[经济杂谈]Berkshire Hathaway Annual Meeting Notes(转载)

It has three big lessons, a) stock is a part of a business b) market serves you doesn’t instruct, and c) margin of safety.

We buy businesses with great management in place. We have seen their record. They come with business. Our job is not to select great managers, our job is to retain them. A majority are wealthy. They don’t have a monetary reason to work in many cases. We have nineteen people at headquarters, and 250k around world. Our job is to make sure they have same enthusiasm. We have to see passion in eyes and believe the passion will remain, but we can create an environment to keep them happy. At these annual meetings, we tell them what a great job they did and make them feel appreciated. We don’t have contracts – it doesn’t work. Our managers are appreciated. I can’t be of help if you are looking at group of MBAs. They know at this point in life how to fool you, what answers to give you. I would look for person with passion for job, doing more than their share, good communicators.

You only need 2 courses, how to value a business and how to think about stock market fluctuations.

what matters is buying businesses at the right price.

You must have attitude where you aren’t influenced by market. You need a mindset, and you need to have the attitude to divorce yourself from letting the market influence you.

I’ve never given up anything that made a difference to me

I’m giving away excess, not necessity

We let managers run businesses, and their standards over the years have been extraordinary. I am very happy turning over keys of financial and business performance. I write them a letter every two years, and I ask them to send a letter with successor. I also tell them we have all the money we need. We never want to trade reputation for money. Not only do they behave to conform with the law, but act as if there was going to be a story in local paper in morning written by intelligent investigative reporter. There are no budgets, we have no incentives to cause people to do anything or push people to play games.

Dilesh, California. How do you maintain your good mental and physical health?
　　
　　WB: You start with a balanced diet. [laughter] If Charlie and I can’t have a decent attitude, who can? We get to do what we like every day, and we work with people who love to do what they do. We are not forced to do what we don’t want. I get to do what I like everyday. We are very blessed in so many ways. How could you be sour? Charlie is 84 and I am 77. We have slowed down but we pretend we haven’t. There is no reason to look at minuses in life. It would be crazy. We count our blessings. Not much more to it than that.

I enjoy it. It is a terrible mistake to sleep walk through your life. Unless Shirley Maclain is right you won’t have another one.

You have to find your passion in life.

Go to work for organization you admire or an individual you admire

Get the right spouse. Charlie talks about the man who spent twenty years looking for a perfect woman and found her. Unfortunately she was looking for perfect man.

You’ll do better if you have passion for something in which you have aptitude. If Warren had gone into ballet, no one would have heard of him.

I avoided all classes that had public speaking, I got physically ill if I had to speak. I signed up for Dale Carnegie course. Gave them check for $100, then I went home and stopped payment on check. I was in Omaha, took $100 cash to Wally Kean, I took that Carnegie course, and then I went to University of Omaha to start teaching – knowing I had to get in front of people.

Ability to communicate in writing and speaking – it is under taught – and enormously important. If you can communicate well, you have an enormous advantage. Force yourself into situations where you have to develop those abilities.

India, how to grow small business into big business?
　　
　　WB: Berkshire was a small business at one time. It just takes time, it is nature of compound interest. You can’t build it in one day, or one week. Charlie and I never tried to do a master stroke to convert Berkshire into something four times bigger. We have felt and kept doing what we have understood consistently and have fun doing it then it’ll be something quite large at some point. Nothing magical. It would be nice to multiply money in a few weeks. In a general way we have done same things for years. We will have more businesses in a few years, some will do worse, most will do better. It is an automatic formula for getting ahead, but not galloping. We are happy not doing anything at all. As Gypsy Rose Lee said, I have everything I had before, just two inches lower. We want everything in 2 yrs to be higher.

Investing is laying out money now to get more money later on

you are looking to asset itself. Do I understand enough about business so that financials will be able to tell me meaningful things that will help me to foresee the statements in the future

I have bought stocks on the way you describe. They were in businesses I understood, and if I could buy at 40% of X, I’d be okay with margin of safety. If you don’t tell me nature of business, financial statements won’t tell me much.

We use our general understanding of business and look to specifics from financial statements.

One metric catches people. We prefer businesses that drown in cash. An example of a different business is construction equipment. You work hard all year and there is your profit sitting in the yard. We avoid businesses like that.

Oil won’t run out - it doesn’t work this way. At some point the daily productive capacity will level off and then start declining gradually. There is the depletion aspect and the decline curves. We are producing 86m barrels per day or so, more than ever produced. We are closer, by my calculations, to almost our productive capacity, than we have ever been. I think our surplus capacity is less, and quite a bit less, than in past. Whatever that peak is, whether 5 or 10 yrs, the world will adjust, and we will think about it. Adjustments will cause demand to taper off. I don’t know how much oil is there, but there are lots of barrels of oil in place. We never recover total potential. We may have better engineering recovery in future. It is nothing like an on and off switch. You may still have enormous political considerations to get access to avail oil since it so important. There is nothing you can do over short period of time to wean world off oil.

We’ve always been fans of living within your means and income. You’ll have a lot more income later on. They will follow example of their parents. Parents don’t covet other people’s belongings, don’t increase cost of living which is not necessarily increasing quality of living. If you go too tough on children they go crazy later on. There are plenty of people I don’t advise to save.

