For detailed notes on the whole meeting, go HERE.
Below are some of my notes. I just wrote down a few things I thought were interesting. Much of it has been said before by Mr. Buffett (WB) and Mr. Munger (CM), but good advice is always worth repeating. These are my notes and paraphrasing, not direct quotes from Warren and Charlie.
WB: There should only be 2 investment courses taught in school: (1) How to Value a Business, and (2) How to Think about Market Prices. Option pricing theory, etc. is all nonsense. [added to the etc. that is nonsense are things like Efficient Market Theory, Beta as a measure of risk, and the Capital Asset Pricing Model (CAPM)]
CM: If you have some extreme political ideology, you’re very likely to make some dumb charitable gifts.
WB: Don’t ever trade away reputation for money.
CM: While we don’t like inflation because it’s bad for our country and our civilization, we’ll probably make more money because of inflation.
WB: The most important factor in choosing a career is finding something you’re passionate about.
CM: But you’ll do better if you develop a passion in something you have an aptitude for.
In response to a question from a professor who is writing a book to help people who are introverted:
WB: The ability to communicate, both in writing and orally, is enormously important. It is great for people who have trouble with that [like he said he used to] to get into situations where they have to do it [get up and talk in front of a bunch of people, etc.], preferably with other people having trouble too, at first.
CM: It’s a real pleasure to have an educator come who is doing something simple and important instead of foolish and unimportant.
WB: [After mentioning that he shorted out the market generally while running his partnership] It is really unnecessary to short anything if you have some good long ideas.
CM: [After Buffett discussed the inefficiency in the Municipal Bond Market recently] The dislocation in Muni bonds was very brief and very extreme. You had to be ready to act fast.
CM: We prefer businesses that drown in cash. [Told a story about a friend with construction business whose profit at the end of the year was sitting in the yard] Berkshire prefers those businesses that can write a check at the end of the year.
CM: Because of human nature….we’ll have turmoil [in this world] for as far as you can see. [There will always be something.]
CM: The goal of investment is to find situations where it is safe to non-diversify. This is the opposite of what is taught in school.
WB: There may be situations where by only putting 20% or less of your net worth in an investment, you’ll miss the opportunity of a lifetime.
WB: WB read the annual report for PetroChina [without talking to management or anyone else] and thought it was worth about $100 billion. He then checked the price and it was trading for $35 billion. The basic business was easy for him to understand and there was a big margin of safety, so he bought. When oil was at about $70-75 he thought it was worth $275-300 billion which is where it was trading, so they sold.
WB: Most big food businesses are good businesses in that they earn good returns on tangible assets. You can feel good about branded products when they’re runaway leaders in their field. If you buy good branded products and don’t pay too much, you should do okay – but you won’t do exceptional because that fact is well known. A brand is a promise.
CM: A risk officer is often just a guy who makes you feel good while you do dumb things. Models and things that make you feel good and have confidence in an investment often just clobber up your head.
WB: There’s no reason to be exposed to ruin and disgrace for something that doesn’t matter that much.
There are a lot of things WB and CM can make quick decisions about because there are a whole lot of things they won’t allow themselves to take the time to think about.
CM: I would argue there’s an environmental reason for using coal. [Explained something along the lines of using those (coal) hydrocarbons so that we can save food producing hydrocarbons – oil, gas – for food production]. Most people don’t think that way, but I do.
WB: You can become, to an enormous degree, the person you want to be.
CM: Avoid being manipulated by vendors and lenders by using their own tricks. [Recommended Robert Cialdini’s book Influence, and his new book, Yes!.]
WB: Americans have an aversion to mass transit. I don’t think this view will change anytime soon.
CM: Agrees with Al Gore that we shouldn’t be burning hydrocarbons, but they have different reasons. “My brain works differently than Al Gore’s. You’ll have to decide which you prefer.”