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48 Lessons From Warren Buffett and Charlie Munger

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The Berkshire Hathaway meeting is always a moment where you can learn some excellent and eternal lessons (together with some funny remarks as always). This year 2018 meeting wasn’t different. Warren Buffet with Charlie Munger respond to a lot of questions and left 48 answers (ideas) on several topics. Read all of them here.

Learning Throughout Your Life

  • Munger: “Ben Graham, he outlived the game that he was playing most of the time. … If you’re going to live a long time, you’ve got to keep learning.” If you don’t adapt, “you’re like a one-legged man in an ass-kicking contest.”

Business Schools

  • Buffett on business schools: “What we do is not a complicated business. It’s gotta be a disciplined business, but it does not require a super high IQ or anything of the sort. There are a few fundamentals that are incredibly important. You’ve got to understand accounting.”

International Investing

  • Buffett on investing outside the US: “We do see some [companies] outside the US — thank heavens we saw the one in Israel and we bought a business that’s an important part of Berkshire now.” The Israeli business is ISCAR Metalworking.

Hostile takeovers

  • Buffett: “I don’t think it’s evil to conduct a hostile offer for a company — it’s just that we won’t do it and we don’t want to get into that. We like being liked by the management that we join.”
  • Munger: “I don’t envy these people who are in these” confrontational situations. “Imagine doing that if you were already rich. It’s insane.”

Investing based on the products

  • Buffett: “We really want products that make people kiss you — not slap you.”

AIG

  • Buffett on $10 billion AIG deal: “If we are correct about our estimates about how much money will be paid, and when it will be made, we should come out being better off than if we had borrowed a similar amount. We have a history of doing 10-12 big deals like that.”

S&P 500

  • Buffett: “American industry has gotten incredibly more profitable in aggregate in the last 20-30 years. Look at the S&P500 in terms of the net tangible assets… it is amazing, … this has become, you could call it, an asset-light economy.”

Cryptocurrencies

  • Buffett asked about cryptocurrencies: “If you bought gold at the time of Christ and you figure the compound rate on it, it’s maybe a couple tenth of 1%. It’s essentially not going to deliver anything other than supposed scarcity … but so what?”
  • Buffett says that “cryptocurrencies are going to come to bad endings. … You also have the problem that it draws in a lot of charlatans.” Munger: “I like cryptocurrencies a lot less than you do. To me, it’s just dementia.”
  • Munger on cryptocurrencies: “It’s like somebody else is trading turds and you can’t be left out.”
  • Buffett on cryptocurrencies: “You’re just hoping that the next guy is going to pay more. … If you ban trading in tulip bulbs or in bitcoin, people would say: ‘Well, why in the world would I buy it?'”

Cyber Insurance

  • Warren Buffett says he doesn’t want Berkshire Hathaway to be a leader on cyber insurance because neither he nor others in the industry really know the risk

Machine Intelligence

  • Munger on machine intelligence: “I think there is more hype in that field than achievement. I don’t think the world is going to be changed that much by machine intelligence. Some, but not much.”

Duracell

  • Buffett on Duracell: “Duracell should be earning more money than it is now, and it will be. … It’s well on its way. … Duracell is our kind of business”

Newspapers

  • Buffett on print newspaper industry: “I wish I had a better answer for you, but I don’t.” It’s negligible to Berkshire’s business while “the significance to society is enormous. I hope we find something.”
  • Munger on the declining newspaper business: “We’re going to miss these newspaper if they disappear. We’re going to miss them terribly.” Buffett: “The business has changed in a very material way.”
  • Buffett on the newspaper business: “The problem has been that… no one except The Wall Street Journal, The New York Times, and now The Washington Post has come up with a digital model that will replace the revenue being lost.”

Trade War with China

  • “When you think about it, it’s really not the worst thing in the world to have someone send you the goods that you want and for you to send a piece of paper.”

American Express

  • Buffett: “American Express has done a fabulous job and now we own about 17% when we used to own about 12%.” Munger: “There is one tiny cloud on the horizon … and that is WeChat in China. I don’t have the faintest idea of how important that cloud is.”

Apple

  • Buffett: “Apple has an incredible consumer product. … I’m delighted to see them repurchasing shares. … Mentally, you can say we own 5% of it. … Over the passage of time, we may own 6 or 7% because they repurchase shares.”
  • Munger on Apple: “I think generally speaking in America when companies are hellbent to go out and buy other companies, … it’s a way down, not up. … The reason these companies are buying their stock is that they’re smart enough”
  • Buffett on investing in Apple: It wasn’t that it’s a tech company. “It’s much more about the nature of consumer behavior. And some things strike me as having a lot more permanence than others.” Munger: We are not “high-tech wizards.”