You need to live a life that is true to yourself. We don’t encourage extreme frugality. You are not a better or worse person if you live differently from your neighbor.

I read it in Spring 2002, and I never asked anyone else their opinion. I thought worth 100bil. It was selling for 35bil. What is sense of talking to management? It doesn’t make any difference. At value of 40bil, you would need to refine analysis. We don’t like things you have to carry out to 3 decimal places. If someone weighed somewhere between 300-350 pounds, I wouldn’t need precision -- I would know they were fat. If you can’t make a decision on Petrochina off the figures, you go on to next one. You weren’t going to learn more if you thought their big field was going to decline out slightly faster, etc.

We have lower due diligence expenses than anyone in America. I know of a place that pays over 200mil to its accountants every year, and I know we are safer because we think like engineers – we want margins of reliability. It is a very dicey process.

A brand is a promise. Coca-cola delivers something to you. Virgin Cola – an unusual promise in a product. I couldn’t figure it out, and whatever it is it didn’t work. Don Keogh would know. Who would buy a can at 2cents a can less than Coca-cola? We feel pretty good about branded products as leaders in the field. There is nothing unusual about Kraft that’s different from Kellogg, some good factors are price. If you don’t pay too much, you will do okay. But you won’t get superrich, as attributes are well recognized.

Need someone you trust with analytics, but also ability to contemplate new possibilities and risks. That is a rare quality.

Charlie and I spend a lot of time thinking about things that could hit us out of the blue that other people don’t include in their thinking. We miss a lot of opportunities. But we think essential when managing other people’s money.

You can see how risk averse Berkshire is. We try to behave in a way so that no rational person will worry about our credit. We also try to behave in a way that if people don’t like our credit we wouldn’t notice for months. That double layering of protection against risk is like breathing.

We run Berkshire so that if world working in different way tomorrow we don’t have a problem. We are not dependent on others. It gives up earning higher returns 99% or 99.5% of the time, but in one year – we wouldn’t feel comfortable running business that way – why be exposed to ruin and disgrace and embarrassment? If we can return a decent return on capital what is an extra point? This can not be farmed out. Management thought they were farming it out at some institutions.

We don’t worry about stuff we miss. We know there are many things we won’t know enough when we finish thinking about it, so we throw it out. We make a decision in five minutes. We know about a lot of industries, and there are some things we don’t understand. We like to expand universe of knowledge. If we can’t make a decision in five minutes, we can’t learn enough in five months. If we get a call, with business for sale – or I am reading a paper or 10k, we will move right then if big difference between price and value.

I think Olympics should be allowed to continue forever with everyone participating. It is hard to grade a couple hundred couple countries. It is a terrible mistake to try to start grading, more that participate the better, I would not start getting punitive. I think it’s a terrible mistake to ban countries from Olympics. The United States only started allowing women to vote in 1920s and I consider that a huge violation of human rights, but we wouldn’t (want to) be banned from the Olympics the years prior. I think that overtime they are contributing and getting better.

Many are distressed by imperfections in China, so I ask - is china more or less imperfect as decades have gone by ? it is moving in right direction. That is a good thing, and it is not good to pick worst thing about a person you don’t like and obsess about it.

You do better with people you are working with if you nudge him/her a bit

character the institution. It will be reflection of CEO you have.

You should know culture of management and institution before making decision to buy a bank. We own Wells Fargo and M&T, but it doesn’t mean they are immune. But likely they are immune from institutional stupidity. There was wise man that said there are more banks than bankers. If you think about that a while you will get my point.

Most important investment is in themselves. Potential horsepower is rarely achieved. Just imagine you are 16 – going to give you car of your choice. But only car you would get for rest of your life. How would you choose? Of course you will read manual 5 times. How would you treat it? Keep it garaged. Change oil twice as frequently, keep rust to minimum because you know it’ll last a life time. I tell students that you get only one body and one mind. Better treat it same way. Hard to change habits at age 50 or 60. Anything students do to invest in bodies and mind is good, particularly in the mind.

When I get classes in university I ask them to buy one classmate to own for rest of life. They pick the person who not with highest IQ, but who are most effective, the ones you want to be around. These people are easy to work with, generous, on time, not claiming credit, helping others. There are things that turn other people on, and turning other people off. Those are good habits to develop.

I still lean strongly towards fair value accounting – it is hard to use, but should we use cost? I think there are more troubles when you start openly valuing things at prices that don’t matter instead of best estimates even if inaccurate. I would stick with financials reporting assets at fair value.

The test on dividends is can you create more than one dollar of value than the one you retain

We like companies where we have investments to pay to us money they can’t use effectively.

Most important job you have is to be the teacher to your children. You are the big great thing to them, you don’t get rewind button, you don’t get to do it twice, teach by what you do not what you say. By the time they get formal school they would have learned more from you than school. Provide warmth and food and everything else. It won’t change when they get to graduate school – and you get no rewind button. You teach with what you do, not what you say.

I devour books

Differing people learn in differing ways. I was put together to learn by reading

With a book, I can learn what I want at speed that works. It works for my nature. For those people who are like me, welcome, it is a nice fraternity.

[经济杂谈]Berkshire Hathaway Annual Meeting Notes(转载) - The Diigo Meta page

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