Lessons from this meeting:
1. Buy Already‐Efficient Businesses
- Avoid painful turnarounds. Berkshire prefers companies that run efficiently out of the box rather than ones needing massive cost cuts or job layoffs to become profitable.
- Focus on growth, not just productivity. By sidestepping “fixer‐uppers,” management can devote its energy to expanding the business rather than wrestling with restructuring.
2. Keep a Healthy Cash Cushion and Deploy with Discipline
- Maintain a minimum liquidity buffer. Buffett targets at least $20 billion of “dry powder” so Berkshire can sleep soundly and pounce on large deals when they arise.
- Return excess cash when opportunities thin. If you can’t find smart deployments, shift idle capital into buybacks or dividends rather than stretch into overvalued assets.
3. Productivity Drives Long-Term Prosperity
- Embrace gains, despite short-term pain. Improvements in output per worker are the engine of rising living standards—even if they require tougher choices today.
- Anticipate political and social backlash. Productivity wins can be unpopular (think factory closures), so factor in potential regulatory or reputational headwinds.
4. Partner with Owner-Minded Managers
- Hire people who think like shareholders. Todd Combs and Ted Weschler stand out because their first question is “What’s best for Berkshire?” rather than “What’s best for me?”
- Don’t over‐load even great leaders. Buffett resisted handing them ever-more capital beyond what they could deploy wisely, rather than diluting their returns.
5. Value Intrinsic Economics—not Accounting Gimmicks
- Look past book value and EBITDA. As Berkshire’s footprint shifts from securities to wholly-owned businesses, simple per-share or EBITDA metrics obscure true worth.
- Treat depreciation as real cost. Ignoring capex via EBITDA is “horror squared”—always ask how much cash the business reinvests to sustain its outlook.
6. Learn More from Bad Businesses than Good Ones
- Volunteer for a “lousy” business stint. Facing down adversity exposes you to the limits of pure IQ and theory and teaches invaluable lessons about real‐world risks.
- Mine painful experiences. Every failure—whether a shuttered textile mill or department store—cements practical insights far deeper than textbooks ever could.
7. Expand Your Circle of Competence—Cautiously
- Don’t dismiss unfamiliar sectors out of hand. Buffett originally shunned tech but ultimately found Apple fit his “consumer franchise” criteria, despite its gadgetry.
- Stick to the economics you understand. When you cross into new territory, focus on durable cash flows, pricing power and competitive moats rather than technical details.
8. Exercise Options & Warrants Rationally
- Crunch the numbers, not your nerves. Buffett will exercise the Bank of America warrant if the incremental income from common dividends exceeds the preferred’s yield.
- Time the conversion close to expiration. A valuable warrant is only worth its upside if you convert—so execute just before it lapses, provided the price remains attractive.
9. Patience Beats Panic in Capital Allocation
- Don’t chase deploy-or-perish thinking. With $90+ billion idle in rock-bottom-yield T-bills, Buffett would rather wait for truly great opportunities than overpay.
- Remember: best deals often come in downturns. History favors the patient buyer—be prepared that your “big moment” may arrive in a recession or market panic.
10. Be a Lifelong Learner
- Stay hungry for new ideas. Buffett credits Phil Fisher’s “scuttlebutt” approach—talking to competitors and customers—as a timeless research tool he still uses.
- Unlearn when you must. The hardest but most important skill is shedding outdated beliefs (e.g., “tech is for others”), so you can crystalize fresh, better-informed judgments.
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