This week would normally mark our annual visit to Omaha for Berkshire’s Annual Meeting. Since we are taking a rain check this year, I took a moment to reflect on some of our most memorable moments. Our Lessons from Omaha was included in The Manual of Ideas Berkshire Hathaway Issue.Here are a few gems:
- Your true cost of capital is what can be produced by your second best idea.
- People don’t change when they get older; they become more of what they were.
- You can learn a lot by asking questions; you can learn even more by asking “the right” questions.
Last year marked Buffett’s 50th anniversary at Berkshire. Seth Klarman marked the occasion highlighting lessons learned: “He has provided generations of investors with a great gift. Many, including me, have had our horizons expanded, our assumptions challenged, and our decision-making improved through an understanding of the lessons of Warren Buffett.” More lessons from Klarman here.
Finally, a few random musings from past meetings compliments of BuffettFAQ.com:
On Harley stock and Harley riders: I don’t know if Harley-Davidson stock is worth $20 or $30. I like a business where customers tattoo their name on their chest – I’m not sure you can go around questioning those guys!
On what qualities they look for in the leadership of companies they acquire: We look for three things: intelligence, energy, and integrity. If you don’t have the latter, then you should hope they don’t have the first two either. If someone doesn’t have integrity, then you want them to be dumb and lazy.
On sleepwalking, Playboy, and what he’d do differently: You have to find your passion in life. I would choose the same job. I enjoy it. It is a terrible mistake to sleepwalk through your life. Unless Shirley MacLaine is right, you won’t have another one. My dad had a business with [investment] books on his shelves, and they turned me on. This was before Playboy. If he was a minister, I’m not sure I would have been as enthused. If you have obligations, you have to deal with realities.
On advice for recent grads (and MBAs): I tell students to go work for an organization you admire or an individual you admire, which usually means that most MBAs I meet become self-employed.
On knowing what you don’t know: All investing is laying out cash now to get some more back in the future. The concept of “a bird in the hand” came from Aesop in about 600 BC. He knew a lot, but not that [he lived in] 600 BC. He couldn’t know everything. … If you need to use a computer or calculator to figure it out, you shouldn’t [buy the investment]. Those types of [situations] fall into the “too-hard” bucket. It should be obvious. It should shout at you, without all the spreadsheets. We see something better.
On the value of first-hand experience (and romance): Investing on paper is like reading a romance novel vs. doing something else. You’ll soon find out whether you like it. The earlier you start, the better.
On envy—and lust Our experience is that envy is what really drives people. You can give someone a $2 million bonus and they’re happy until they see the next guy got $2.1 million and then they’re miserable. Charlie has pointed out that of the seven deadly sins, envy is the most useless, because you just make yourself miserable and can’t sleep. There’s real upside to gluttony – I’ve had some great times with gluttony. And we won’t get into lust.
On heroes and marriage: Choosing your heroes is very important. Associate well, marry up and hope you find someone who doesn’t mind marrying down. It was a huge help to me – I can tell you that. (To which the very witty Munger chimed in:You’re not restricted to living people when choosing your mentors. Some of the best people are dead.)
And, some solid advice on life in general: Avoiding the dumb things is the most important. Learn more, know limitations, avoid the dumb things.
Chris Pavese blogs at The View from the Blue Ridge.