Last month, I went to Omaha for the annual Berkshire Hathaway shareholders meeting. It’s always a lot of fun, and not just because of the ping-pong matches and the newspaper-throwing contest I have with Warren Buffett. It’s also fun because I get to learn from Warren and gain insight into how he thinks.
Since the financial crisis, Warren Buffett's Berkshire Hathaway has had significant exposure to financial stocks in its portfolio. Q1 2021 hedge fund letters, conferences and more At the end of March this year, Bank of America accounted for nearly 15% of the conglomerate's vast equity portfolio. Until very recently, Wells Fargo was also a prominent Read More
Here are three things I’ve learned from Warren over the years:
1. It’s not just about investing.
The first thing people learn from Warren, of course, is how to think about investing. That’s natural, given his amazing track record. Unfortunately, that’s where a lot of people stop, and they miss out on the fact that he has a whole framework for business thinking that is very powerful. For example, he talks about looking for a company’s moat—its competitive advantage—and whether the moat is shrinking or growing. He says a shareholder has to act as if he owns the entire business, looking at the future profit stream and deciding what it’s worth. And you have to be willing to ignore the market rather than follow it, because you want to take advantage of the market’s mistakes—the companies that have been underpriced.
I have to admit, when I first met Warren, the fact that he had this framework was a real surprise to me. I met him at a dinner my mother had put together. On my way there, I thought, “Why would I want to meet this guy who picks stocks?” I thought he just used various market-related things—like volume, or how the price had changed over time—to make his decisions. But when we started talking that day, he didn’t ask me about any of those things. Instead he started asking big questions about the fundamentals of our business. “Why can’t IBM do what Microsoft does? Why has Microsoft been so profitable?” That’s when I realized he thought about business in a much more profound way than I’d given him credit for.
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