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the story of the woman who turned 103 and was asked, “What do you like about being 103?” She responded, “No peer pressure.”
While determining the timing is very difficult, predicting what will happen is easier.
gold is a dumb investment.
if you take a centuries-long view, you will see that extraordinary things have happened.
CEOs with big egos making precise predictions are kidding investors, themselves or both. This, in turn, sets up a system that exerts psychological and financial pressure to do things that people don’t want to do.
Buffett noted the best way to find great managers is to look at the record.
the best investment you can make is to invest in yourself.
When you are buying groceries, you welcome lower prices. Buffett said Berkshire is the same way. They will be glad to see temporarily low prices, so they can put their cash to work.
the SEC now requires CEO pay to be listed. While it was hoped this added transparency would rein in egregious compensation, the list has had the opposite effect. Envious CEOs use it as a shopping list for seeking pay raises.
“It’s a good habit to trumpet your failures and be quiet about your successes.”
the CPI (Consumer Price Index) is not a particularly good measure of inflation.
the CPI understates inflation.
Buffett noted that one possible side effect of the weaker dollar could be significant inflation. It is tempting for governments to devalue what they owe to reduce the burden of debt repayment
“To measure opportunity cost, take your best available opportunity versus all other options.”
modern portfolio theory is so asinine.”
the best opportunities come in the midst of some convulsion. The key is to buy when others are paralyzed.
The key is to follow logic rather than emotion. Focus on what is important and knowable rather than on public opinion.
the chance of going 60 years with no nuclear events was close to zero.
Low Turnover = Owner Attitude
Buffett noted that he and Charlie have seen guys go broke or close to it because 99 of 100 of their decisions were good, but the 100th did them in.
One element contributing to the crowded trade risk is the rise of what Buffett calls “the electronic herd.”
“History doesn’t repeat itself, but it rhymes. We’ll have something that rhymes.”
Buffett believes the dollar will likely decline against most major currencies over time unless current policies change in a major way.
He called it “dumb lending” for lenders to make a high percentage of loans where people make tiny payments early on and hope to make it up with higher payments later. Someone who can only make 20-30% of a full payment now isn’t going to be able to make 110% payments in the future.
the larger problem is having the wrong manager rather than the wrong compensation system.
It’s an enormously difficult thing to run a big company, so the greater sin is having the wrong person.
He noted that everyone on the board at Berkshire has a lot of Berkshire stock. Thus, they are in the same position as shareholders.
real owner’s board.
Historically, when corporate profits get to around 8% of GDP, there’s a reaction, such as higher taxes.
the bust in South Korea produced some of the cheapest stock prices he’s ever seen.
Gambling: A Tax on Ignorance
He finds it socially revolting when a government preys on its citizens rather than serving them. A government shouldn’t make it easy for people to take their Social Security checks and waste them by pulling a handle. In addition, other negative social things can flow from gambling over time.
Buffett favors great businesses, which he defines as those having a high return on capital for a long period of time, where he thinks management will treat shareholders right.
Buffett buys these businesses for 40 cents on the dollar, but he’ll pay closer to a dollar for a really great business.
Let’s say you want to buy a farm, and you calculate that you can make $70/acre as the owner. How much will you pay for that farm? You might decide you wanted a 7% return, so you’d pay $1000/acre. If it’s for sale at $800/acre, you buy, but if it’s for sale for $1200/acre, you don’t.
Buffett has taught in past years that it is important to know the one or two key factors in each business you own.
Buffett agreed that he is big on reading everything in sight and recommended good investors should read everything they can.
Fill your mind with competing ideas, and see what makes sense to you.
“What do you own, and why do you own it?”
At age 19, Buffett read The Intelligent Investor. He shared that at age 76, he’s still running through the same thought processes he learned from the book at age 19.
asserting volatility does not measure risk. Beta is nice and mathematical, but it’s wrong.
Buffett believes that real risk comes from the nature of certain kinds of businesses, by the simple economics of the business and from not knowing what you’re doing.
We recognized early on that very smart people do very dumb things, and we wanted to know why and who so we could avoid them.”
“I think the idea of running vehicles on corn is one of the dumbest ideas I’ve ever seen. Governments under pressure do crazy things, but this is among the craziest. Raise the cost of food so you can run these autos around?
The idea of finding talented people to do what they do best is one of Buffett’s driving principles.
when you are buying a stock, you are really buying part ownership of a business.
If Buffett were teaching business school, he would make it shockingly simple. “Teach (1) How to Value a Business, and (2) How to Think about Market Fluctuations – that the market is there to serve you, not influence you.” That would be it. Professors fill the time with all sorts of formulas.
If you were buying a farm, for example, you would look at the farm’s production over time versus the purchase price. You would not be trading farms based on short-term swings in agricultural prices.
Buffett noted that he cheats when it comes to finding good managers. He simply buys the ones who are already running great companies.
the manager loves the money or loves the business. If they love the business, they’ll be a good fit for Berkshire.
