Charlie Munger and Li Lu interview in China (august 18)

[Lakesider]

Found on Reddit, sharing here.

 

 

Part 1

 

Part 2

 

Edit: Just seen that Alpha has already posted in berkshire news thread... My bad.

[captkerosene]

Charley prefers to invest in China over other markets because of the natural intelligence of the Chinese. Isn't anybody going to bash him like you did me?

[Rod]

Charley prefers to invest in China over other markets because of the natural intelligence of the Chinese. Isn't anybody going to bash him like you did me?

 

Charlie did make a comment about Chinese girls adopted at birth by Americans and raised in America being high achievers. I found the idea strange since it would suggest that there is something genetic involved. I have believed the success of Chinese Americans to be cultural and involve values instilled in them by family and community. So it would be very interesting to see strong evidence that there is a genetic component to the success of the Chinese. Right now I'm sceptical. I doubt any ethnic group has inbuilt genetic advantages. I could imagine that the American adoptive parents may subconsciously expect their Chinese child to be a high achiever because that is the stereotype and it would affect the way they raise the child. In any case, trying to conclude genetic superiority of some group is pretty much impossible to do scientifically because it's impossible to separate cultural and social factors.

[captkerosene]

By adopting poor Chinese girls "they got better babies." His comments start 18 minutes in and leave no doubt about the genetic origin of the differences.

[Rod]

By adopting poor Chinese girls "they got better babies." His comments start 18 minutes in and leave no doubt about the genetic origin of the differences.

 

It's not the first time I've heard Charlie say something scientifically questionable. I think science is his weak spot despite his efforts to be a generalist.

[Dynamic]

I got the impression that Charlie was attempting to address a Chinese audience and encourage them that a lot of culturally important Chinese values like perseverance, long attention span and pride in intellectual and skilled accomplishment are indeed very worthwhile and well prized in a market economy. I think that's an admirable message. I felt his observation about Asian immigrants and refugees bringing that culture was highly plausible. But I also felt his mention of adoption carried implicit assumption that it was genetic, when in fact it could equally be related to the adoptive parents trying to imbue some of the culture of the child's geographical and racial origin too. And it could be the result of a cognitive bias that this impression of Asian traits came to be made.

 

From my memory Charlie didn't express an opinion as to the explanation for the anecdotal observation he mentioned.

 

It could be that Charlie is assuming it's at least partly genetic, it could be he's being a little manipulative to his intended audience in China as an encouragement to strive to be more rational and high achieving, it could be he's providing some anecdotes about how well regarded Chinese people are in the USA but stopping short of implying that it's because of innate characteristics, though people may make the associations, whether rationally or not. It may be he is speaking off the cuff and realises mid anecdote that perhaps the adoption line is one he shouldn't explicitly tie in with the admiration of Chinese cultural traits.

 

Given his history I'd be tempted to be charitable and assume he's rational, though even the best skeptics still make mistakes from time to time, unless more evidence convinces me otherwise in future. And even if he did show an area about which I disagree with him it wouldn't stop my admiration for him.

[clutch]

Really?? This is what you guys want to talk about from the whole interview and over analyze it? We can't look at anything nowadays without the lense of identity politics...

[Guest longinvestor]

Although not the first time, “We change our opinions when the world has changed. How about you? “ was the anchor of the interview. If there’s one message to internalize, shredding prior conclusions is rationality. The fact that they can do it at 90 is something. Most people don’t do that after what, 12?

[Dynamic]

From my memory Charlie didn't express an opinion as to the explanation for the anecdotal observation he mentioned.

 

I have now happened across a conversation at Caltech in 2008 where he mentioned explicitly that he believes it's largely genetic and that he's observed so many instances among his friends that he thinks there's a difference.

 

He rightly points out that many academics cannot point out that a pigmy and a zulu are different heights because it's not politically correct to say these things are genetic differences. He then goes on to say that some of the intellectual characteristics of the chinese do seem to be genetic possibly from societal genetic selection and well suited to the capitalist system. This link is 59m 13s into the video, where he goes into it after some further comments about Guns Germs & Steel by Jared Diamond.

