Munger: charging to underperform is a “deep moral depravity”

Posted by TEBI on February 21, 2023

Munger: charging to underperform is a “deep moral depravity”



Charlie Munger was on sparkling form the other day at the latest Daily Journal’s shareholder meeting.

Warren Buffett’s right-hand man likes to speak his mind, and he certainly wasn’t mincing his words this time .

Below you’ll find a video of the event. It’s more than two and a half hours’ long, so I would like to draw your attention to one section of it in particular.

In it Munger answers the question, What is the most challenging behavioural bias to overcome?

It begins at 32.13. I’ve edited his words slightly for brevity and clarity, but this is what said:


“If I had to name one factor that dominates human bad decisions, it would be what I call denial. If the truth is unpleasant enough, people’s minds play tricks on them, and they think it isn’t really happening.

“If you want an example of how denial is affecting things, take the world of investment management. How many managers are going to beat the indexes? All costs considered, I would say maybe 5%… Everybody else is living in a state of extreme denial.

“They’re used to charging big fees for stuff that isn’t doing their clients any good. It’s a deep moral depravity.

“If some widow comes to you with $500,000 and you charge her one point a year for her, you could put her in the indexes, but you need the one point. And so people just charge a considerable fee for worthless advice.

“The whole profession is full of that kind of denial. It’s everywhere. I always quote Demosthenes. More than 2,000 years ago he said, what people wish is what they believe.

“The agency costs in money management (are) so many billions. It’s uncountable.

“And nobody can face it. So you do what’s good for you and bad for them.”


Incidentally, Munger was also rather outspoken, to the say the least, on cryptocurrencies. Go to 53.59 if you’d like to hear what he had to say about those.

Of course, Munger’s views on both of these subjects are bound to cause offence in some quarters. But, whether you agree with him or not, you have to admire the wartime generation for their willingness to say what they think.

Alas, the investment world has already lost the famously straight-talking Jack Bogle. Neither Munger nor Buffett — aged 99 and 92 respectively — is likely to be with us for very much longer. Let’s just be grateful for their candour, wisdom and integrity while they are.




“Nothing is so easy as to deceive one’s self; for what we wish, that we readily believe — Demosthenes




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