“If you buy a business for less than it’s worth, you’re going to make money.” –Warren Buffet
This year, I made my third trip to Omaha for the annual Berkshire Hathaway shareholder’s meeting. Warren Buffet are Charlie Munger took center stage and shared their wisdom on investing, business management, and the economy to a packed house that included billionaire Bill Gates and rock superstar Bono.
While I will drip some of the wisdom into many posts for months to come, here are some top gems that made me think, laugh, or learn from the Oracle from Omaha.
“We’re not going to have an arts major in charge of Berkshire”
Holding to my mantra that you should choose your major based on a career goal rather that something fun for the moment, Warren made it clear that you should have a serious business background if you want to run a business.
In 2008, I wrote that you should major in getting a job. I followed in in 2011 suggesting that a solid education is the cornerstone of fixing your personal economy. I am glad to see that Mr. Buffet is on the same page.
US electricity usage decreased 4.7% in 2011
While discussing the future of MidAmerican Energy, Warren shared this interesting fact with us. It shows that US conservation efforts are working and that we are making steps toward a brighter, greener future. MidAmerican is invested in both solar and wind energy, and decreasing overall usage makes environmentally friendly energy sources a more important part of our energy economy.
“A 16 year old male is more likely than me to have an accident. I drive 3,500 miles per year and don’t try to impress a girl while doing it.”
While discussing risk and underwriting tactics at GEICO, Warren left the audience laughing with this great quote. It is amazing how Warren and Charlie can take a complex issue like the insurance quoting business and simplify it in practical terms that apply to risk and profit.
He also discussed risks with the insurance and re-insurance businesses and told us that one of the biggest part of any CEOs job is to be the Chief Risk Officer.
“The 84 year old man who makes investment decisions based on politics should buy Fox.”
An audience member shared that his 84 year old father would not buy Berkshire Hathaway stock because of Warren’s public political opinions. This witty reply goes right to the core of value investing and the theme of the day. Investment decisions should not be made based on personal beliefs, politics, or emotion. You should buy based on the ability to earn a healthy return.
“I’m not interested in buying and selling businesses. I’m buying for keeps.”
One of the guiding principles I use in my personal portfolio decisions is to buy for the long run. Volatility will always be there. The economy and markets will always ebb and flow. But if you buy a stock with a short term gain in mind, you will not perform as well in the long run.
Buying solid companies with a bright long term horizon is a fundamental to value investing. I avoid looking at my portfolio daily for this reason. I don’t care what my stocks do on Wednesday; I care what they do over the next 520 or so Wednesdays and beyond.
“Everyone wants fiscal virtue, but not quite yet.” –Charlie Munger
While discussing our obnoxious political situation in Washington regarding our taxation and national debt, Charlie, a known conservative, said something that makes way too much sense. He said that both Democrats and Republicans know that we need to raise taxes and lower spending, but no one is ready to do it today.
We want fiscal virtue, and smart people on both sides want to get there, but no one is willing to look weak or take any political risk getting there. That is, to me, one of the biggest single problems the United States is facing going forward.
“I’ve got nothing further to add.” –Charlie Munger