 

I agree that we shouldn't get too hung up on this point, but I agree that it wasn't the main thing to draw from Charlie's interview.

[Spekulatius]

By adopting poor Chinese girls "they got better babies." His comments start 18 minutes in and leave no doubt about the genetic origin of the differences.

 

It's not the first time I've heard Charlie say something scientifically questionable. I think science is his weak spot despite his efforts to be a generalist.

 

It’s very likely the other way around - the Chinese kids got better parents. Adopting kids from China isn’t cheap, so the parents very likely have financial resources. there are also significant background checks. There is a significant selection bias going on on the parent side.

[Rod]

By adopting poor Chinese girls "they got better babies." His comments start 18 minutes in and leave no doubt about the genetic origin of the differences.

 

It's not the first time I've heard Charlie say something scientifically questionable. I think science is his weak spot despite his efforts to be a generalist.

 

It’s very likely the other way around - the Chinese kids got better parents. Adopting kids from China isn’t cheap, so the parents very likely have financial resources. there are also significant background checks. There is a significant selection bias going on on the parent side.

 

A very good point. And who was it that said to always invert? ;)

[Cigarbutt]

...I agree that we shouldn't get too hung up on this point, but I agree that it wasn't the main thing to draw from Charlie's interview.

1+

 

...he mentioned explicitly that he believes it's largely genetic and that he's observed so many instances among his friends that he thinks there's a difference.

 

Anecdotal experience on my part also suggests that adopted Chinese and Asian children tend to "outperform" but, from a humble perspective, the adoptive parents also happen to be VERY different from the general population. This is hard to study but seems to be corroborated:

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2398719/

 

FWIW, I think the conclusion of genetic superiority should be be considered carefully and after other explanations have been ruled out. Parents who are financially secure and who have certain attitudes towards effort and education can definitely move the needle. No?

 

[captkerosene]

The original question I posed was: Should you include the intelligence of a nation as a whole in the variables you're looking at when making INVESTMENT decisions? Clearly, Munger and probably Buffett have. They have chosen China as an area to focus on because of their high regard for the Chinese intellect. Partially unleashed from communism they are moving towards world domination. (Still a long, long way to go.) In contrast, Prem has not. If Prem was Chinese I suspect he would be investing in China and if Li Lu was Indian I suspect he would be investing in India. Too many benefits of being familiar with a culture and its people to not focus on that market. If I was buying an index though, I'd choose China over India for the reasons Charley stated. (All else being equal.) With that said, I think Prem will do very well in India and I am a happy owner of FFH. Prem hasn't always been right, but, he could have been and Fairfax fits in very nicely with other more aggressive stocks I own.

 

An interesting thing I learned  recently was posed as a question: Would you rather get a few extra IQ points yourself or give them all to your countrymen? The surprising answer is that it's better to give them to your neighbors. Giving them to your neighbors improves your standard of living five times as much as if you're smarter yourself.

 

If you want to learn about IQ, best to read The Bell Curve first. IQ has been studied and studied for decades.

[greenwave]

By adopting poor Chinese girls "they got better babies." His comments start 18 minutes in and leave no doubt about the genetic origin of the differences.

 

It's not the first time I've heard Charlie say something scientifically questionable. I think science is his weak spot despite his efforts to be a generalist.

 

It’s very likely the other way around - the Chinese kids got better parents. Adopting kids from China isn’t cheap, so the parents very likely have financial resources. there are also significant background checks. There is a significant selection bias going on on the parent side.

