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March 29, 2020 - November 15, 2024
Buffett surmised that Berkshire has a pretty good group of businesses for the world we face. While we may not know which will be super-winners, a significant number will do okay.
Buffett asserted the larger problem is having the wrong manager rather than the wrong compensation system.
Buffett’s view is that the most important job of the board is to pick the right CEO. The second most important job is to prevent the CEO from overreaching, which often happens in acquisitions.
Buffett noted that people simply like to gamble.
gambling is a tax on ignorance. You put it in, and it ends up taxing many that are least able to pay while relieving taxes on those who don’t gamble.
He finds it socially revolting when a government preys on its citizens rather than serving them.
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.
Ideally, Buffett buys these businesses for 40 cents on the dollar, but he’ll pay closer to a dollar for a really great business.
Finally, Buffett stressed the importance of staying within one’s circle of competence. Buffett said a large part of his success has come from knowing how to recognize and step over one-foot bars and to recognize and avoid the seven-foot bars.
Fill your mind with competing ideas, and see what makes sense to you.
take a small amount of money, and do it yourself. He joked that investing on paper is like reading a romance novel versus doing something else.
One good place to look is where there are few other players.
In an interesting point, Buffett again noted that you need something in your programming so that you don’t lose a lot of money. He claimed that his best ideas haven’t done better than others’ best ideas, but he’s lost less on his worst ideas.
Buffett begs to differ, 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. If you understand the economics and you know the people, then you’re not taking much risk.
roulette wheel, you sometimes have to pay 35 to 1,
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.”
You use up just about as much hydrocarbons making ethanol as it produces,
finding talented people to do what they do best is one of Buffett’s driving principles.
George Clason’s classic, The Richest Man in Babylon,
He also noted that if you become very reliable and stay that way, it will be very hard to fail in doing anything you want.
2008
The Qwest Center on the Berkshire weekend has become part meeting, part circus. There were country western singers, live bulls, speed boats, antique cars and an entire manufactured home from Clayton Homes.
Some 25 Berkshire companies, from Justin Boots to Fruit of the Loom to GEICO insurance, sold their wares in the show room.
Fortune 500 Ranking: 11th Stock Price: $141,685
Buy the Business Asked how not to be an investment lemming, Buffett suggested reading his old standby, The Intelligent Investor by Benjamin Graham (especially chapters 8 and 20), which changed his life.
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.
Munger added, “We’re happy making money at a reduced rate and suggest you do the same.”(96)
Buffett noted that he cheats when it comes to finding good managers. He simply buys the ones who are already running great companies.
He simply finds decades-long records of excellent performance. Then he seeks to retain them in a way that maintains their enthusiasm for the work.
Once in a while, Buffett brings props, and this year’s was a set of municipal bond bid sheets. He noted that there were some $330 billion of auction rate securities (ARS) weekly. Voilà—long-term funding with short-term rates. Good as long as it works. But when credit markets seized up in February, so did the ARS market. Chaos ensued.
If you cannot think fast and act resolutely, it does you no good. Like men spear fishing, you may wait a long time, and when opportunity comes, you must act.
Ajit Jain
the benefits for the professional investor of loading up on your best ideas.
Buffett claimed that concentration is a good thing in investing, noting that he has had 75% of his non-Berkshire net worth invested in a single idea numerous times. It would be a mistake not to have 50% of your net worth in a really good situation. The big mistake is having 500% of your net worth in things.
The world now produces 87 million barrels per day, the most ever, and yet we are probably at the lowest surplus capacity ever as demand marches ever higher.
OFHEO (Office of Federal Housing Enterprise Oversight) oversees two incredibly important entities, Fannie Mae and Freddie Mac. These two accounted for 40% of mortgage flow a few years back and perhaps some 70% today.
Buffett opined that “a chief risk officer is an employee that makes you feel good while you do dumb things.”
And he predicted, eventually, we will see it all again, just in a different form. Some combination of wanting to get rich, leverage and belief in the tooth fairy will generate another bubble in time.
CDOs (collateralized debt obligations),
CDS (credit default swaps),
good returns on tangible assets.
Good branded products are often a good investment.
Buffett suggested that the fact that the U.S. savings rate has turned negative is not necessarily a big negative for the economy.
What is needed is for the half-dozen largest institutional owners, in egregious cases, to withhold their votes and make statements about excessive compensation. Big shots do not like to be embarrassed. The press can help, too. An effective pressure is needed to check the self-interest of management.
Munger believes CEOs taking compensation have a moral duty not to take the last dollar. Like Supreme Court justices, they should choose to be underpaid.
Seriously, he noted the importance of a good mental attitude, to love what you do and to do it with other people who love what they do.
He pointed out that it is a terrible mistake to sleepwalk through life, to just go through the motions. Ideally, you have a job that you would do for free.
the story of the man who spent 20 years looking for the perfect woman before he finally found her. Unfortunately, she was looking for the perfect man.
effective communication is under taught, and recommended that many could benefit by forcing themselves to learn public speaking at an early age.(104)
