Elaine Yi's List: Investing

• 上对了船比找到好划手还重要
  　　公司的管理层是经常会发生变动的，而经营策略有时也会表现得朝令而夕改毫无理性可言，但是消费者对好的产品与服务的需求是永远不会变的，在一个大众具有迫切需求的行业，只要管理者不犯过于愚蠢的错误，往往能使企业获得较好的收益，起决定性的作用的应该是好的行业，倒并不一定是管理者的超人的智慧。
  　　巴菲特反复强调这点：“良好的管理记录与其说是你很有效率，倒不如说是因为你上了哪条船。当有着辉煌名声的管理人员要去对付前程黯淡、管理混乱、声名狼藉的公司时，不变的只会是公司的名声。如果你发现自己在一艘长期漏水的船上，那么造一艘新船要比补漏洞有效得多。优秀的骑士会在好马，而不是衰弱的老马上充分发挥。我对此事的观点从未改变。”
  　　真正最好的企业是“傻瓜”都可以管的，“迟早会有一个笨蛋爬上懂事长的位置”。此话本意不是说管理不重要，而是说：1、了解一个管理者是很难的 2、面对行业的困境，巧妇也难为无米之炊 3、有时你信任的管理着也会让你失望的。
  　　但行业不会骗人，行业的发展，产品的需求是骗不了人的。
• 我一直相信我自己的眼睛远胜于其他的一切。”
      　　（美国）沃伦·巴菲特

• 在1999年伯克希尔股东大会上查理·芒格说："我认为我和巴菲特从一些非常优秀的财经书籍和杂志中学习到的东西比其他渠道要多得多。我认为，没有大量的广泛阅读，你根本不可能成为一个真正的成功投资者"。
• 正如巴菲特所说，学习投资很简单，只要愿意读书就行了。

• And Ajit Jain [of National Indemnity] made so much money in the first quarter that I don't even want to tell you about it.
• [Audience and Munger applauded.] When you see Charlie clap, you know he's made us a lot of money.
• What we really want is low-cost float. That's what I tell my managers.
• If GEICO grows 16%, it adds $1 billion of float. GEICO will grow -- I'd bet my life on that.
• [If McLane earns 1% pre-tax on $22 billion in sales, that's $220 million, so Buffett may have bought this business for 6.6x pre-tax earnings. I think this is a good price, especially if the business can grow substantially under Berkshire, but not a steal -- the guys at Wal-Mart aren't fools. But I think they let it go for a below-market price to Buffett because their biggest concern is that the business continue to be a reliable supplier to their stores. Such a low-margin business has little room for error, and it could get into trouble (as other similar companies have) under the ownership of a financial buyer that used too much leverage or tried to tinker with its operations.]
• the autobiography of Jim Clayton, the founder of Clayton Homes. He'd written a nice inscription. I said to the students that I was an admirer of Jim's. I read the book and called Kevin Clayton, Jim's son, and said how much I'd enjoyed his dad's book. I said if they ever decided to do anything [regarding selling the company], we'd be interested and I told him what price I'd be willing to pay.

  • I was an admirer of Jim's
• I don't worry about what I don't know -- I worry about being sure about what I do know.
  
• Berkshire in its history has made money betting on sure things.