----

Spekulatius ,

I agree with your perspective . It seems very logical and probable that adopting young Chinese girls generally requires considerably  more financial resources than the average American family could likely afford . Additionally ,I would think that the adopting  parents would probably be very well educated and would be better prepared to plan for and foster a life-long  learning environment for the adopted kids . Thus , it does not surprise me that these kids become more motivated by being nurtured and loved by well  prepared parents .  ( Maybe the  children simply become products of their positive , constructive environments  ?)

greenwave

 

 

     

 

 

[Cigarbutt]

The original question I posed was: Should you include the intelligence of a nation as a whole in the variables you're looking at when making INVESTMENT decisions? Clearly, Munger and probably Buffett have. They have chosen China as an area to focus on because of their high regard for the Chinese intellect. Partially unleashed from communism they are moving towards world domination. (Still a long, long way to go.) In contrast, Prem has not. If Prem was Chinese I suspect he would be investing in China and if Li Lu was Indian I suspect he would be investing in India. Too many benefits of being familiar with a culture and its people to not focus on that market. If I was buying an index though, I'd choose China over India for the reasons Charley stated. (All else being equal.) With that said, I think Prem will do very well in India and I am a happy owner of FFH. Prem hasn't always been right, but, he could have been and Fairfax fits in very nicely with other more aggressive stocks I own.

 

An interesting thing I learned  recently was posed as a question: Would you rather get a few extra IQ points yourself or give them all to your countrymen? The surprising answer is that it's better to give them to your neighbors. Giving them to your neighbors improves your standard of living five times as much as if you're smarter yourself.

 

If you want to learn about IQ, best to read The Bell Curve first. IQ has been studied and studied for decades.

 

You raise controversial questions similar to what is discussed in "The Bell Curve".

It really seems that Mr. Munger believes in "their innate quality".

 

There's also the additional dimension of jumping from individual IQs to the "intelligence" of a nation as a whole.

Hard to say what the future holds and Mr. Munger has mentioned that it does not hurt to try to learn from history.

 

In the last years, during free time, I've spend time reading on the introduction of the Industrial Revolution and how it caught on (and did not) in various regions of the globe. Another controversial question. Any relevance to today's challenges?

 

 

 

[captkerosene]

The original question I posed was: Should you include the intelligence of a nation as a whole in the variables you're looking at when making INVESTMENT decisions? Clearly, Munger and probably Buffett have. They have chosen China as an area to focus on because of their high regard for the Chinese intellect. Partially unleashed from communism they are moving towards world domination. (Still a long, long way to go.) In contrast, Prem has not. If Prem was Chinese I suspect he would be investing in China and if Li Lu was Indian I suspect he would be investing in India. Too many benefits of being familiar with a culture and its people to not focus on that market. If I was buying an index though, I'd choose China over India for the reasons Charley stated. (All else being equal.) With that said, I think Prem will do very well in India and I am a happy owner of FFH. Prem hasn't always been right, but, he could have been and Fairfax fits in very nicely with other more aggressive stocks I own.

 

An interesting thing I learned  recently was posed as a question: Would you rather get a few extra IQ points yourself or give them all to your countrymen? The surprising answer is that it's better to give them to your neighbors. Giving them to your neighbors improves your standard of living five times as much as if you're smarter yourself.

 

If you want to learn about IQ, best to read The Bell Curve first. IQ has been studied and studied for decades.

 

You raise controversial questions similar to what is discussed in "The Bell Curve".

It really seems that Mr. Munger believes in "their innate quality".

 

There's also the additional dimension of jumping from individual IQs to the "intelligence" of a nation as a whole.

Hard to say what the future holds and Mr. Munger has mentioned that it does not hurt to try to learn from history.

 

In the last years, during free time, I've spend time reading on the introduction of the Industrial Revolution and how it caught on (and did not) in various regions of the globe. Another controversial question. Any relevance to today's challenges?

 

 

The Chinese edited the genes of an embryo last week (for the first time) to cure an inherited disease. Eventually, ALL children will be edited to improve intelligence, health and appearance. (We're just a software program.) How's that for an industrial revolution? The gold ring will go to those countries that win the technology race. Even last place will benefit tremendously though.

 

 

[Cigarbutt]

The Chinese edited the genes of an embryo last week (for the first time) to cure an inherited disease. Eventually, ALL children will be edited to improve intelligence, health and appearance. (We're just a software program.) How's that for an industrial revolution? The gold ring will go to those countries that win the technology race. Even last place will benefit tremendously though.

Hmmm..

