Pragmatic Prevention

Charlie Munger and Lee Kuan Yew

Lee Kuan Yew was one of Charlie Munger’s heroes. In a Forbes interview on May 22, 2010, Charlie said, “If I were Lee Kuan Yew, I’d make finance less attractive to go into.”

Charlie: “We would do better coping with complex systems if we thought about them more. Lee Kuan Yew thinks things through. The fact that it is unpleasant does not stop him. Affluence and poverty can both ruin children. Charlie recommends a much more rational and tough-minded approach. An ounce of prevention is not worth a pound; it is often worth ten.”

Charlie: “Is there an example of a prudent decision like the Marshall Plan after World War II? The George Washington of Singapore, Lee Kuan Yew, decided to marry the smartest girl in his class. Their son is now the PM of Singapore. He was very practical man. He didn’t want people dying of malaria, so he drained all the swamps and didn’t care if a little fish went extinct. He didn’t like the drug problem and he looked around the world to solve the drug problem. He found the solution in the US by copying the US military’s policy. Any time you can be tested, and if you fail, you go to jail. If something was going to grow like a cancer, he would check it hard with the wrath of God. He turned a country with no resources or agriculture into a prosperous country starting from zero miles per hour. We need to pay more attention in our country to the Singapore model. They hate Lee Kuan Yew in liberal arts colleges. They hate that Singapore does not allow free speech. But time after time he has been successful, and even the leaders in China came to Singapore and learned from Lee Kuan Yew.”

Charlie does not care whether the cat is black or white, as long as it catches mice. In many respects, the United States is too damn permissive.

Charlie: “We do not step hard enough on things that can grow into trouble. If some of the silly accounting practices had been stopped, then none of this would have happened.” In a Q&A at the University of Michigan in 2010, Charlie Munger praised Lee Kuan Yew and the Singapore model in response to a question posted by a student: “If you could design a system, how would you take into consideration so that it enables rationality?” Besides praising Singapore’s system of eradicating the drug problem, smoothing out racial tensions, and making the island “user-friendly,” Munger also praised Lee Kuan Yew for choosing an intellectually accomplished partner.

Charlie: “If you will make a study of the life and work of Lee Kuan Yew, you will find one of the most interesting and instructive political stories written in the history of mankind. This is better than Athens…and you will learn a lot that will be useful in your whole life.”

Charlie Munger 2015 Daily Journal Meeting:

Q: “Charlie, I’m here from Sydney, Australia. I’d like to just come back to Lee Kuan Yew. What are the chances of that culture continuing with the current government and future governments of Singapore?”

Mr. Munger: “They’re pretty good. Lee Kuan Yew left a base, eliminated the corruption, made it hard to get in, and paid the people a lot. There is no real incentive to steal in Singapore. Either in Parliament or as an advanced government administrator, you get paid very well, and you’re admired, and so forth. I think what he has left Singapore will continue to do very well. But of course, he rose when he was doing it, and China wasn’t. Now Singapore has to compete with China. China makes it harder.”

Reporter: “What about the changes since his son or predecessor came in, for example, allowing casinos to come to Singapore?”

Mr. Munger: “I would have hated that. You make so much money running a casino, compared to any normal human business. There are no inventories; it’s like having a license to print money, and people just can’t stand temptation. So, he organized a casino business. Only foreigners can play; he didn’t want to ruin the locals. I would not have slept with the devil that much. But Yew was no longer really in power when that happened. If he’d still been young, I’d like to think he would not have done that.”

Charlie Munger at Berkshire Hathaway’s annual meeting in 2007:

“The work has been heavily concentrated in one mind, Warren Buffett. Sure, others have had input, but Berkshire enormously reflects the contributions of one great simple mind. This is not how we normally live in democracy; everyone takes turns. But if you really want a lot of wisdom, it’s better to concentrate decisions and process in one person. It’s no accident that Singapore has a much better record, given where it started, than the United States. There, power was concentrated in one enormously talented person, Lee Kuan Yew, who was the Warren Buffett of Singapore.”

Wikipedia: “Lee Kuan Yew, known to be the man who transformed Singapore from a poor society into one of Asia’s wealthiest nations, Lee Kuan Yew is often called a ‘benevolent dictator.’ As a leader who was in power for thirty-one years from 1959 until 1990, he implemented some laws that were deemed autocratic, and often opted to dismantle political opposition. Despite this, he is often looked upon favorably for his transformation of Singapore, and is considered by many to be one of the most successful political pragmatists.”

Munger’s prevention argument is that a small intervention can sometimes avoid a much larger later cost. Work on behavior and incentives by Robert Cialdini, Richard Thaler and Daniel Kahneman offers ways to examine why preventable mistakes recur.

Lee Kuan Yew: “All great religions, all great movements, all great political ideologies start off saying ‘let’s make human being as equal as possible.’ In fact, he is not equal—never will be.” Lee Kuan Yew, in his interview during Shell’s 120th anniversary in 2013, was asked, “What is the meaning of life?” And he answered the following: “Life is what you make of it. You’re dealt a pack of cards. Your DNA is fixed by your mother and your father… Your job is to do the best of the cards that have been handed out to you. What can you do well? What can you not do well? What are you worst at? If you ask me to make my living as an artist, I’ll starve. Because I can’t draw. But if you ask me to do mathematical questions or to argue and point out, I’ll get by. Those are the cards I handed out—and I make use of them.”

Munger and Buffett’s circle-of-competence idea asks us to recognize what we understand and where our judgment is limited.

Charlie: “I wasn’t going to dance lead in Bolshoi Ballet.” Use your skills where they are useful, and know when a decision exceeds your present competence.