Amazon

  • Buffett on missing Amazon: “The truth is that I’ve watched Amazon from the start, and I think what Jeff Bezos has done is something close to a miracle. The problem is that if I think something is a miracle, I tend not to bet on it.”

Microsoft

  • Buffett on never buying Microsoft: “In the earlier years, the answer is very clear: Its stupidity.” Nowadays, “it would just be a mistake for Berkshire to buy Microsoft” given the friendship with Bill Gates.

Politics

  • Buffett on American resilience: “I’ve lived under 14 presidents in my life… if you told me at the start, you’d have a Cuban missile crisis, nuclear weapons, and a financial panic, and many recessions … through it all, America really moved ahead.”

Bureaucracy

  • Munger on bureaucracy: “Bureaucracy is like cancer — and it functions like cancer. And we’re very anti-bureaucracy. In that case, we’re very different from Anheuser-Busch at its peak.”

Kraft-Heinz

  • Buffett on Kraft-Heinz: “There is a number of items besides ketchup that enjoy growing demand, and some vary quite a bit by geography. Consumer packaged goods are still a terrific business with a return on assets.”

FED and Bonds

  • Buffett on bonds: “It’s almost ridiculous when you think about it — the Federal Reserve is doing all in its power to make sure you don’t get more than half a percent a year. I would stick with productive business or productive assets.”
  • “The answer is ‘I don’t know’ and the good news is no one else knows. … Long-term bonds are a terrible investment at current rates or close to current rates.”

Investing

  • Buffett on where he’d put $1 billion now: “My first inclination would be to comb through things in the U.S. … I probably wouldn’t get into very small markets.”

Trump

  • Munger on Trump tariffs: “The conditions in steel were almost unbelievably adverse to the American steel industry. Even Donald Trump can be right on some of this stuff.”
  • Buffett on Trump tariffs on China: “We’ve seen steel costs increase lately … But I don’t think either country will dig themselves into something that precipitates … any real trade war.”
  • Buffett on Trump tweets: “Communication is extremely important for a president, going back to Roosevelt. … If I were frustrated by” communication with shareholders, “then I would try to figure out a way to do it directly.”

Healthcare

  • Buffett on going into healthcare: “The motivations are not primarily profit-making. we want our employees to get better medical service at lower cost…. we know the resistance will be unbelievable, and if we fail — at least we tried.”
  • Buffett on health care initiative: “We simply have three organizations that we admire and trust … and we hope to … change a system that was taking 5% of GDP in 1960 and now is taking close to 18%.”

Wells Fargo

  • “Wells Fargo is a company that proved the efficacy of incentives, and it’s just that they had the wrong incentives. And that was bad. But then they created the much greater error… of ignoring the fact that they had a faulty incentive system.”

Berkshire Hathaway

  • Buffett on Berkshire in the future: “I think the reputation of Berkshire being a good home for companies … I don’t think that’s dependent on me and Charlie.”
  • Munger: “Part of the Berkshire secret is that when there’s nothing to do Warren is very good at doing nothing”
  • Munger on Buffett being “semi-retired”: “He sits around reading most of the time and thinking, and every once in a while he talks on the phone. I can’t see any difference… Warren is very good at doing nothing.”
  • Buffett on reporting highlighting Berkshire 401k plans: “In the end, we overwhelmingly let our managers make those kind of decisions and others.” Munger: “You’re right that has happened because we’ve delegated those choices.”
  • Buffett on company culture: “I’ve been on 19 boards, and I’ve never seen a board like ours. … It’s a group of owner-oriented, Berkshire-conscious, business-savvy owners. … People opt into it to a great deal.”

Precision Castparts

  • Buffett’s outlook for Precision Castparts: “It’s a very, very good business… Mark Donegan is a fabulous manager, I wouldn’t have bought it without him in charge… it’s got very long tails to the products that are being developed.”

TTI, inc

  • Buffett on TTI, Inc.: “Their average item is less than a nickel. It’s kind of like being in the jelly bean business.”
  • Munger on TTI: “Very few people want to distribute zillions of electronic parts at a nickel each. … It’s a huge growth business … it’s the electronic equivalent of gathering up and delivering dead horses.”

Amazon

  • Buffett on missing Amazon: “The truth is that I’ve watched Amazon from the start, and I think what Jeff Bezos has done is something close to a miracle. The problem is that if I think something is a miracle, I tend not to bet on it.”

Gender Equality

  • Munger on gender equality: “We grew up in a different time. … There is an old saying: ‘The past is a very strange country and they behave very differently there.'”
  • Buffett on gender equality: “I have two sisters that are absolutely as smart as I am and have better personalities… And they didn’t have remotely the same opportunities that I had. … It makes me bullish on the human race.”

48 Lessons From Warren Buffett and Charlie Munger Berkshire Hathaway 2018 #Investing #MoneyTips

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