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Lessons Learned – Warren Buffett And Charlie Munger

Notes from Berkshire Annual Shareholder’s Meeting from 2010 in which Warren Buffett and Charlie Munger discuss the lessons they learned.

Lessons Learned – Warren Buffett And Charlie Munger (2010)

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Transcript

Some banks made the mistake of drifting into a business that they didn't know for more money now and some kind of real or alleged problem situation arises. Their motto has been get it right get it fast get it out get it over Munger says the complexity that has come to the system is quite counterproductive. It is very difficult to change a culture. It is much better to start. All right Ajeet Jane is extremely disciplined but he cannot be replaced. This is a repeat thing. Warren says that cash is a terrible protection against inflation because the value goes down stocks are pretty good. Owning a great business is very good and your own skills which you can apply to making more money is the best. So number one is your skill. Number two as a business growing faster than the rate of inflation 3 stocks and the last best asset is cash in all important decisions and especially ethical ones you don't do something just because the other person is doing it. You should have other reasons than that Charlie Munger says we only admire the rich when they've earned it honestly and spend it wisely. The exact quote is only when it's been fairly won and wisely used On Berkshire's risk profile. They're okay when an occasional disaster such as Katrina or 9/11 happens every 10 years or so it costs them two to three billion. As long as they make good decisions over the long term and Warren Buffett and Charlie Munger would not even be uncomfortable with a five billion dollar loss they go on say that most businesses prefer to have smooth earnings.

But Berkshire is okay with lumpier earnings on big businesses. Charlie says that it's almost a fluke of history. But when the newspaper business has got big they behave even better. One potential reason could be because they regarded themselves and others regarded them as well as the fourth branch of the government. So having that sense of importance rubbing your nose in your own mistakes is a good practice. Next is a certain point at which more information obfuscates rather than illuminates. Charlie would much prefer to invest in places that are prosperous and disciplined prosperous because it's hard for an empty sack to stand upright and disciplined because integrity is important. You should be very aware of contagion and undisciplined behavior unchecked can spread very quickly. Furthermore it is a vain imagination to think that more cash will solve your competitive problems. Charlie Munger describes himself andco. as being very stupid in many ways but they've been able to avoid a slight subset of very important stupidities. Integrity is the safest way to make money even if there is an occasional perfect knave who makes money. Of course everyone wants to profess integrity but actual integrity is very difficult to discern. It is very hard to avoid inanity when everyone else around you is doing it. People feel as if they're not getting all they can if they don't keep up the shady behavior. A lot of bad behavior does not come from malevolence but from subconscious poor cognition which justifies behavior that is not really justifiable. If it's better understood one cure is for people making the decisions to bear the consequences of their decisions.

Warren Buffett says getting rid of counterproductive fear is very difficult. Charlie says that what helped him get over the fear was going through hardship and realizing that he could handle it. Perhaps you should get your feet wet with more failure frequently in the real world. The correct answer is counter intuitive. Some advice for entrepreneurs in defining themselves. Spend less than you earn. Follow your passion something that turns you on. You might have found it already or it may take awhile but don't give up in searching for it. The beauty of it is in a sense there is not that much competition. There won't be many people running faster than you in the race you select. And finally on the fundamental or unified theory of management and life in 10 words or less Charlie Munger says it's pragmatism. Partly we do things differently in our way because it suits us. Partly we do it because of our temperament and natures and partly we do it because it works better. It's just that simple and we had enough sense to keep doing something when it was working. And that's an exact quote. So we've used the fundamental algorithm of life. Keep doing what.