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March 29, 2020 - November 15, 2024
Buffett said to beware projections (“Don’t ask the barber if you need a haircut.”) and to keep things simple (“I’d rather multiply by three than by pi.”).
‘Listen to your customers’ as a business principle does not require a 300-page book.”
On Projections In another poke at human foibles, Munger claimed projections do more harm than good as they are prepared by people desiring a certain outcome.
“jealousy is the only sin you can never have any fun at.”
Munger scoffed at the paranoia of newspaper proprietors who worry about rising newsprint prices: “People don’t care what floor the elevator is on, just which way it’s going.”
Buffett added that a 15-year graph of newspaper advertising rates versus newsprint prices would show ad rates have done far better.
Buffett said shareholders are presented all the numbers needed in the Berkshire annual report to estimate Berkshire’s intrinsic business value. He dropped a hint saying the discussion of Berkshire’s $3 billion of float was the most important page in the report.
when million-dollar nonphysical transactions swing on just a signature, there is potential for lots of mischief.
The moat represents a barrier to competition and could be low production costs, a trademark, or an advantage of scale or technology.
when accounting appears confusing, avoid the company. The confusion may well be intentional and reveal the character of the management.
Buffett noted that debt is meaningless without looking at the ability to pay.
Even with U.S. national debt at 60% of GDP (versus 125% of GDP at the end of World War II), Buffett does not think the national debt is a big worry.
Bertrand Russell, “Most men would rather die than think. Many have.”
Diversification makes no sense for someone who knows what they are doing.
Buffett claimed that three wonderful businesses is more than you need in this life and would serve you much better than 100 average businesses.
Munger said to think of the problem in reverse. While he could not name one business ruined by downsizing, he could think of many ruined by bloat.
Munger bristled at the notion that he and Buffett are “aging executives,” exclaiming “I don’t know anybody who’s moving in the other direction!”
it is essential to learn from both the mistakes of others as well as your own.
Patton: “It’s an honor to die for your country. Make sure the other guys get the honor.”
When asked how he would teach business students, Buffett said, “For the final exam, I would take an Internet company and say ‘How much is this worth?’ And anybody that gave me an answer, I would flunk.”
the greater the certainty and the amount of future cash flows. The key dangers relate to changes in market share, changes in unit demand and the allocation skills of management. The bigger the moat, the less great management is needed. As Peter Lynch has said, “Find a business any idiot could run because eventually one will.”
Buffett agreed that there is a lot of money to be made in telecommunications for those who understand it.
airline and auto industries as examples of huge growth industries where very few got rich.
travel better thanks to NetJets.)
After you have enough for daily life, all that matters is your health and those you love. Likewise in work, what really matters is that you enjoy it and the people with which you work.
Munger warned that corruption in accounting systems was a significant factor in Japan’s collapse over the past decade – a lesson in how important it is not to let slop into the system.
Executive Jet Aviation (EJA),
Currently, 6%-7% of investment funds in the U.S. are indexed.
high profits on capital often rely on information inefficiencies. A really efficient auction system will remove such inefficiencies as it enables the buyer to find the low price.
rich). If someone else is getting rich, so what? Someone else will always be doing better.
The real key is to know what you really want to avoid and give those things a wide berth (such as a bad marriage, an early death, and so on). Do this and life will go much better, he advised.(45)
we should all employ an interdisciplinary approach to solving human problems.
break-points and back-up systems in engineering)
have difficulty realizing the most important thing with a power system is to have surplus capacity.
In the case of sugar, Buffett noted the average human body eats something like 550 pounds in dry weight of food in a year, and about 125 pounds (over 20%) of that consists of sugar in one form or another. Yet the average life span of Americans keeps going up.
Buffett asserted that the biggest money made in Wall Street in recent years has not been made by great performance, but by great promotion.
He noted that it’s much easier to save during your teen years when your parents are taking care of your financial obligations. He surmised that every dollar saved then is worth $20.
He recommended learning about local businesses – which ones are good and why, which ones went out of business, etc. As you go, you’ll build a database in your mind that is going to pay off over time.
the very best investment you can make is in yourself.
Know the Big Cost
In the carpet business, Buffett continued, only 15% of costs relate to employees. The big cost in that industry is the raw materials, fibers.
In retail, the big cost is rent, with labor being a significant secondary cost.
The key is to understand a company’s costs and why it’s got a sustainable edge against its competitors.
airline travel is pretty much a commodity business, costs are the key factors. The biggest cost is labor.
The figure to look for with airlines, then, is cost per available seat mile and the cost per occupied seat mile.
(Buffett joked that buying The Buffalo News was Munger’s idea: Munger was stuck in Buffalo during a blizzard, and he called Buffett to ask what he should do. So Buffett told him to go out and buy a paper.)
Buffett anticipated that Berkshire might buy 40 companies, roughly two a year, over the next 20 years.
While we may deeply regret what happened, we should not regret facing reality with more intelligence.
Buffett shared that he has long been worried about a terrorist nuclear disaster, and 9/11 leaves his view unchanged.
Jon Alter’s book, The Defining Moment: FDR’s Hundred Days and the Triumph of Hope,
