Lessons from this meeting:
1. Passion & Intensity Matter
- Love the game: Buffett emphasizes that to excel you must absolutely enjoy every minute of investing—passion fuels the intensity (“Intensity is the price of excellence”).
- Sustain your drive: Even after decades and billions managed, he still relishes the hunt for new opportunities, proving that enthusiasm need not wane with size or age.
2. Business, Not Stock, Analysis
- Think like an owner: Evaluate a company as if you’re buying the entire business—focus on long-term earnings power, competitive position, and management quality—not just ratios.
- Customize your lens: Different sectors demand different metrics; banks, insurers, manufacturers and brands all require unique analyses beyond simple screens.
3. Intrinsic Value Over Macros
- Ignore macro forecasts: Buffett and Munger rarely discuss GDP or “new normals”—they focus on the economics of individual businesses they understand.
- Own durable moats: Seek companies with strong, sustainable competitive advantages (e.g. Coca-Cola, BNSF) you can predict with confidence 10+ years out.
4. Pay What It Takes for Quality
- Reluctant overpayment: If a business’s future earns far more than its cost of capital, it often pays to “gag” and stretch for the price, since great economics can justify a premium.
- Hunger for scale: The best businesses can profitably reinvest capital—willingness to “pay up” keeps you in the ones that can grow.
5. Thrift vs. Tax & Stimulus
- Be prudent but pragmatic: Buffett rails against big deficits, yet recognizes the necessity of stimulus post-2008 panic—timing and scale matter more than abstract thrift.
- Blend politics & prudence: He’s non-partisan in the boardroom but clear that runaway debts and bad incentives (e.g. pre-crisis housing policies) carry real costs.
6. Cash Isn’t King Today
- Low-rate trap: In a near-zero rate world, savers lose purchasing power; Buffett recommends sticking with low-priced equities or well-run businesses rather than cash.
- Equity vs. fixed income: Historically, businesses outperform fixed-dollars over time—own productive assets if you can stomach volatility.
7. Float Is a Hidden Goldmine
- Insurance float: Berkshire’s sub-zero cost float (money held before claims) is akin to cheap, permanent capital—key driver of Berkshire’s returns.
- Honest conservatism: Build in “pessimistic bias” in loss reserves to insulate against climate risks or unexpected catastrophes.
8. Culture & Autonomy Create Moats
- Decentralize decisively: Subsidiaries run autonomously—no forced “cross-selling” or centralized mandates—so managers feel truly in charge.
- Perpetuate the right DNA: A non-executive chairman (Howard Buffett) will safeguard Berkshire’s unique culture long-term, enabling smooth CEO transitions.
9. Read Widely & Study Folly
- Learn from history: Buffett devours stories of past financial disasters (e.g. 1901 Northern Pacific corner) to understand human error, not sigma-based risk models.
- Edge through psychology: IQ & math aren’t enough—understanding how people behave in booms and panics gives you a sustainable advantage.
10. Say No to Complexity & Fads
- Avoid new issues & high fees: Buffett hasn’t bought an IPO in decades—promoted offerings with big commissions rarely justify the hype.
- Ignore hot categories: He never targets specific countries, sectors or themes—only businesses he truly comprehends at sensible prices.
Leave a Reply