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• extraordinary intelligence, rationality, and capital allocation abilities
• abulous collection of businesses they've assembled over the past 30 or so years.
• You need an intellectual framework, which you can get mostly from The Intelligent Investor. Then, think about businesses you can get your mind around if you really work at it. Then, you will do well if you have the right temperament.
• temperament alone won't do it. You need a lot of curiosity for a long, long time.
• If you pay way too much for a business, you'll get a poor return on what you paid, even if the return on tangible equity is very good.
• he key is to have a "money mind," which is not IQ, and then you have to have the right temperament. If you can't control yourself, you're going to have disasters...
• We believe almost anything can happen in financial markets... [so] even smart people can get clobbered with leverage. It's the one thing that can prevent you from playing out your hand.
• Buffett: Wall Street is awash in money and talent, but you get these absolutely extraordinary swings... At the minimum, you want to protect yourself from this type of insanity from wiping you out and, better yet, make a profit from it.
• We don't pay any attention to this kind of thing... Going back to '59, I can't think of any discussions Charlie and I have had in which we've passed on something because of a view on macro conditions... Show us a good business tomorrow and we'll jump.
• Buffett: Look at the people you like to hang out with. What qualities do you like about them? Why don't you copy them? And look at the people you don't like. What don't you like about them, and can you stop doing these things?
• Munger: If your new behavior gives you a little temporary unpopularity with your peer group, then the hell with them.
• Buffett: This reminds me of the old lady who was asked what she liked about being 103 years old. She replied, "No peer pressure."

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• • I think about this a lot – it’s my job to think about the absolute worst-case scenario. No matter what happens, we’ll be OK.
    
    But everything that can happen will happen.
    
    
• • I’m concerned about our political leadership, but as Peter Lynch once said, “Invest in businesses any idiot could run because someday one will.” (Laughter) We’ve had all sorts of bad Presidents, but have still done well. Our real GDP per capital rose seven-fold in the last century, which is remarkable.
    Sure, the big consumer debt load and trade deficit could cause some financial market distress – there are great investment opportunities in dislocations – but the country will survive.
    Eventually the country will do fine, but there’s a significant possibility of a chaotic situation.
• • Acquisition Criteria
    We look for people who have a passion for their business. We frequently buy businesses the owners still manage, where they are monetizing a lifetime of work. They often don’t want to sell but need to for estate planning or other reasons.
    They need to have a passion because we don’t have any employment contracts – because we don’t think they work – we don’t stand over them with whips, and they’re already rich. We just try not to kill or dampen their love for their business.
    We also look for three things: intelligence, energy and integrity. If you don’t have the latter, then you should hope they don’t have the first two either. If someone doesn’t have integrity, then you want them to be dumb and lazy. (Laughter)
    We look them in the eyes and ask, “Do they love the business or the money?” If someone wants to cash out, then we have a problem because we only have 16 people at Berkshire’s headquarters and can’t run it ourselves.
    Munger: The interesting thing is how well it [our acquisition strategy/process] has worked over a great many decades, and how few people copy it. (Laughter)
• • Buffett: We’re like an incredibly rich family. We sit on the porch of our huge farm – so big that we can’t even see the end of it – and each year, we consume 6% more than the farm produces. To pay for this, each year we sell or mortgage a little bit of the farm that we can’t see, so we don’t even notice. We’re very, very rich and the rest of the world is happy to buy from us or lend to us, so each year they take a piece of our valuable assets – and they work very hard.
    But we will have to service this. If it goes on for a long time, our children will pay. We’re sending $2 billion per day [overseas right now].
• • GEICO is a great, great business model, run by a superb person and businessman
• • The successor to me will come from Berkshire, knows our system, has seen that it works, and will be surrounded by people who believe in it.
• • I knew a guy who had $5 million and owned his house free and clear. But he wanted to make a bit more money to support his spending, so at the peak of the internet bubble he was selling puts on internet stocks. He lost all of his money and his house and now works in a restaurant.
    It’s not a smart thing for the country to legalize gambling [in the stock market] and make it very accessible.
    Buffett: Is there anyone we’ve forgotten to offend? We don’t want to miss anyone. (Laughter)
• • We’re successful because of simplicity itself: We let people who play the game very well keep doing it.
    
    We’ve Picked Great Managers By Only Picking Proven Winners
    It would be tough to evaluate a class of MBAs and pick which ones would prove to be the best managers, just like it would be tough to pick the best golfer by watching them hit on the practice range.
    
