You will make big errors: Even Buffett admits the Energy Future bet was “a significant mistake.” Owning up to that upfront normalizes error as part of the process.
Scramble out of them: The ability to pivot—selling Hutzler’s or exiting near-bust GEICO—turned disasters into multi-billion-dollar opportunities.
2. Always Anticipate Disruption
Constantly ask “What can mess up our model?”: From drilling tech flattening gas prices to ride-sharing upending taxis, every business must plan for game-changing innovation.
Adapt relentlessly: GEICO’s evolution from mail to phone to Internet to social media shows that even “stable” models need ongoing reinvention.
3. Focus on Intrinsic Value, Not Benchmarks
Value = PV of all future cash flows: True worth is what a business will distribute over its lifetime, not the next quarter’s earnings.
Ignore stock-index theatrics: Buffett continues to compare his book-value growth to the S&P as a “self-inflicted hair shirt,” not a rational exercise—but it enforces discipline.
4. Think Like an Owner, Not a Trader
Buy 100% of a business in miniature: Evaluate companies as if you’re buying the whole thing—ask “What will this look like in 5–10 years?” not “What’s its P/E today?”
Size matters: At Berkshire’s scale, focus on large deals (railroads, utilities, Heinz) that move the needle; smaller bolt-ons are fine but won’t define your growth.
5. Leverage Relationships & Reputation
A “Buffett stamp” opens doors: Long-standing personal credibility helped land Heinz and crisis-era bank investments when trust was at a premium.
Deserve good partners: The 3G deal shows that treating partners well attracts the best—“if you deserve a great spouse, you’ll find one.”
6. Deploy Capital Where You’ll Earn High Returns
Seek predictable, fair-regulated returns: MidAmerican’s sub-1% ROA looks weak only because it’s a growing utility—earnings are reinvested at regulatory-guaranteed% returns.
Don’t over-leverage for cheap thrills: Buffett avoids buying small, overly cyclical businesses with high financing risk; he prefers steady “iron-clad” assets.
7. Favor Individuals, Not Just Corporate Fines
Prosecute the human actors: Chasing individuals for malfeasance changes behavior far more than corporate fines ever will.
Protect your culture: With 300,000 employees, occasional wrongdoing is inevitable—early detection and personal accountability safeguard reputation.
8. Keep “Dry Powder,” But Use It
Extra cash is a built-in problem: At some point Berkshire will have more cash than smart uses—but that’ll be a good problem to solve with buybacks or big deals.
Be patient: Buffett’s “big elephant” approach means waiting for the right $20–$50 billion opportunity, rather than forcing smaller deals.
9. Government Has a Role in Fragile Markets
30-year fixed mortgages need a backstop: Mortgages can’t be entirely privatized—GSEs fill a critical gap that private capital couldn’t cover.
Beware dual incentives: Fannie/Freddie strayed chasing returns—keeping portfolio activities out of GSEs would restore focus on their housing-support mission.
10. Teach Financial Literacy Early
Habits form young: Instilling basic money skills—saving, budgeting, understanding credit—in grade school prevents lifelong pitfalls.
Schools must step up: Buffett applauds “Secret Millionaire’s Club” and calls for integrating financial basics into the core curriculum ASAP.
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