University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting

by Daniel Pecaut

Where the pricing umbrella has been raised too high (cigarettes, cornflakes, diapers) and where much marketing muscle has been lost to retailers, brands are quite vulnerable to generics.

In the case of Philip Morris, the price of Marlboro was steadily raised to $2.00 per pack, enabling $1.00 per-pack generics (a $500 per-year differential for a 10-pack-per-week smoker) to grab significant market share. Philip Morris recently responded by dramatically cutting the price of Marlboro.

Coke sold for 0.8 cents per ounce many decades ago, and today sells for 2 cents per ounce. Few food items have gone up less in price.

This is a departure from the early years at Berkshire when they owned cheap stocks and easy-to-operate companies. Now, they’ve learned to find great managers, which creates an opening to own more complex businesses.

Buffett’s formula for happiness is simple: “Do what I like with people I like.” He noted that he learned early in life that his favorite employer was himself. It avoids aggravation.

Buffett noted that a major cyber, nuclear, or biological attack is a near certainty that will happen at some point.

think about business performance and what you would pay for the business, just as you would a farm.

GDP per capita is up six-fold in his lifetime.

india GDP per capita us doubling every 10 years

you can change the profitability of banking totally with capital requirements. With a 100% capital requirement, you could not make any money. With a 1% capital requirement, you add too much risk to the system.

Karnataka bank CAR is 19.85% against the apex bank's stipulation of 11.5%. SBI 14.28% Canara Bank: 16.44% Wells Fargo: 13%

New, tougher capital requirements for banks are sure to make large banks less profitable, though less risky.

the Sequoia Fund came up for discussion. Buffett reminisced that he was the father of the fund.

“If you need a manager, look for someone with intelligence and energy and integrity. If they don’t have the last one, then be sure you don’t have the first two. If they have no integrity, I want them dumb and lazy.”

If the consultants just say, “Buy an S&P 500 Index fund and sit for 50 years,” they wouldn’t be able to charge much. The hyperactive traders and their “helpers” are, in aggregate, a tax on the system.

you can skip the fees and get the performance of American industry by owning an S&P 500 Index fund.

To a significant degree, size is the enemy of performance.

the surest way to make money is to buy dollar bills for less than a dollar.

Buybacks above intrinsic value destroy value. Buffett: “A full wallet is like a full bladder. One could get the urge very quickly to pee it away.”

1972, See’s Candy had 140 shops. You could look at each shop, see how it did in year one, year two, year three. It was very interesting. You never know when some fact might pop up as useful.

focus on intrinsic value growth, not reported earnings. Again, it’s not what the numbers are but what they mean that matters.

Each business will have a couple of unique factors that are essential in evaluating its progress.

Under pressure from analysts, shareholders, and other constituencies, public companies are often driven to forgo the long-term, rational decision in favor of short-term gratification.

These five companies (Alphabet, Amazon, Apple, Facebook, Microsoft) require no equity capital to run them. None. It’s a very different world.

It used to be that growing and earning larger and larger amounts of money required large reinvestments of capital. Not so with these top five, which generate almost infinite returns on capital.

“Lose money for the firm and I will be understanding. Lose one shred of reputation for the firm and I will be ruthless.”

he loves a competitive advantage that can last for decades, talented and eager managers who fit the Berkshire culture, and of course, a good price.

Buffett reviewed how buying See’s Candy in 1972 was a watershed moment. They paid $25 million net for an entity earning $4 million pre-tax that has since generated $2 billion of pre-tax earnings.

Buffett added that if you want to be a good evaluator of a business, run a lousy business for a while.

Buffett is proud of Berkshire’s large investments in wind and solar and has a large appetite for more. He said that, if there were a $5 billion solar project, they would look at it.

Buffett predicted that in the next 10 years, Berkshire will have significantly more money invested in utility systems

Munger piped in that there is much in medical care that he doesn’t like. Too much chemo for the almost dead, doctors doing too many unnecessary surgeries.

“They asked him what he wanted said at his funeral, and he said, ‘I want them to all be saying that’s the oldest looking corpse I ever saw.’”

Buffett shared that his ideal legacy is very simple. What he really likes is teaching. He’s been teaching both formally and informally all his life.