2007 Berkshire Hathaway Annual Meeting

Lessons from this meeting:

1. “Areas don’t make opportunities; brains do.”

• Don’t chase the latest “hot” sector just because it’s in vogue—your edge comes from what you understand, not the area’s hype.
• A narrow mandate (e.g. only bonds or futures) handicaps you; the best “fund” is one with the freedom to deploy capital wherever your intellect finds an edge.

2. Read voraciously and avoid catastrophes.

• The single best investment you can make early on is in your own knowledge—devour annual reports, industry studies, and high-caliber mentors.
• Cultivate an “aversion to big losses”: your long-term returns come more from avoiding disasters than from landing home-runs.

3. Volatility is not risk.

• Price swings (beta) quantify volatility but do not measure your true exposure to permanent loss of capital.
• True risk comes from misjudging a business’s economics or management—not from short-term market gyrations.

4. Play within your circle of competence and insist on a margin of safety.

• If you don’t fully understand a business—or it’s “too hard”—park it in your “too difficult” file and move on.
• A superior business merits a smaller discount; a mediocre one requires a larger cushion between price and intrinsic value.

5. Management quality and integrity are vital.

• Annual reports (and the tone of a CEO’s shareholder letter) reveal more than slick presentations—look for candor and substance, not spin.
• If leaders habitually bend the truth in small matters, don’t trust them with your capital in big ones.

6. Think in terms of opportunity cost, not fixed hurdle rates.

• Compare every prospective investment to what you’d otherwise do with the cash—if a bond yields 5%, you need a business that can comfortably beat that over time.
• Don’t fetishize a single “hurdle rate”; instead, rank your options and deploy capital where the gap between expected return and alternative is widest.

7. Size constraints limit your universe.

• As your war chest grows, you naturally can’t invest in tiny, high-return niches—big sums demand big, liquid opportunities.
• Before committing billions, make sure there’s enough trading volume (or asset size) so you’re not moving the market against yourself.

8. Equities over bonds, but with tempered expectations.

• In a low-yield world, stocks still offer the best long-term upside versus fixed income—but don’t expect the “glory days” of 17% annual returns.
• Prepare for modest equity gains above what high-quality bonds deliver; don’t gamble on the market going parabolic.

9. The discipline of the “too difficult” pile.

• Whenever an idea demands more work or insight than you’re ready to invest, file it under “too difficult” and revisit later if still compelling.
• Focus your effort on a handful of high-conviction ideas rather than half-baked “promises” that overpromise easy money.

10. Portfolio review is ongoing—but needn’t be frantic.

• When capital is scarce versus ideas, you’re always sizing up what to buy next and what least attractive position to trim.
• Once your cash exceeds opportunities, you shift to monitoring existing holdings for material changes and stand ready to act if truly compelling ideas emerge.