    We haven’t tried to evaluate, before they have a record, who will be superstar managers. Instead, we find people who’ve batted .350 for 10-50 years. We just assume we won’t screw it up by hiring them. We take people who play the game very well and allow them to play.
• • Invest in Yourself
    It’s hard for individual investors to successfully pick stocks or time the market. The best investment you can make is in your own abilities. Anything you can do to develop your own abilities or business is likely to be more productive than investing in foreign currencies.
    If you own your own business in America [and you run it well, you’ll do OK].
• • This is a good life lesson: getting the right people into your system is the most important thing you can do.
• • The Chinese government owns 90% and we own 1.3%, so if we vote with them, together we control the business. (Laughter)
• • <b>Avoiding Mental Mistakes
    
    </b>The first step is to recognize the traps. Charlie, in <b>Poor Charlie’s Almanack,</b> talks about various traps, so read that book.
    
    Our <b>personalities</b> are such that we’re probably less prone to falling into these traps, but it still happens – just less than before.
    Munger: You don’t have to have perfect wisdom to get very rich – just a bit better than average over a long period of time.
    -15-
    Buffett: It reminds me of the story about the two guys being chased by the bear and one guy says to the other, “I don’t have to outrun the bear. I just have to outrun you!” (Laughter)
• • Munger: Part of it is intelligence, partly temperament. Rick Guerin, for example, wanted to be rich, he was smart and had the right approach [so I knew he would be very successful].
• • We won’t sell a business just because it’s underperforming.
• • Use Bill Gates to Invest in Tech Stocks?
    Charlie and I put money in things we understand and think we’ll know what it’ll look like in 5, 10 or 20 years. Bill being on the board doesn’t change this. I’ll listen to any idea of his and, in fact, our investment ideas overlap quite a bit. I still wish I’d bought Microsoft when I’d first met him. (Laughter)
• • Poor Charlie’s Almanack
    Munger: Peter Kaufman did it. He came up with the idea and Warren got excited about it. It’s a ridiculous name [the title]. (Laughter)
    If you assimilate everything that’s in that simple book, you’ll be far ahead in the game.
    Buffett: It’s a sensational book. You’ll learn a whole lot about life – and making money.
• • Learning to be a Good Investor
    When I was seven years old, I first took an interest in stocks. My dad was in the business, so I’d go with him to the office and I saw interesting things. [When I was a little older,] I went to the library and read every book on markets and investing.
    When I was 11, I bought my first stock – three shares. I was following charts. When I was 19, I read The Intelligent Investor and it changed my whole framework.
    My advice is to read a lot. There are no secrets in the business that only the priesthood knows. It’s all right there.
    It requires qualities of temperament way more than qualities of intellect.
    Once you have a 125 IQ, much more doesn’t matter. Look for opportunities that fit your framework. Try to learn every day, but you can’t act every day. It’s important to enjoy the game, just as it is to enjoy bridge or baseball [if you’re going to play those games seriously].
• • The competition right now is tough, so our efforts to buy businesses are likely to be futile. But there are 1-2 deals we might get done…
• • We like buying businesses with some untapped pricing power. For example, when we bought See’s for $25 million, I asked myself, “If we raised prices by 10 cents per pound, would sales fall off a cliff?” The answer was obviously no. You can determine the strength of a business over time by the amount of agony they go through in raising prices.
• • Berkshire doesn’t do much conventional asset allocation. We just search for good opportunities and don’t want to put up artificial barriers.
• • Our test has been whether, if we retain a dollar, will it be worth more than a dollar in present value.
• • Comments on Financial Companies
    Financial companies are more difficult to analyze than other companies. They can report whatever earnings they want – it’s an easy game to play. For banks, earnings depend on loans and the reserves set aside. It’s easy to change and manipulate the reserves.
    With a company like WD-40 or a brick company, the financials are easy to analyze. But with financial [companies] it’s tough, especially when you throw in derivatives.
• • You can learn a lot about the durable economics of a business by watching price behavior. The beer industry is able to raise prices, but it’s getting tougher.
• • Market Views
    Regardless of the market, I will keep buying businesses. We like low prices.
    We’re not good at forecasting markets. Charlie and I spend no time thinking about where the market’s going. We do know when we’re getting good value [when we’re buying a stock or business].
    There are always going to be some good and bad things happening.
    I’ve seen more people lose more money by getting focused too much on one factor. We’ve never not bought something due to macroeconomic concerns.
• • I’m also careful not to communicate anything to the contrary via body language.
• • Insurance companies in particular can report pretty much any numbers that they want. With $44 billion of reserves, it would be easy to adjust the reserves to show whatever profit was desired.
• • The Best Business
    The best businesses can maintain their earnings without continued reinvestment, whereas in the worst you have to keep pouring money into a money-losing business.
    The best business is being the best surgeon in town. You don’t have to do any reinvestment – the investment was the education. The surgeon will retain his earnings power, regardless of inflation.
• • More on the Housing Bubble (and Why Foreigners Invest in the U.S.)
    The financing terms have become easier and easier as prices have risen, which is contrary to normal [and prudent] practices. But the financing process has become so disintermediated that the mortgage buyer doesn’t care. The easier financing has led to a boom in prices.
    The Nebraska farm bubble was fueled by banks that historically had been conservative but went crazy. They said that a farm was an asset-appreciation investment, not an income investment – in other words, they were playing the greater fool game.
• • Munger: What we don’t like in modern capitalism is the expectations game. It’s not the kissing cousin of evil; it’s the blood brother.
    
