Warren Buffett and Charlie Munger receive a question on USAir (now US Airways) at the 1995 Berkshire Hathaway annual meeting.
Buffett And Munger On USAir -1995 Berkshire Annual Meeting
Q4 hedge fund letters, conference, scoops etc
Transcript
Hey there. I'm Susie Taylor from Lincoln Nebraska. And by way of explaining.
We wrote down the value of USAir reflecting our investments current market value. You had a good explanation in your report as to why the economics of the business are unattractive at present given that choice. We wouldn't do it over again. I think that's a first and I should imagine anybody want to ask about us.
We put them in the other room just so you know the second part is better.
But I watch you I just see you on the monitor and quoting from your profound statement you don't have to make it back the way you lost it right. Wouldn't it be a good idea to put that 89 million in something you read. I really behind. As opposed to USAir.
Well that's a very good question because it is true that a very important principle in investing is you don't have to make it back the way laws did. And in fact it's usually a mistake to make try and make it back the way that you lost it. And. We have. When we write our. An investment down as we did with USAir, 89 million, we probably think it's worth something more than that. But wait wait. We tend to want to be on the conservative side but it's worth a whole lot less than we paid and. The nature of that preferred as well as other private issues we've bought. Usually makes it quite difficult. To sell. That's one of the things we know going in. When we bought. Preferred. Some people. Thought that we were getting unusually favorable terms. I haven't heard from them lately on USAir but they buy that one of the considerations in that is that if you buy 100 shares of a preferred that's being offered through a securities firm from the same measure you can sell it tomorrow. And we we are restricted in some ways legally and another way simply by the way that markets work.
From disposing of holdings like that. And we know that there is an extra cost involved to us if we should try to sell or it may be impossible and that's that's not that's not of great importance with us because we don't buy things to sell but it's of some importance. And and we are not in the same position. Owning our series A preferred of USAir as we would be if we'd bought a shares or 5000 shares of the Series B preferred I believe it as that trades on the New York Stock Exchange. That would be very saleable. And our preferred. Could well even be saleable at a price modestly above what we carry it for. But it would require not. It would not be very easy to do it. It might if it were DOL, we want about to do it we could probably. Assuming we could do it at all we could probably get a little more money for it but but it would not and were not easy to do partly because of legal restrictions. Charlie and I are on the board that complicates things. We always know something that just by being on the board that the public doesn't know also that that complicates things and in the end we usually find that dealing with anything where we've got fiduciary obligations. As is maybe not practical at all. And if it is it's probably more trouble than it's worth Charlie.
It's certainly been an interesting experience. The USAir variants. Is that it. No. I'd like to repeat that business about. Not having to get it back the way you lost it. You know that's the reason so many people are ruined by gambling. They get behind that and then they feel.
They have to get it back the way they lost. That's a deep part of the human. Nature and. It's very smart just to lick it. But it will. Have little phrases like that.
Are very useful. Now one of the important things in stocks is that the stock does not know that you own it.
You know you have all these feelings about it and you remember what you paid it and all that. Remember who told you about it all these little things you know.
And you know it doesn't give a damn.
It just sits there and it you know you had a stock at 50 somebody paid 100 they feel terrible somebody else paid and they feel wonderful all these feelings and it has no impact whatsoever. And so it's it's it's. It's. As Charlie says gambling is the classic example someone builds a business over years.
And that they know how to do. And then they go out someplace and get into a mathematically disadvantageous game start losing it. And I think they've got to make it back not only the way they lost it but that night.
And it's it's a great mistake.
