What would you pay for the opportunity to spend a few hours with the world's two most successful investors?
And when I say the world's two most successful investors, I'm talking about two guys with a combined 140 years of investment success. They've operated businesses, they've invested across industries and asset classes. They've navigated every political, economic and investment cycle you can fathom and they've been pitched every idea under the sun. They'll cover off on almost any topic you can think of and there really is very little they haven't had to consider over the years. Basically, they'll be willing to share all their investment secrets with you.
Does three or four million dollars sound reasonable?
That's the order of magnitude needed to win Buffett's annual charity lunch where you and seven friends can dine with Warren Buffett at New York’s Smith & Wollensky steakhouse. But you only get Buffett. If you want his partner too, Charlie Munger, you're best bet is taking the 'value' option. It will cost you a plane ride to Omaha, Nebraska for the annual Berkshire Hathaway meeting. Attendance is complementary if you own Berkshire shares. Here Buffett and Munger sit on stage while addressing unscripted questions from the audience for five or six hours.
2018 Power Lunch Auction Source: EBAY
For many decades, the only way to see and hear them was to be in the room itself. Until live streaming began in 2016, those attending, including journalists, were not allowed to make or release any video or audio recordings. For the first time, earlier this year, Buffett shared the entire series of videos, going back to 1994, that Berkshire had taped for their own internal records. These videos and the accompanying transcripts have been compiled by CNBC into one of the Greatest Investment Treasures of this century. "It blew my mind when I saw it," Buffett said.
This year, I finally took the time out to see my two favourite investors and mentors in Omaha. While standing in line at 4.30am I met two businessmen who'd traveled from New York to attend. These two friends had been coming for the last five years. When I inquired where their interest lied they said "This is the best 6 hour MBA you will get anywhere. Period." I agree.
Source: CNBC Buffett Archive
Over 40,000 people flock to Omaha each year to hear Warren and Charlie answer impromptu audience questions covering a broad swathe of topics. Sitting in the stands, you quickly realise these attendees love Buffett. And I can tell you, the locals do, too. Whether it was the Uber drivers, the staff at Gorat's Steakhouse [A highly recommended trip back in time], or Nebraska Furniture Mart's Ronnie Blumkin, [whom I had the pleasure of meeting], the feedback was consistent: Buffett's just your regular, friendly, great guy!
It's lucky for us that one of Buffett's strengths is his ability to change his mind. And thank goodness he does. At the 1995 Berkshire meeting an audience member asked Mr Buffett, "Could you consider availing a videotape of this meeting to us, the shareholders?" Buffett, in his iconic humorous way responded..
WARREN BUFFETT: "Yeah, we’ve had that suggested a number of times. It’s a good suggestion, and we’ve considered it. The thing we’re worried about, in connection with that, is discouraging attendance. I mean, it — (laughter) — we’d hate to have two people here asking questions and then send it out to tens of thousands. So — (laughter) — in the end —
CHARLIE MUNGER: Particularly if it might make sales go down at the jewelry store.
WARREN BUFFETT: Yeah. (Laughter and applause). Since we were just attacking hypocrisy in American business, Charlie felt like he should add that to my comments. (Laughter) But we — it’s a close call on that because we would like everybody — Of course, we try to cover a great many subjects in the annual report. But we like the idea of the meeting — answering a lot of shareholders questions. We don’t want to discourage attendance. And it’s fun to have everybody come in and ask questions. And the chances are, if we had far fewer people, we would have, you know, far more — far fewer — good questions. So that the quality of the meeting is enhanced, I think, by having a lot of people come. But you’ve come a long way, so I can understand why you might be interested in a transcript. (Laughs) I appreciate that. Thank you.
AUDIENCE MEMBER: — or no. Is that a yes or a no?
WARREN BUFFETT: It’s — (Laughter)
CHARLIE MUNGER: It was a no.
WARREN BUFFETT: It’s a no.
AUDIENCE MEMBER: OK. (Applause)
WARREN BUFFETT: Most everything we say is a no. But we have various ways of getting there. (Laughter)
I suppose with 40,000 plus attendees Buffett weighed the odds of releasing the videos against the chances of poor attendence and questions, and found in favour. These transcripts are an unfettered gold mine of investing nuggets. And while I've read every one of Buffett's annual letters from both Berkshire Hathaway and the Buffett Partnership, trawling through the transcripts opened my eyes to so many new concepts and insights I hadn't considered. Not just on investing but on life as well. I hope you'll enjoy them and learn from them as much as I have.
In Part One of this series I've included some of my favorite insights .. hopefully some of these will be new to you...