    Buffett: People who predict precisely are either kidding themselves or others. We’ve seen people get their egos involved. And everyone in the organization knows what the CEO has promised in public. It’s setting up a system that sets up financial or psychological pressure for people to do things they probably don’t want to do. It’s a terrible mistake.
• • Buffett: I have less than 1% of my net worth outside Berkshire and when the Nasdaq hit its high, I had nearly all of it in REITs, which were selling at a discount to their liquidation values. REITs are quite attractive now, especially compared with 5-6 years ago when they were very unpopular.
    It’s better to pay attention to something being scorned than championed.
    Munger: And REIT accounting is phony.
    Buffett: Other than that, we love REITs. (Laughter)
• • [GM CEO] Rick Waggoner and [Ford Chairman] Bill Ford have both been handed, by past managers, extremely difficult hands to play. They’re not the consequences of their own doing, but they have inherited a legacy cost structure, with contracts put in place decades ago, that make it very difficult for them to be competitive in today’s world.
• • Munger: Warren just gave a very optimistic prognosis in my view. Just because the full consequences haven’t yet hit, doesn’t mean there isn’t a huge problem. It’s as if someone jumped out of a window on the 42nd floor. As you go by the 20th floor, you’re still OK, but that doesn’t mean you don’t have a real problem. (Laughter)
• • Munger: We just throw some decisions into the “too hard” file and go onto others.
    Buffett: We get paid not for jumping over 7-foot bars but for finding 1-foot bars that we can step over.

