Wanting To Get and Stay Rich? Charlie Munger Is Pessimistic if You’re Gen Z Member.
Two major obstacles change the situation compared to his time.
Approaching 100 years, Charlie Munger, Warren Buffett's lifelong partner at Berkshire Hathaway, loves to give his opinion on all sorts of topics. The media certainly loves to ask him about a lot of things, too, because Charlie Munger is a true wellspring of wisdom.
His advice is good to hear, whether you think it's relevant or not. Like everyone else, Charlie Munger is sometimes wrong, but given his career, I find it always worthwhile to at least listen to what he says. As you probably know, I think he is wrong about Bitcoin, which he calls a venereal disease.
Still, I take the time to listen to him for food for thought.
Charlie Munger sees two major obstacles for Gen Z members
Recently, Charlie Munger gave his opinion on whether young people entering the workforce and the investment world can get rich and then more importantly stay rich. In his eyes, two major obstacles make him pessimistic for members of Generation Z: inflation combined with soaring real estate prices, and the complexity of investing.
Charlie Munger thinks things were easier in his day.
Counting the changing economy and the real value of money, the price is not what it was back then. In 1980, the year Charles T. Munger became vice chairman of Berkshire Hathaway (a position he still holds today), a house in California cost $80,000 (median price). If we were to relate the price to today, that would be $275,000.
Except that the median price of a house in California today is over $800,000!
That's why real estate is often considered a safe investment, as a hedge against inflation and other risks. Nevertheless, this investment is becoming less and less accessible to young people entering the workforce. Members of the Z and Alpha generations will necessarily be penalized, according to Munger.
Charlie Munger finds today's investment world too complex
Another observation Munger makes is that investing and being successful in investing has become more complex in recent decades. He finds it increasingly difficult to give universal, “one size fits all” investment advice. For years, he preached, for example, to hold a diversified portfolio of common stocks, which gave up to 10% return on investment.
But the investment world has become more complex for Charlie Munger, and his surefire boot is no longer the example to follow:
“I don't think the future will offer the young person coming out of college this year such an easy investment opportunity.”
If you're a member of Generation Z and you listen to Charlie Munger, you might be tempted to give up and accept your sorry lot. Fortunately, there are still some glimmers of hope.
Warren Buffett advocates investing in funds to avoid this complexity
One tip for a gateway to the business world can be found in Warren Buffett. He offers an argument similar to that of his dear friend Munger, namely to have a diversified portfolio, but more broadly. Warren Buffett advises avoiding single stocks in favor of passive, less risky investments such as funds, especially funds that track the S&P 500, where there are inexpensive examples.
To see a return, however, one must be patient: since the beginning of 2022, the index is down 5% and is experiencing some volatility. But it is precisely this patience that has allowed Charlie Munger and Warren Buffett to be so successful in investing. If you want to follow their examples, you know you have to take the long view.
Charlie Munger concludes by saying that a key to success in this more complex market is personalized advice. For Munger, you need to determine your skill level or your advisor's skill level, and then act accordingly. His conclusion will give a taste of what's in store for young people entering the workforce:
“To anyone who finds the current investment climate tough and difficult and somewhat confusing, I would say, Welcome to adulthood.”
Final Thoughts
If new generations don't have the same opportunities as previous generations, I won't sink into pessimism like Charlie Munger.
On the contrary, I will remind you that in every generation and every period there are very specific opportunities that should be seized. Your role is simply to constantly deepen your knowledge to reduce your ignorance so that you can seize these opportunities when they present themselves to you.
There is no fatality in my opinion, contrary to the speech of Charlie Munger.
Some reading
5 Reasons Why Bitcoin Fixes This for the Developing World. Bitcoin is a unique game-changer.
A Country of Deflation for Several Decades, Japan Is Finally Rediscovering Rising Prices. But this is still not enough to stimulate wages upward.