How to Behave
“We work all the time at trying to behave with other people as if our positions were reversed. That’s what Charlie’s always advised in all our activities, and we’ve tried to follow it. And we’re certainly far from perfect at it, but if you keep working at it, it does get results.” Warren Buffett
A Good Family Helps
“We owe a considerable amount, both of us, to the families we were raised in. I think the family standards helped us to identify the good people more easily than we would have if we’d had a more disadvantaged background.” Charlie Munger
There is More than Managing Money
“If you’re good at just investing your own money, I hope you’ll morph into doing something more.” Charlie Munger
“If all you succeed in doing in your life is to get early rich from passive holding of little bits of paper, and you get better and better at only that for all your life, it’s a failed life. Life is more than being shrewd at passive wealth accumulation." Charlie Munger
Culture is Important
"Everything we do we hope is consistent with what most people would call a “culture” at Berkshire." Warren Buffett
"I think Berkshire’s culture runs as deep as any large company could be in the world." Warren Buffett
Trust is Most Important
"Trustworthiness is more important than the brains. It’s not that they don’t have the brains, but we wouldn’t hire anybody, no matter how able, if we didn’t trust them." Charlie Munger
Look For a Successful Framework
"Look for the successful framework that’s been successful for people, and there’s nothing like Graham’s, in my view, and you’ll have a lot of fun and you’ll probably make a lot of money." Warren Buffett
Investment Principles Haven't Changed for 40 Years
"I know more about businesses than I knew 20 years ago, or 40 years ago. I haven’t really changed the principles. The last change — the basic principles are still Ben Graham. They were affected in a significant way by Charlie and Phil Fisher, in terms of looking at the better businesses. But they — but I didn’t leave any of — I didn’t leave Graham behind on that. And I really haven’t learned any new fundamental principles. But I may have learned a little bit more about how business operates over time." Warren Buffett
Analysing Stock Prices hasn't Changed in 50 Years
"There’s nothing different, in my view, about analyzing securities now than there was 50 years ago." Warren Buffett
Start Investing
"I think you have to jump in the water, because investing on paper and investing with real money, you know, is like the difference between reading a romance novel and doing something else." Warren Buffett
The Stock Market Offers Better Prices Than Private Market
"The stock market will offer you opportunities for profit, percentage-wise, that you’ll never see, in terms of negotiated purchase of business. In negotiated purchase of a business, you’re almost always dealing with someone that has the option of either selling or not selling, and can sort of pick the time when they decide to sell, and all of that sort of thing. In stock markets, it’s an auction market. Crazy things can happen." Warren Buffett
Wonderful is More Important than Price
"Generally speaking, I think if you’re sure enough about a business being wonderful, it’s more important to be certain about the business being a wonderful business than it is to be certain that the price is not 10% too high or 5% too high or something of the sort." Warren Buffett
Wonderful Businesses Are Worth More Than Most People Think
"I would say that if it’s a really wonderful business, we probably come up with higher intrinsic values than most people do." Warren Buffett
Could Pay Significantly More for Wonderful Businesses
"Looking back, when we’ve bought wonderful businesses that turned out to continue to be wonderful, we could’ve paid significantly more money, and they still would have been great business decisions. But you never know 100 percent for sure." Warren Buffett
Avoid Declining Businesses
“If you really think a business is declining, most of the time you should avoid it. The real money is going to be made by being in growing businesses, and that’s where the focus should be.” Warren Buffett
Successful Investors Sell Stocks that go up
"I would worry, frankly, if I sold a bunch of things right at the top [of the market], because that would indicate that, in effect, I was practicing the bigger fool-type approach to investing, and I don’t think that can be practiced successfully over time. I think the most successful investors, if they sell at all, will be selling things that end up going a lot higher, because it means that they’ve been buying into good businesses as they’ve gone along." Warren Buffett
Three Week Delay Would be Okay
“I think you could be in someplace where the mails were delayed three weeks, and the quotations were delayed three weeks, and I think you could do just fine in investing.” Warren Buffett
Psychological Edge
"Humans will continue to make the same mistakes that they have made in the past. I mean, they get fearful when other people are fearful... when people get scared, you know, it’s very, very pervasive.. It’s just the way the humans are constructed. That’s where Charlie and I have an edge. We don’t have an edge, particularly, in many other ways." Warren Buffett
Risk Relates to Time Horizon
"If you have a time horizon on a business, we think the risk of buying something like Coca-Cola at the price we bought it at a few years ago is essentially, is so close to nil, in terms of our perspective holding period. But if you asked me the risk of buying Coca-Cola this morning and you’re going to sell it tomorrow morning, I say that is a very risky transaction." Warren Buffett
The Thing to Do
"The thing to do is just find a good business at an attractive price and buy it." Warren Buffett
Get Back more than you Put in
“I just cringe when I hear people talk about, “Now it’s time to move from growth stocks to value stocks,” or something like that, because it just doesn’t make any sense.” Warren Buffett
"Anybody that tells you, “You ought to have your money in growth stocks or value stocks,” really does not understand investing." Warren Buffett
Phil Fisher's Lesson on Compounding Machines
"Phil Fisher was just telling me the same thing that Charlie was telling me, which was that it’s very important to get into a business with fundamentally good economics, and one that you could ride with for decades, rather than one where you had to go from flower to flower every day." Warren Buffett
What to Study
"We think you should study things like Mrs. B out at the Nebraska Furniture Mart, who takes $500 and turns it, you know, over time, into the largest home furnishing store in the world. There has to be some lessons in things like that. What gives you that kind of a result and that kind of competitive advantage over time?" Warren Buffett
Follow the Competition
"If we own stock in a company and in an industry, and there are eight other companies that are in the same industry, I want to own or be on the mailing list for the reports for the other eight, because I can’t understand how my company is doing unless I understand what the other eight are doing.