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• • How Buffett Would Manage $1 Million Today
    We formed our first partnership 50 years and two days ago, on May 4, 1956, with $105,000. If we were starting again, Charlie would say we shouldn’t be doing this, but if we were, we’d be investing in securities around the world. Charlie would say we couldn’t find 20, but we don’t need 20 – we only need a few that can pay off very big. We’d also be buying [stocks in] smaller companies.
    If we were planning to buy [entire] businesses, we’d have a tough time. We’d have no reputation and only $1 million.
    Charlie started out in real-estate development because with only a little capital, brain power and energy, you could magnify the returns in real estate unlike in other sectors.
    I’d just do it one foot in front of the other over time. But the basic principles wouldn’t be different. If I’d been running a little partnership three years ago, I’d have started out 100% in Korea.
    Munger: You should find something to invest in and then compare everything else against that. That’s your opportunity cost. That’s what you learn in freshman economics, even if it hasn’t made it into modern portfolio theory. That’s why modern portfolio theory is so asinine.
• • Buffett: We are best at evaluating businesses where we can come to a judgment that they will look a lot like they do now in five years. The businesses will change, but the fundamentals won’t. Iscar will be better – maybe a lot bigger – in five years, but the fundamentals will be the same.
• • Sometimes I get a letter and a person’s character and intellect jump off the page at me.
• • Charlie started out in real-estate development because with only a little capital, brain power and energy, you could magnify the returns in real estate unlike in other sectors.
• • Charlie says we have three boxes: In, Out and Too Hard. You don’t have to do everything well. At the Olympics, if you run the 100 meters well, you don’t have to do the shot put.
• • Tom Watson [the founder of IBM] said, “I’m no genius. I’m smart in spots and I stay around those spots.”
• • According to a friend, at another venue Charlie said that a person like Eitan Wertheimer comes along “every 200-300 million people.
• • I’d just do it one foot in front of the other over time.
• • Munger: A foreign correspondent, after talking to me for a while, once said: “You don’t seem smart enough to be so good at what you’re doing. Do you have an explanation?” [Laughter]
    Buffett: Was he referring to me or you? [Laughter]
    Munger: I said, “We know the edge of our competency better than most.” That’s a very worthwhile thing. It’s not a competency if you don’t know the edge of it.
• • Buffett: I’d like Eitan and his two managers to stand up. Jacob Harpaz is President and CEO. Danny Goldman is CFO. Take a good look at these people – they’re going to do very, very well for you.
• • Buffett: Ben Graham said you’re neither right nor wrong if you’re investing with the crowd – you’re right if your facts and reasoning are right. Once you have the facts, you have to think about what they mean. You don’t take a survey.
• • You didn’t have to have a high IQ or a lot of investment smarts to buy junk bonds in 2002, or certain other things after Long-Term Capital Management blew up. You just had to have the courage of your convictions and the willingness to act when everyone else was terrified and paralyzed. The lesson of following logic rather than emotion is obvious, but some people can follow it and some can’t.
• • You should focus on what’s important and knowable. There are many things that are important but now knowable, like [whether there will be] a nuclear attack tomorrow. You can’t focus on those.
• • As Ben Graham said in chapter 8 of The Intelligent Investor: The market is there to serve you, not instruct you. If it does something silly, it gives you a chance to do something. It just sets prices. If it doesn’t give you an opportunity, go play bridge and come back the next day. And the nice thing is that the prices will be different.
• • Buffett: People who won’t put their business up for auction like a piece of meat and care about the home in which their business resides are the type of people we want to be partners with. <b>It says something very important about how much they care about their business, their customers and their employees.</b>
• • <b>In it, we tell you everything I’d want to know if our positions were reversed. </b>If I had 100% of my net worth in the stock and had been on a desert island for a year, it has everything I’d want to know. We don’t leave anything out. <b>You could drown people in information that doesn’t make much difference. We explain it in the way we think about it. </b>It’s the report I would make to Charlie or he’d make to me if one of us were running the business and the other were inactive.
• • At that time, there was [an unprecedented] 30 basis point spread between on- versus off-the-run 30-year Treasuries. All you have to do [in such situations] is make sure you can play out your hand under all circumstances. If you can and you have the right facts – and you let the market serve rather than instruct you – you can’t miss.
• • Munger: It would be one of the most irritating experiences in the world to do a lot of work to uncover a fraud and then watch it go from X to 3X and watch the crooks happily partying with your money while you’re meeting margin calls. Why would you want to go within hailing distance of that?
• • <b>How to Value Berkshire</b>
    <b>I’d think about what’s there, what are they trying to do, what’s it worth if they don’t succeed in deploying additional capital, and what it’s worth if they do. What are the resources available to keep adding to the collection of businesses?</b> I think you’ll find the information [in the annual report] that you need to evaluate Berkshire. Don’t take it out to 4 decimal places. If Charlie and I had to write down a number, it would be different but in the same <b>ballpark</b>.
    What Berkshire will be worth 10 years from now will depend on earnings, the quality of those earnings and the liquid assets we have. We keep working on it, but we’re so big. There’s no way in the world we can replicate the past, but hopefully we do a reasonable job.
    <br><br><b>Munger: Quickly get rid of the no-brainer decisions. Just go through the cash and investments, which are easy to value. The insurance operation is very interesting and look at the way the cash is deployed.</b>
    