That will be the end of the discussion from my perspective but I guess it would be interesting to hear from Dynamic.

 

Not too long ago, Mr. Munger's list of recommended books, along Guns, Germs and Steel, included The Selfish Gene by Mr. Richard Dawkins who has voiced opinions on the concept of designer babies. In the book, the author marvels at how historical bottlenecks have been solved by the random jostling of small particles.

https://www.inc.com/jessica-stillman/10-book-recommendations-from-warren-buffett-s-right-hand-man.html

https://www.express.co.uk/news/science/673390/Richard-Dawkins-Designer-babies-HITLER-selfish-gene

Handle with care?

 

 

[Deepdive]

Maybe Charlie was actually being very politically correct by not mentioning the alternative to adopting Chinese girls.  Years ago, I overhead an older Canadian couple who was having a conversation.  The older gentleman mentioned this phenomenon of adopting Chinese girls from poor Chinese villages.  He mentioned that black and white babies up for adoption in North America sometimes came from young moms who had drug problems, engaged in sex work, etc.  People have experiences where the adopted babies exhibited behavioral problems and it ruined their adoption experience.  In contrast, the Chinese baby girls were put up for adoption due to poverty and/or the one child policy that favors baby boys.  I guess if you are spending thousands of dollar in adoption, you probably talked to people and words get around.  In short, one population was a potential land mine for behavioral problems and another population was consistently devoid of defect.  Making this differentiation was likely okay on an airplane in a semi-private conversation.  For Charlie to talk about "crack babies" on public television will likely bring out all the social justice warriors. 

[Dynamic]

I think this discussion has reached the edge of my knowledge. It's always important to look for confounding variables and it seems that everyone who has posted in this thread is doing pretty well. I think it's very likely that Charlie hasn't accounted for some socioeconomic confounding factors that may well override his conclusion - and the examples suggested, such as wealthy and well-educated adoptive parents are pretty likely candidates. In my limited experience, these socioeconomic effects seem to be larger effects than genetic ones, so much so that once controlled-for, the genetic effect strength is usually down in the noise floor of experimental error.

 

Nonetheless it is hard to rationally consider population-level genetic differences when it gets caught up with things as emotionally charged as race and slavery and individual-level respect, achievement and opportunities. Indeed, for some countries, the history of racism and slavery could have quite plausibly generated selective pressures on the gene pools, and the effects of such policies may still linger in the socioeconomic environment long after such policies have been removed.

 

It could be a valid question to ask whether selection - which may have both social inheritance (memetic) and biological inheritance (genetic) components - has had a role to play in the economic development of certain nations or possibly the physical characteristics of their inhabitants, but it can get very messy and hard to untangle such differences from other factors. For example, those from Europe who colonised and emigrated to various countries in the Americas, or Australia, for example would have been self-selected to some degree, but partly for different reasons. Perhaps such selection is part of the explanation of economic outcomes. Then again, so could be freedom from monarchistic power structures (whether those be state-based or religion-based).

 

The problems arise when people switch from observations and explanations of subtle differences of how things are, into turning these things into prescriptions and plans for how things ought to be and they take these ideas too far and often use them to put down social groupings they wish to suppress, frequently in violent and inhumane ways. And idealogues can easily latch onto carefully expressed scholarly writings and cherry-pick those that led superficial support to their political power struggles and racist ideals. I can well understand that the last thing any social scientist wants is for their work to be taken up and championed by hate groups and fascists who have cherry picked the ideas that suit their objectives and pre-conceived notions and wish to persuade others and ignore all the caveats that express the limits of how far such ideas can be taken. For that reason they rationally steer well clear of such controversial areas.

 

Charlie's more interesting point is probably memetic selection, rather than genetic. It's possible that to survive and prosper under the highly restrictive regimes of Chairman Mao and his successors, certain characteristics were selected for that can work very well in capitalism. I can imagine that a certain amount of lateral thinking could be very helpful in overcoming such restrictions and not getting into trouble with the authorities, for example, necessity being the mother of invention, and that could prove very useful in a capitalist system. It may have some side-effects, such as widespread bribery and corruption, too, but if these aren't so excessive that they break the economic engine, the ingenuity could really help them to prosper.