I want to have the perspective of, in terms of market share, what’s going on in the business or their margins or the trend of margins, all kinds of things that I can’t get unless I know —
I can’t be an intelligent owner of a business unless I know what all the other businesses in that industry are doing. And so, I try to get that information out of a report." Warren Buffett
Never Mind the Macro
"Charlie and I, to my knowledge, or my memory, I can’t recall ever us making an acquisition or turning down one based on macro factors that — you know, and we talk about deals when they come along, but whether it was See’s Candy, or whatever it might have been, the Burlington Northern we bought at a terrible time, in general economic conditions." Warren Buffett
Business Adversity
“One of the things we look for in businesses, is how — you know, if you see a business take a lot of adversity and still do well, that tells you something about the underlying strength of the business.” Warren Buffett
You Need To See A CEO's Track Record
"It is far easier to tell the great baseball batters after you’ve seen a couple seasons of their batting than it is to go to a college — in college baseball teams or high school baseball teams — and pick out the superstars." Warren Buffett
Don't Try and Change Management
“I would say that we’ve found it almost useless in 60 years of investing to give advice to anybody in business.” Warren Buffett
“I would say that the history that Charlie and I have had of persuading decent, intelligent people, who we thought were doing unintelligent things, to change their course of action has been poor.” Warren Buffett
No Single Metric
"I don’t think price-earnings ratios, you know, determine things. I don’t think price-book, price-sales ratio; there’s no single metric I can give you, or anybody else can give you, that will tell you this is a great time to buy stocks or not to buy stocks." Warren Buffett
Forget Concepts & Country Allocations
"When we hear somebody talking concepts, of any sort, including country-by-country concepts or whatever it might be, we tend to think that they’re probably going to do better at selling than at investing." Warren Buffett
Businesses Don't Always Meet Expectations
"Businesses do not meet expectations quarter after quarter and year after year. It just isn’t in the nature of running businesses. And, in our view, people that predict precisely what the future will be are either kidding investors, or they’re kidding themselves, or they’re kidding both." Warren Buffett
Stock Prices in the Lobby is a Tell
"We’ve been suspicious of companies, for example, that place a whole lot of emphasis on the price of their stock. I mean, when we see the price of a stock posted in the lobby of the headquarters or something, you know, things like that make us nervous." Warren Buffett
Avoid Start-Ups
"I've never swung at a ball while it's still in the pitcher's glove." Warren Buffett
Wonderful Businesses beat Cigar Butts
"Those sub-working capital stocks are just almost impossible to find now. And if you got into a market where a lot of them existed, you’d probably find wonderful businesses selling a lot cheaper, too. And our inclination would be to go with a cheap, wonderful business." Warren Buffett
Don't Be 1% Incautious
“I would rather be, you know, a hundred times too cautious than 1 percent too incautious, and that will continue as long as I’m around.” Warren Buffett
Buffett and Munger have spent their whole lives, over a century in time, thinking about not only investment but also leading a fulfilling life. Their track record is unprecedented. Their communicative style can be best described as simple, genius in fact. If you really want to understand investing, I can't recommend highly enough studying the lessons of these Investment Masters. When asked what he would like to be remembered for in the future, or his legacy, Buffett replied "If you really ask me, I’d probably like 'teacher'. I enjoy teaching a lot." To this day, most Finance and Investment Courses don't take up Buffett on his wish. For those that do, let's hope the status quo remains; there will be more opportunities to leverage his wisdom.
I hope to see you in Omaha next year! Maybe we can grab a steak at Gorat's together...
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Further Suggested Reading:
Investment Masters Class - The Buffett Series
Investment Masters Class - Evolution of a Value Manager