• • While we don’t like having excess cash, we like doing dumb deals even less because we’re stuck with them forever. You’re right that we should be uncomfortable that we have this cash, but [the alternative of doing bad deals is far worse].
• • Buffett: I don’t think there’s a bubble in agricultural commodities like wheat, corn and soybeans. But in metals and oil there’s been a terrific [price] move. It’s like most trends: At the beginning, it’s driven by fundamentals, then speculation takes over. With copper there was a little shortage and then people got worried [and then the price skyrocketed]. As the old saying goes, “What the wise man does in the beginning, fools do in the end.” With any asset class that has a big move, first the fundamentals attract speculation, then the speculation becomes dominant.
    Once a price history develops and people hear that their neighbor made a lot of money on something, envy sets in and that impulse takes over. We’re seeing that in commodities – and housing as well. Orgies tend to be wildest toward the end.
    But you never know when it will end.
• • It’s like Cinderella at the ball. At the start of the party, the punch is flowing and everything’s going well, but you know that at midnight everything’s going to turn back to pumpkins and mice. But you look around and say, ‘one more dance,’ and so does everyone else. Everyone thinks they’ll get out right at midnight.
    This is what’s happening with copper today, Internet stocks in 1999 and uranium stocks in the 1950s. The party does get to be more fun – and besides, there are no clocks on the wall. And then suddenly the clock strikes 12, and everything turns back to pumpkins and mice.
• • The calls we want to get are from people who care about their business, who for tax or family-ownership reasons want to sell to us. They’re looking to change the ownership structure, not the operating personality and culture of the company they care deeply about.
• • Munger: The interesting thing about it to me is the mindset. With all these “helpers” running around, they talk about doing deals. We talk about welcoming <b>partners</b>. The guy doing <b>deals</b>, he wants to do a deal and then unwind it in the near future. It’s totally opposite for us. We like to build lasting relationships. I think our system will work better in the long term than flipping deals. I think there are so many of them [helpers] that they’ll get in each other’s way. I don’t think they’ll make enough money to meet their expectations, by flipping, flipping, flipping.
    Buffett: By charging fees, fees, fees. [Laughter]
    Munger: Warren talked to guy at an investment bank and asked how they made their money. He said, “Off the top, off the bottom, off both sides and in the middle.”
• • Munger: We didn’t get where we are by owning non-interest-bearing commodities. It’s a good habit to trumpet your failures and be quiet about your successes.
    Buffett: Well, we have a lot of to trumpet then! [Laughter]
• • I read five newspapers every day. Charlie does too.
• • They invariably try to sell it quickly to a strategic buyer, which is another way of saying someone who pays too much. Anytime someone calls me and says we’d be a logical strategic buyer, I hang up the phone faster than Charlie would.
• • We’re a one-of-a-kind place for certain owners. They have a problem to solve and only we can offer a good home [for their business].
    