[captkerosene]

Maybe Charlie was actually being very politically correct by not mentioning the alternative to adopting Chinese girls.  Years ago, I overhead an older Canadian couple who was having a conversation.  The older gentleman mentioned this phenomenon of adopting Chinese girls from poor Chinese villages.  He mentioned that black and white babies up for adoption in North America sometimes came from young moms who had drug problems, engaged in sex work, etc.  People have experiences where the adopted babies exhibited behavioral problems and it ruined their adoption experience.  In contrast, the Chinese baby girls were put up for adoption due to poverty and/or the one child policy that favors baby boys.  I guess if you are spending thousands of dollar in adoption, you probably talked to people and words get around.  In short, one population was a potential land mine for behavioral problems and another population was consistently devoid of defect.  Making this differentiation was likely okay on an airplane in a semi-private conversation.  For Charlie to talk about "crack babies" on public television will likely bring out all the social justice warriors.

 

Charlie also said that the adopted babies were better than if the parents had had their own children. He wasn't talking about crack babies. He also wasn't just praising to gain favor with his audience. He brought up the gambling stereotype which was not intended to be complimentary. Charlie is at a point where he can say what he thinks ... as am I.

[Charlie]

I remember that Munger said that Chinese people have some mathematical advantages, because historically

they were very good in counting rice.

 

To many people this will sound too simplistic, but I think it´s a very plausible explanation.

[merkhet]

I remember that Munger said that Chinese people have some mathematical advantages, because historically

they were very good in counting rice.

 

To many people this will sound too simplistic, but I think it´s a very plausible explanation.

 

I mean, the better explanation is likely that the Chinese numeric system is easier than the Arabic numeric system.

 

The problem with the other stuff in this thread, of course, is that it is very difficult to do a solid double-blind experiment with proper control and experimental groups for this kind of stuff...

[Deepdive]

Maybe Charlie was actually being very politically correct by not mentioning the alternative to adopting Chinese girls.  Years ago, I overhead an older Canadian couple who was having a conversation.  The older gentleman mentioned this phenomenon of adopting Chinese girls from poor Chinese villages.  He mentioned that black and white babies up for adoption in North America sometimes came from young moms who had drug problems, engaged in sex work, etc.  People have experiences where the adopted babies exhibited behavioral problems and it ruined their adoption experience.  In contrast, the Chinese baby girls were put up for adoption due to poverty and/or the one child policy that favors baby boys.  I guess if you are spending thousands of dollar in adoption, you probably talked to people and words get around.  In short, one population was a potential land mine for behavioral problems and another population was consistently devoid of defect.  Making this differentiation was likely okay on an airplane in a semi-private conversation.  For Charlie to talk about "crack babies" on public television will likely bring out all the social justice warriors.

 

Charlie also said that the adopted babies were better than if the parents had had their own children. He wasn't talking about crack babies. He also wasn't just praising to gain favor with his audience. He brought up the gambling stereotype which was not intended to be complimentary. Charlie is at a point where he can say what he thinks ... as am I.

 

Scientifically, how does Charlie observe, measure, and quantify the performance of the adopted babies versus that of "never been born" babies?  Better than if the parents had had their own children?  Aren't we giving Charlie too much credit here? 

[theasiareport]

I am Chinese (Singaporean). I am doubtful of the genetic claims.

 

However - I think there are strong cultural norms which exert a push towards working hard. If you look at the history of China, individuals who wanted to "leap above their position in society" had option of the Gao Kao (National Examination) to become selected as a public official.

 

This narrative feed strongly into what we are taught from young (same stories for other overseas Chinese in Taiwan, Hong Kong etc) - and why its so necessary to study hard at school to succeed in life.

[captkerosene]

Had dinner with a friend last night who is acting as a surrogate mother. The adoptive parents chose an Indian engineer/Chinese mother donor combination for their child. They also can choose the sex of the child ahead of time. The fertility doc said that designer babies are on the way as more and more traits can be selected.