directors to act [forcefully to protect your interests as a shareholder, then you’re crazy]. As a general rule in America, boards act only if there’s been a severe disgrace. My friend Joe was asked to be on the board of Northwestern Belland he jokes that “it was the last thing they ever asked me.” [Laughter] I think you get better directors when you get directors who don’t need the money. When it’s half your income and all your retirement, you’re not likely to be very independent. But when you have money and an existing reputation that you don’t want to lose, then you’ll act more independently. http://www.tilsonfunds.com/wscmtg04notes.doc
If mutual fund directors are independent, then I’m the lead character in the Bolshoi Ballet. [Laughter] http://www.tilsonfunds.com/wscmtg04notes.doc
A director who gets $150,000 per year from a company and needs the money is not independent. http://www.tilsonfunds.com/brkmtg05notes.pdf
I think it would be a great improvement if there were no D&O insurance . The counter-argument is that no-one with any money would serve on a board. But I think net net you’d be better off. http://www.tilsonfunds.com/
Disasters:
“Years ago, portfolio insurance was popular. People were selling it as a highly sophisticated way for large institutions to manage money and mitigate risk, and they earned a lot selling it. Then on Oct. 19, 1987, a relatively small amount of money that had been invested in portfolio insurance led to a one-day 22% drop. Each of the individuals who invested in portfolio insurance was intelligent, but in aggregate, they created a doomsday machine. I think the odds of something like this are magnified today compared to the 1980s. I don’t know who will yell “fire,” but when it happens, I’m sure the currency markets will play a role in the race for the door. “http://www.fool.com/news/commentary/2006/commentary06053101.htm
Discipline
“We have this investment discipline of waiting for a fat pitch. If I was offered the chance to go into business where people would measure me against benchmarks, force me to be fully invested, crawl around looking over my shoulder, etc., I would hate it. I would regard it as putting me into shackles.” http://www.tilsonfunds.com/
Discounted Cash Flow
“Warren talks about these discounted cash flows. I’ve never seen him do one.” [“It’s true,” replied Buffett. “If (the value of a company) doesn’t just scream out at you, it’s too close.“] 1996 Berkshire Hathaway annual meeting http://www.ndir.com/SI/email/q403.shtml
Diversification
The Berkshire-style investors tend to be less diversified than other people. The academics have done a terrible disservice to intelligent investors by glorifying the idea of diversification. Because I just think the whole concept is literally almost insane. It emphasizes feeling good about not having your investment results depart very much from average investment results. But why would you get on the bandwagon like that if somebody didn’t make you with a whip and a gun? http://www.kiplinger.com/personalfinance/features/archives/2005/11/munger2.html
“The idea of excessive diversification is madness.” http://www.tilsonfunds.com/brkmtg04notes.doc
Dividends
“The total amount paid out in dividends is roughly equal to the amount lost in trading and investment advice, so net dividends to shareholders are zero. This is a very peculiar way to run a republic.” http://www.tilsonfunds.com/brkmtg04notes.doc
Downturns:
“If you, like me, lived through 1973-74 or even the early 1990s… There was a waiting list to get OUT of the country club — that’s when you know things are tough. If you live long enough, you’ll see it.” http://www.tilsonfunds.com/
“It is an unfortunate fact that great and foolish excess can come into prices of common stocks in the aggregate. They are valued partly like bonds, based on roughly rational projections of use value in producing future cash. But they are also valued partly like Rembrandt paintings, purchased mostly because their prices have gone up, so far.” http://www.tilsonfunds.com/Mungerwritings2001.pdf#search=%22%20%22charlie%20Munger%22%20Outstanding%20investor%20digest%22
Earnings
“We don’t care about quarterly earnings (though obviously we care about how the business is doing over time) and are unwilling to manipulate in any way to make some quarter look better.” http://www.tilsonfunds.com/wscmtg04notes.doc
“What we don’t like in modern capitalism is the expectations game. It’s not the kissing cousin of evil; it’s the blood brother.” http://www.tilsonfunds.com/brkmtg05notes.pdf
“We don’t give a damn about lumpy results. Everyone else is trying to please Wall Street. This is not a small advantage.” http://www.fool.com/boringport/2000/boringport00051500.htm
EBITDA:
“I think that, every time you saw the word EBITDA [earnings], you should substitute the word “bullshit” earnings.” http://www.tilsonfunds.com/
Economics
“Gigantic macroeconomic predictions are something I’ve never made any money on, and neither has Warren ” http://www.tilsonfunds.com/wscmtg04notes.doc
“Economics is in many respects the queen of the soft sciences. It’s expected to be better than the rest. It’s my view that economics is better at the multi-disciplinary stuff than the rest of the soft science. And it’s also my view that it’s still lousy.” http://www.tilsonfunds.com/MungerUCSBspeech.pdf
“…Max Planck the great Nobel laureate who found Planck’s Constant, tried once to do economics. He gave it up. Now why did Max Planck, one of the smartest people who ever lived, give up economics? The answer is, he said, “It’s too hard. The best solution you can get is messy and uncertain. “http://www.tilsonfunds.com/MungerUCSBspeech.pdf
“economics should emulate physics’ basic ethos, but its search for precision in physics–like formulas is almost always wrong in economics.” http://www.smalla.net/tidbits/quotations/index.shtml
“Economists get very uncomfortable when you talk about virtue and vice. It doesn’t lend itself to a lot of columns with numbers. But I would argue that there are big virtue effects in economics. I would say that the spreading of double-entry bookkeeping by the Monk, Fra Luce de Pacioli, was a big virtue effect in economics. It made business more controllable, and it made it more honest. http://www.originaldissent.com/forums/archive/index.php/t-14214.html
“If you try and talk like this to an economics professor, and I’ve done this three times, they shrink in horror and offense because they don’t like this kind of talk. It really gums up this nice discipline of theirs, which is so much simpler when you ignore second- and third-order