    - he made a niche for himself.
• • But we have a method of coping: we just put it in the “too hard” basket. If something is too hard, we move on to something that’s not too hard. What could be more simple?
• • In our shareholder letter and in this meeting, [we try to make clear what our culture is]. We want managers to join us who believe in what we do and make a lifetime commitment to join us. Once they join us, we want to act consistently and be consistent. They see that it works.
    There are plenty of people who don’t believe in our culture and they don’t join us. It would be bad to have a mismatch. The nice thing about it is that our culture is so well defined that there are rarely mismatches.
• • We don’t train executives, we find them. If a mountain stands up like Everest, you don’t have to be a genius to figure out that it’s a high mountain.
• • Our shareholders are long-term and loyal owners. We have the most honest-to-god attitude of ownership of any public company. People buy it to own it.
• • Investing Based on Big Trends
    Buffett: We don’t play big trends like demographic trends. They just don’t mean that much. There’s too much money to be made year to year than worry about trends that take ten years to play out. I can’t think of one investment we’ve ever made based on a macro or demographic trend.
    Munger: Not only that, but we’ve missed the biggest commodity boom in history – and we’ll continue to miss things like this!
    Buffett: But we’ll search for new ways to fail! [Laughter]
    -
• • Charlie and I do not know enough about the [ethanol production] business to evaluate it. We’ve been approached many times and they’re quite popular, but trying to figure out the economics of an ethanol plant will depend on government policy and a lot of other variables we’re not good at predicting. It’s also a very hot area for investors right now, and our general experience is that we don’t participate in things that are hot and easy to raise money for.
• • The motivation for buying back stock used to be just because companies thought their shares were cheap. Thirty or forty years ago, it was very fertile to invest in companies that were buying back their stock. The most extreme case was Teledyne – we made some money investing there.
    But that’s being swamped today by companies doing it because it’s in fashion or to prop up the stock. The SEC has rules to prevent propping up the stock on a daily basis [but companies still try to do it]. We wouldn’t do it for those reasons.
• • Ethanol could prove to be an exception, but I’m not sure how you gain a significant competitive advantage with any particular ethanol plant.
• • I thought we’d have economies of scale, but if anything we’ve had diseconomies of scale. I could give you reasons, but Rich Santulli knows the business and is addressing it. He works 16 hours a day. There is no one I have greater confidence in to fix this business. High fuel costs are a pass-through but affect the business. I think it’ll be profitable before long, but I’ve been wrong so far.
• • Munger: My attitude is even more hostile than Warren’s. I know just enough about thermodynamics to understand that if it takes too much fossil-fuel energy to create ethanol, that’s a very stupid way to solve an energy problem. [
• • He trusted you, Warren, and I think that mattered.
• • If you buy a house for $300,000 and take a $270,000 mortgage, you’re going to stay there and continue to make your mortgage payments, even if the market value of the house falls (unless something bad happens to you like losing your job). But if you have investors and speculators holding the properties – effectively day traders in the condo market – that kind a speculation can produce a market that can move in a big way. First the buying and selling stops and then the market reopens.
• • Buffett: In the boardroom, it’s partly a business situation and partly a social situation. The key is: Do they think like owners and, even if they do, do they understand enough about business that their decisions are any good? We’ve been on many boards and I’ve never seen any difference in behavior based on the nature of the votes that got them there. But I think you’d be blown away by the difference in savviness and whether people think like owners.
• • But you can’t pay 2 and 20 [2% annual management fee and 20% of the profits, standard for private-equity and hedge funds
• • The whole concept of the house advantage is an interesting one in modern money management. The terms of the managers of the private partnerships look a lot like the take of the croupier at Monte Carlo, only greater.
    Buffett: Is there anyone we’ve forgotten to offend? [Laughter]
• • Buffett: That’s a terrific question. If you run a copper company and it’s at $3.50/lb., you could be the village idiot and coin money. But if it’s at 80-90 cents/lb., which is what it’s been for most of my life, there can be tough times.
    
