Buffett & Munger: Advice On Managing People’s Money

From the 2019 Berkshire Hathaway annual meeting, Warren Buffett & Charlie Munger advice to an aspiring money manager.

people's money

Warren Buffett & Charlie Munger advice to aspiring Money Manager

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Transcript

Mr. Buffett and Mr. Munger I'm 27 years old and aspire to be a great money manager like you to one day. I am considering starting my own investment fund. But I also recognize that I am young and have a lot to learn. My question to both of you is how did you know you were ready to manage other people's money. And what general advice would you give to someone in my shoes. Thank you. Well it's a very interesting question because I face that and. I sold securities for a while but in May of 1956. I.

Had a number of members of my family. I'd come back from New York and they wanted me. To. Help out with stocks as I had earlier before I'd taken a job in New York and I said. I did not want to get on the stock sales business but I. I. I wanted. I enjoyed investing I was glad to. Figure out a way to do it which I did through a partnership form. But. I would not have done that. If I thought there was any chance really that I would lose the money. And. What I was worried about was not how I would behave. But how they would behave. Because I what I needed people who were in sync with me. So when we sat down for dinner in May of 1956 with seven people who either were related to or one was a roommate. College. And this mother and I. Showed him the partnership agreement. I said You don't need to read this you know there's no way that I'm. Doing anything in the grade with it. That. There's any way that you know you don't need a lawyer to read anything of sort. But I said Here are the ground rules. As to what I think I can do and how I want to be judged. And if you're in sync with me. I want to manage your money because I know. I won't order you about the fact that you will panic if the market goes down or somebody tells you something different so we have to be on the same page. We're on the same page then I'm not worried about managing your money and we aren't on the same page. I don't want to manage your money because you may be disappointed when I think that. Things are even better to be investing and so on so I don't think. I don't think you'll want. It. I don't think you want to manage other people's money. Until you have a vehicle. And can reach the kind of people. That. Will be in sync with you. I think you ought to have your own ground rules as to what your expectations are when they should send you roses and when they should throw bricks at you. And you want you want to be on the same. And that's one reason I never we didn't have a single institution in the partnership because institutions met committees and committees meant that you had some aunts that trusted you.

What's that you had some aunts who trusted you.

Yeah. Well and a father in law that gave me everything he had in the world you know. But I didn't mind taking everything he had in the world. As long as he would stick with me and wouldn't get panicked by headlines and. And that sort of thing. And so it's very it's enormously important. That you don't take people that have expectations the view that you can't meet. And that means you turned down a lot of people that means you probably start very small and you get an an ordered record. And. When you've got the competence where. If your own parents came to you and they were going to give you all their money. And you were going to that forum. You've got the kind of competence that you'll say I may not get the best record but I'll be sure that you get a decent record over time as when you're ready to go on it may tell you a story. I tell young lawyers who've really come to me and say How can I quit.

Practicing law and become a billionaire instead. And so. I say well it reminds me of a story they told about Mozart right. Young man came to him and he said I want to compose symphonies and I want to talk to you about that Mozart. How old are you. That's at 22. Mozart's said you're too young to do symphonies and the guys but you were writing symphonies when you were 10 years old. He says yes but I wasn't running around asking other people how to do it. Carol. We wish you well. And good. But. And we and actually we really do because the fact you asked that sort of a question.

Isn't it to some extent indicative of the fact you've got the right attitude going and it isn't that easy to be a great master.

I don't think we've got made it.




About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and three kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own 2.5 grams of Gold