Charlie Munger's partner Li Lu just posted a post on WeChat Moments about some common sense: 2024 Mr. Munger once said that common sense is the most scarce cognition. Violating common sense will pay a price. The so-called common sense is usually disproven by these costs. Therefore, the discussion of common sense is always valuable. Here I will talk about some common sense and listen to your opinions.

1) Modernization is the product of the combination of market economy and modern technology. But there is a causal relationship between them. Market economy is the cause and modern technology is the result. Without modern market economy, modern technology will not be produced. In a non-market economy system, technology cannot be effectively transformed into productivity, and therefore cannot produce lasting and leading technology. However, a developed market economy will definitely produce leading technology.

2) Except for national defense, all advanced technologies today were first created by private enterprises in a market economy environment. This is true in the United States, the West, and China. If the government leads the innovation of advanced science and technology and destroys the market mechanism, there will be no successful cases.

3) Human nature is selfish. Human morality is actually a description of broader and long-term self-interest. If institutional design and policy measures cannot stimulate human self-interest and form a positive incentive mechanism, they will not be sustainable. This is true in both economic and political activities.

4) On corruption. Corruption is essentially a form of rent-seeking. As long as there is power, there will always be corruption. Throughout human history and under all systems, corruption has always existed and will always exist in the future. Corruption can only be controlled, not completely eliminated. Excessive corruption harms society, and excessive anti-corruption will also harm society. Fair institutional control is more sustainable than artificial control and has fewer negative consequences.

5) Power is the influence of one group of people on the behavior of another group of people. Its total amount is fixed and related to the population. Power is essentially a zero-sum game. If the government has too much power, it will inevitably lead to too little power for the people. If the officials are in dire straits, the people will inevitably be in dire straits. This has been the case in ancient and modern times, both in China and abroad.

6) The essence of a market economy is that the government gives economic power to the private sector. In a market economy, all important decisions can only be made by private individuals. The role of the government is to serve and maintain the rules, not to command. There is no successful case of the government directing the market economy. Whether the private economy and the market economy are vibrant often depends on whether the government's power in economic activities is small enough.

7) The selection of talents in a market economy is determined by free competition, which is unpredictable and unconventional. The more a society can tolerate talents with different personalities and values, the more successful it will be in a market economy. And vice versa.

8) People are all pursuing equality by nature. A mechanism that pursues equality of results will create the greatest inequality, while a mechanism that pursues equality of opportunity will form the greatest approximation to equality of results.

9) People’s need for security far outweighs their pursuit of wealth. If people have enough food and clothing and no personal security is guaranteed, their pursuit of wealth will be greatly reduced.

10) Market economic behavior is related to expectations. When the vast majority of people in a market economy begin to hold negative expectations for whatever reason, economic activity will decline, and the decline itself will reinforce negative expectations, thereby accelerating the recession. And vice versa.

11) The market economy is formed by spontaneous demand, autonomous supply and free competition. Demand is the main cause, and supply is the means and result. The real total volume of the market economy is actually determined by the real total demand, not by supply. An increase in real demand can boost supply. If real demand decreases, boosting supply will not only fail to solve the problem, but will also cause more related problems.

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