Cult of realism that Kissinger and Munger represented
MOST people know about Warren Buffett, the world’s most famous investor. Not that many know about his confidant and right-hand man, Charlie Munger, who was fabled to be the real brains and conscience behind Buffett’s immensely successful investment company Berkshire Hathaway. Buffett himself once credited Munger with developing Berkshire’s investment strategy of “buying wonderful businesses at fair prices”.
Munger died last week, just a month away from turning 100. His death got significant coverage, but it was not even a fraction of the column inches and hours of airtime given to Henry Kissinger, who died the very next day, having turned 100 six months ago. Munger and Kissinger had very little in common, but they both represented the central disposition of our times. I shall call it the ‘cult of realism’.
To make my case, I will begin with a lesser-known story about Charlie Munger. The billionaire investor donated a lot of money to architecture projects. One of these is a massive building in the University of Michigan, which can house 600 students. What is strange about the rooms here is that none has any windows. Munger believed that windowless rooms were more efficient, cutting out distraction and allowing students to control the light in their living quarters. Students, on the other hand, found them horrible. Some said it affected their mental health and consequently their grades.
Munger didn’t care. He tweaked his idea a bit and came up with a solution for another mega dorm house — this time for the University of California, Santa Barbara. These were to have artificial windows, mimicking natural light. Munger argued that these windows, that allowed students to increase and dim the artificial daylight illuminating their rooms, were much better than any real window could be. When an architect on the project quit saying this plan was “unsupportable”, Munger responded by saying, “When an ignorant man leaves, I consider it a plus, not a minus.”
This is instrumental realism which privileges the result — in this case, perhaps, Munger’s idea of more efficient conditions for a student to get better grades — over the experience of being human. This is not very different from Kissinger’s geopolitical realism. Anthony Lewis, the Pulitzer Prize-winning journalist, described Kissinger’s philosophy as “an obsession with order and power at the expense of humanity”.
If Munger believed that an architect batting for students to have windows was ‘ignorant’, Kissinger could extend this idea to an entire people. I am talking of his famous quip when, as Nixon’s Secretary of State, Kissinger chalked up plans to overthrow Salvador Allende’s duly elected socialist government in Chile. “I don’t see why we have to stand by and watch a country go communist because of the irresponsibility of its own people,” he said at the time.
Kissinger’s ultimate objective was to defend American capitalism and “go on a spiritual offensive” to spread it in the developing world. As is well documented, his diplomacy had little to do with ‘spiritualism’. To fight the communist guerillas in Vietnam, Kissinger secretly ordered the bombing of neighbouring Cambodia, the staging ground of the Viet Cong militia. He personally worked out the bombing schedules, and ensured that more kilotons of explosives were dropped on Cambodia than the entire Pacific region in all of World War II, killing more than a 100,000 people who had nothing to do with the conflict in Vietnam.
Closer home, Kissinger played an active role in ensuring US backing to Yahya Khan’s genocide in East Pakistan, what is now Bangladesh. This, according to Kissinger, was a ‘realist’ form of sabre-rattling, not against India, but at the Soviet Union, which was backing the Indira Gandhi government. It is true that Nixon and Kissinger tried to get India to back down, but when Indira didn’t play ball, Kissinger referred to her with the choicest expletives.
Like Kissinger, Charlie Munger understood that capitalism required ‘realism’, not idealistic ‘ethics’. It is not the great free market of its self-image, but an economic system which benefits Big Business. He knew that only a few businesses could flourish in a ‘free’ market, and those who controlled the market would always be the biggest winners of the system. That is why Munger pushed Buffett to bet big on ‘wonderful’ businesses. In Buffett’s investment philosophy, these are castle-like companies with strong ‘moats’ around them. In other words, these are businesses which control the market in a particular industry and competitors are unable to eat into their market share. There is a name for this in economics — monopoly capital.
Munger also knew that money is made in capitalism not because markets are efficient, but because they aren’t. The market system constantly overvalues bad businesses and undervalues good ones. Berkshire Hathaway’s business depends on betting on the arbitrage caused by this inherent inefficiency of markets. Munger would have said, this allows an investor to buy a great business at a ‘fair’ price.
What brings Munger close to Kissinger is his ‘realistic’ view about the relationship between capitalism and democracy. Kissinger had no qualms in backing corrupt dictatorial regimes, often at the expense of democratic forces, to promote the self-interest of USA as a global power.
Munger’s views on democracy were best revealed when he was asked a question about India. He didn’t believe the Indian economy was worth investing in because it has this “crazy democratic thing, where you allow anybody who screams to stop all progress”. According to Munger, Lee Kuan Yew didn’t face those problems, perhaps because Singapore wasn’t a democracy. It, according to Munger, didn’t have to deal with “farmers lying down on the road”.
Jawaharlal Nehru lacked this ‘realism’ when India was embarking on its course of economic development. When KN Raj, the man who wrote India’s first Plan, asked the Prime Minister whether he wanted faster growth or democracy, fortunately for us, Nehru chose the latter.
The author is a senior economic analyst
