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Charlie Munger explains why he and Buffett have changed their minds about tech and airlines

Julia La Roche

Berkshire Hathaway’s Warren Buffett and Charlie Munger used to think the airline industry was a “joke,” and now they own billions of dollars worth of airline stocks.

They also used to shy away from technology companies. Now they own more than $7 billion worth of Apple.

On Tuesday, Berkshire Hathaway (BRK-A, BRK-B) revealed that it boosted its positions in airlines stocks including, American Airlines (AAL), Delta (DAL), and United Continental (UAL). Berkshire also disclosed a large position in Southwest (LUV). Collectively, Berkshire’s positions in airline stocks were worth more than $9.2 billion.

Berkshire also added another 42.1 million shares of Apple (AAPL), bringing its total investment to 57.4 million shares, or 1.09% of the company’s stock.

At the 2017 Daily Journal Meeting (DJCO) in Los Angeles, Munger explained how he and Buffett have changed with age.

“Warren learned better over time, I’ve learned better. The nice thing about the game we’re in is you can keep learning, and we’re still doing it,” Munger, 93, said.

He acknowledged that they used to think the airlines were “a joke it was such a terrible business,” same as they once did about the railroads. He added that “something similar” is happening to the airline business.

“Now if you put all those stocks together, we own one minor airline. By the way, it’s a total catechism.”

“We did the same thing with railroads — ‘railroads are no damn good, too many of them, truck competition.’ We were right — it was a terrible business for about 80 years. Finally, they got down to four big railroads, and it’s a better business. Something similar is happening in the airline business.”

Munger went on to explain how the investment business has gotten harder.

“In the old days, I frequently talk to Warren about the old days, for years and years and years what we did was shoot fish in a barrel. But it was so easy that we didn’t really want to shoot fish while they were moving. So we were waiting until they slowed down and shot at them with a shot gun. It was just that easy. It’s gotten harder and harder and harder. Now we get little edges when before we had golden cinches. It isn’t any less interesting. And we do not make the same returns we made when we’d pick this low hanging fruit off trees that offered a lot of it.”

He continued: “[Buffett’s] changed when he buys airlines and he’s changed when he buys Apple. Think of the hooey we’ve done over the years about high-tech, ‘we just don’t understand it,’ ‘it’s not our circle of competence,’ ‘worst business in the world is airlines.’ And what do we appear in the press with? Apple and a bunch of airlines. I don’t think we’ve gone crazy. I think the answer is we’re adapting reasonably to a business that’s gotten much more difficult.”

“And I don’t think we have a cinch in either of those positions. I think we have the odds a little bit in our favor. If that’s the best advantage we can get, we’ll just have to live on the advantage we can get.”

He concluded with some classic Munger wisdom.

“I used to say, ‘you have to marry the best person that will have you.’ I’m afraid that’s a rule of life. And you have to get by on whatever the best advantage you can get. Things have gotten so difficult in the investment world that we have to be satisfied with the type of advantage that we’ve didn’t used to get.”

The thing that caused it to be difficult is they got so enormously rich.

“That’s not a bad tradeoff.”

Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.

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