A simple, yet profound comment on discount rate by Charlie Munger during the 2016 Daily Journal meeting.

Questioner: How do you use the discount rate to calculate intrinsic value?

Charlie Munger:  We don’t use numeric formulas that way. We take into account quality factors. It’s like a bridge hand, you have to think about a lot of things.

There is never going to be a formula. If that worked, every mathematical person would be rich, but that’s not the way it works.

Questioner: But you value a company…

Charlie Munger: Opportunity cost is crucial, and the risk free rate is one factor.

Questioner: Do you use the same rate for different businesses?

Charlie Munger: The answer is no, of course not, different businesses need different rates. They all are viewed in terms of value and weighed against one another. Of course we’re OK paying more for a good business. ...