it was fixed by the accidental Keynesianism of World War II. Very Interesting.
And Hitler had fixed the Great Depression in Germany by the deliberate Keynesianism, but he wasn't doing to stimulate the economy he wanted to get even with all the people he hated. But he borrowed all this money and created all these armaments. Hitler's Germany by 1939 was the strongest economic power in Europe, and nobody else was close.
So you wouldn't understand that as well as I do, if you haven't lived through it. You could see the place gaining traction, more and more and more, and pretty soon it was fixed.
And of course, in those days there were all kinds of people – most of my family – that believed in hard money based on gold, and not much welfare, and so on. So I was raised among fairly backward people by modern standards. But they were backward in kind of a self-reliant way that I think was helpful. I've never regretted that I wasn't raised in a more liberal establishment.
I had a liberal aunt – she was really my mother's cousin – and she was the second lady Dean at the University of Chicago. And she done her thesis on conditions in the coal mines, and of course she was a screaming leftist. I would be extreme leftist if I observed the way the coal miners of yesteryear were treated. You couldn't be a human being with any decency on you without feeling that it was deeply improper to have misery that great and that manipulated – for the benefit of the mine owners, and so forth. But, she sent me all these left-wing books – one every Christmas – and I always thought she was a little nuts. (Laughter)
Which shows that sometimes the very vivid and extreme acts, you know, evidence misleads you on a deeper reality. You've got to be a guard on that against that all your life. In fact, the whole trick in life is to get so that your own brain doesn't mislead you, and I have found that just a lifelong fun game, and I can't remember a time I wasn't doing it.
I was not a prodigy or anything like that, but I was a prodigy in having adult interests. I was interested in what worked, and what didn't, and why. And I could see that very eminent people that I loved and revered were nuts in some ways. I would to say, I certainly like Doctor Davis but he's a little nutty in one way and I'm not gonna be that way like that. So, I was very judgmental and I think that helped me. (Laughter)
And it also helped me that I kept changing my judgments as I learned more and more facts came in. And that created lifelong habits that were very very useful.
Another thing that really helped me is, particularly on my father's side of the family, my paternal grandfather was the only federal judge in Lincoln, Nebraska – capital city of Nebraska. And he'd been there forever and he stayed there forever, after that I think when he left he was the longest-serving federal judge in the country.
And he was a brilliant man and he'd risen from nothing. He was a child of two impoverished schoolteachers, and when he was raised in a little town in Nebraska they gave him a nickel, to go buy the meat and he'd go to the butcher shop, and he would buy the parts of the animal nobody else would eat.
That's what two schoolteachers lived on in those days. And the very indignity of it bothered him so much that he just determined to get out of poverty, and never go back. And he did. He got ahead like Abe Lincoln, and educated himself in lawyers offices and so on.
He had to leave college because he couldn't pay the tuition anymore, but he educated himself, and since he was utterly brilliant, it wasn't all that hard. And he had an attitude that was pretty damned extreme, and I would say his attitude was: you have a moral duty to make yourself as an un-ignorant and un-stupid as you possibly can.
And that it was pretty much your highest moral duty – maybe taking care of your family came first. But in the ranks of moral obligations – Well, he was conventionally religious so it may have been a religious duty to him. But he really believed that rationality was a moral duty, and he worked at it, and he scorned people who didn't do it.
On the other hand, as a judge, he started with the idea – you know, why would anybody rob a train or whatever a federal crime on those days. And he was pretty hard on people who did it, and I noticed as he got older and older, he was willing to call a man a good man on easier terms than he started out with. And I think that was a correct development.
By the way, when he relaxed a little, he was still pretty tough – (Laughter) – but he did relax a little, which I thought was appropriate. But it was – he influenced by such people and when the thirties came, [There was] one son-in-law, who was a musician, and of course he couldn't make a living.
So my grandfather, who didn't have that much money, sent him to pharmacy school, carefully picking a profession that couldn't fail, and found him a bankrupt pharmacy to buy and loaned him the money. And my uncle was soon prosperous and remained prosperous the rest of his life.
My other uncle had a bank in Stromsburg, Nebraska, but there were 968 people in Stromsburg, and there were two national banks. The capitalization of my uncle's bank was $25,000 and of course he was a lovely man, but he was an optimist – and a banker should not be an optimist. (Laughter)
And when they closed the banks in 1933, the bank examiners came in, and they said you can't reopen, and it was the only business he had.
Well, Judge Munger had always saved his money, and he had a lot of good first mortgages on homes occupied by teetotaling German butchers and people he'd carefully pitched, of course he never had a default. Houses were in the right neighbourhood, and the people were sober and hard-working.
And so what my grandfather did was to take a third of his good mortgages which is all he had, put them into the bank and took all the lousy assets out of the bank. So he saved two out of the three of his children, and I thought it was a pretty good thing to do – and very shrewd the way he did it.
And he actually got most of his money back 10 or 15 years later out of the lousy assets of the bank during World War II. And that was a good lesson.
On the other side – My grandfather on the other side, his main business had gone broke in 1922 with all the other wholesale dry goods houses. And what he did, his son one of them went broke and he cut his house in half and moved that family in.
And in the other family, the guy was an honors graduate of the Harvard School of Architecture and he was very prosperous in the 20s in Omaha, and had a wonderful life. And the 30s came, and the total building permits in Omaha would sometimes be $25,000 a month and that was for furnace repairs or something. There was just no work – none, zero.
He moved to California, and he lived for several years and he finally got the County of Los Angeles to hire this great Harvard architect, and he got $108.08 a month after deductions, and they had him do drafting work but they classified him as a laundry man to save money. And he could actually rent a house for $25 and feed himself and drive an old car. He could live on $109 a month. Amazing how poor everybody was.
And what happened to that grandfather, along came the FHA and they had a competitive civil service examination. He was a very brilliant man, of course he was first in the exam, and that made him a chief architect for the FHA in Los Angeles, where he spent the rest of his life.
But I watched all this family coping with all this difficulty, and I'll say this:
it sounds awful, but they weren't all that unhappy. You can cope pretty well because you get used to it. That's a nice thing about the human condition. I mean, you get to be my age, and you got a lot of horrible things to get used to. (Laughter)
It's just one new indignity all the time. (Laughter)
A friend of mine says a good day when you're old is when you wake up in the morning and nothing new hurts. (Laughter)
So anyway, that's my experience in Omaha. But that background of all these people were educated, and civilized, and generous, and decent. And a lot of them had good senses of humor. And it was a pretty damn good place to grow up in, and my memory is of being surrounded by a lot of very fine people. And I think the whole thing was privileged.
I look at my background is absolutely privileged, and I'm proud of being an Omaha boy. I sometimes use the old saying, “They got the boy out of Omaha but they never got the Omaha out of the boy.”
And so all those old-fashioned values:
- Family comes first.
- Be in a position so you can help others when troubles come.
- A prudence sensible moral duty to be reasonable, it's more important than anything else, and more important than being rich, more important than being important.
An absolute moral duty because none of my intelligent relatives suffered terribly because they didn't advance higher.
(Source: https://youtu.be/S9HgIGzOENA)
[YAPSS Takeaway]
-
Do not be extreme towards anything, it might mislead you on a deeper reality. Be adaptive to change as you learn more and more.
- Surround yourself with good people.
- Things might be awful sometimes, but you can cope pretty well once you get used to it.
- You have a moral duty to make yourself as an un-ignorant and un-stupid as you possibly can.