

Charlie Munger: Turning $2 million into $2 trillion - byrneseyeview
http://stableboyselections.com/2008/03/25/charlie-munger-turning-2-million-into-2-trillion/

======
Prrometheus
There's a lot of hindsight there, even in the first few paragraphs. For
example, the monetary inflation of the 20th century wouldn't have been obvious
to someone living in 1884 right after the monetary tightening accompanying the
resumption of the gold standard. Inflation occurs in societies that debase
their currency or that discover large new sources of whatever commodity their
currency is backed by. It is far from a universal occurrence. Constant
inflation did not occur in the United States until after the FDR presidency
when we adopted a fiat currency standard. Making a company worth $2 trillion
1884 dollars is much harder than making a company worth $2 trillion of today's
dollars or of 1865 dollars.

Couldn't bring myself to finish. If there are good ideas in there somewhere,
let me know.

~~~
byrneseyeview
The inflation thing has been an article of faith with Buffett and Munger. I
think a fairly smart person could see that: unless the government has a bias
_against_ extending suffrage, you should expect politicians to advocate
extending suffrage to more groups (so those groups feel they owe it to whoever
let them vote); so there will be more voters; so politicians will have an
incentive to do take more broadly redistributive action; so if they can have
their money on the benefits (projects funded by deficit spending) but not on
the costs (depreciation of financial assets), they'll go for it. This is a
huge part of the reason that Buffett and Munger have moved away from capital-
intensive industries.

I thought one interesting part was the mix of different cognitive biases used
to make Coke popular: the idea that universal distribution was a form of
'social proof' was new to me (the first time I read it; KO is up about 40%
including dividends since then).

And the inflation thing should not be a big deal. Besides those paragraphs,
the essay holds true if you have a real-money target (with the same compounded
growth) or a target in terms of ounces of gold or cowrie shells. It's not like
Coca-Cola made their money because they were short the dollar through
leverage.

~~~
Prrometheus
>And the inflation thing should not be a big deal.

I know it's not a big deal, it's just in an early paragraph and a glaring
example of hindsight. If you'll recall, in the late 19th century farmers in
the United States wanted to legalize silver as currency because deflation was
making it hard for them to pay back their mortgages.

------
wallflower
The true effect of Coca-cola: Soft drinks were the trojan horse that allowed
food manufactures to begin adding sugar (for taste) across the board

Sugar consumption per person in USA - 1850s (52 lb/yr) 2000s (150 lb/yr)

[<http://www.cspinet.org/new/sugar_limit.html>]

~~~
akd
It's also extremely refreshing on a summer day. Let me worry about my own
sugar intake.

~~~
Tichy
As long as you are not in my health insurance pool, fine...

A good rule of thumb seems to me: avoid drinks that only taste good when
cooled.

~~~
byrneseyeview
Oddly, I can only stand warm/cool coffee if it's been sweetened. Is this rule
of thumb based on a known phenomenon re: sweet drinks?

~~~
Tichy
Probably the underlying rule is really avoid sweetened drinks.

------
mattmaroon
I think it's easy to criticize the New Coke fiasco in hindsight. But when your
product is losing by a wide margin in every blind taste test to a competitor
that is smaller but growing a hell of a lot faster than you are, that's gotta
have the people in the C-suite shitting bricks.

And I'm still not saying I disagree with him, but I think it's a little more
than a lack of knowledge about Pavlovian conditioning that leads to a mistake
like that.

~~~
byrneseyeview
Coca-Cola had invested a whole lot in making their flavor synonymous with,
well, every positive emotion they could think of. It _is_ amazing that they
decided to get rid of their flavor and try again. It would be like Google
getting into the farm equipment business and just _shutting down google.com
because it was distracting them_.

~~~
Retric
I think new coke had more to do with switching to corn syrup than anything
else. Corn syrup tastes worse so you can't do a strait up switch but by
introduce new Coke and then bring back the old taste with a minor change and
people don't notice.

~~~
byrneseyeview
Does Pepsi use corn syrup? Do the other soda companies?

It's a little weird for them to risk their brand on making their product worse
by way of risking their brand on throwing the whole product out. And (I am not
a flavor scientist, so this is perhaps uninformed) why not just sweeten with
10% corn syrup and 90% sugar, and gradually raise the syrup ratio?