    If we owned a copper-mining company in its entirely, we’d base compensation on costs of production, which management has control over, rather than things based on market prices, which they don’t control. Costs won’t fluctuate a lot. Compensation should tie to what is under the control of management. Try to understand what management can have impact on.
• • If oil is $70 per barrel, I don’t think management has anything to do with it – in fact, they denied they did in front of Congress. I’d measure the cost of finding new reserves over time – the ability to discover and extract oil at low unit costs. Some firms are much better at this than others.
• • It’s not rocket science. But a complicated, confusing system works to the advantage of people who have their hand on the switch.
• • Incidentally, the SEC wants more transparency in pay, which is a good idea, but it can become a shopping list. One CEO sees the other getting his haircuts paid for and he wants it too…
• • Munger: I think much of [how bankruptcy is handled] is pretty horrible. It’s a situation where courts themselves have gone into the business of bidding to attract bankruptcy proceedings. They’ve found that if they develop a process in which they over-pay people (lawyers, etc.), they can attract the most cases. It’s so upsetting to watch that I don’t follow it as much as I should. I’m an old man and I don’t like to have an upset stomach.
• • It is certainly true that in the last 5 to 10 years, the disparity in income has widened significantly and the tax breaks for the wealthy have been extraordinary. I’ve said in the past that most of the members of the Forbes 400, myself included, pay a lower percentage of their income in taxes than their receptionist. This wasn’t true decades ago and it’s wrong in a rich society.
    In 2004, my tax rate was the lowest of the 15 people in my office – and I’m not taking advantage of any tax shelters – and it’s even lower in 2005. That’s crazy. I don’t think the American people understand that, and if they did, they wouldn’t be very happy about it. I don’t think the average American has participated in the growing wealth of the country over the past 10 years.
• • Philanthropy
    Buffett: You have to pick the things that are important to you. For many people, it’s their church or their school or schools generally. To some extent, you should give to whatever gives you the most satisfaction.
    I like to think of things that are important but don’t have natural funding constituencies, but for most people there’s nothing wrong with giving to things that give them satisfaction. You don’t have to be as objective about that as you are when picking securities. I’d go where my gut told me.
• • Our country can easily handle the Social Security issue. It astounds me that a government running a $300-400 billion deficit now is worried about a $100 billion deficit decades from now. We produce more every year as we go along. There’s always a debate over how to split the pie, but it’s a huge and growing pie so we can take care of older people.
• • What you see is what you’ll continue to get.

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• 
  - Elaine Yi on 2007-06-29

• • I think the idea of running vehicles on corn is one of the dumbest ideas I’ve ever
    seen. Governments, under pressure, do crazy things, but this is among the
    craziest. Raise the cost of food so you can run these autos around? You use up
    just about as much hydrocarbons making ethanol as it produces, and its cost
    doesn’t even factor in the permanent loss of topsoil. I love Nebraska to the core,
    but this was not my home state’s finest moment.

• • The shorts generally have a tougher time of it in this world. More people are
    bullish on stocks. It’s a tough way to make a living. It’s very easy to spot a
    phony stock or a heavily promoted stock, but it’s hard to say when it will turn. If
    it’s trading at five times its intrinsic value, there’s no reason it can’t trade at ten
    times.
• • This is not a transcript. No recording devices were allowed at the meeting,
    so this is based on many hours of rapid typing, combined with my memory.
    
    - I am amazed by the speed of his rapid typing. Thank you for organized such a wonderful notes.
• • "Buffett quipped, “Charlie can hear quite well and I can
    see, so we work well together.”
• • But you need something in the way you’re programmed so you don’t lose a lot of
    money. Our best ideas haven’t done better than others’ best ideas, but we’ve lost
    less. We’ve never gone tw
• • We think the most logical fund is like the one we manage at Berkshire, where we
    can do anything, but are not compelled to do anything. We would not limit
    ourselves to one area of the market – we buy stocks, futures, bonds, currencies,
    entire businesses, etc. We think it’s a mistake to shrink the universe of
    opportunities.
    There’s no form that produces good investment results, be it hedge funds, private
    equity funds or mutual funds. What makes the difference is whether the people
    running them know their strengths and weaknesses and play when it is to their
    advantage and do nothing when it is not.
• • "In the video, Davidson said he immediately knew Buffett
    was something special – he knew all about GEICO and asked exactly the right questions."
• • But you need something in the way you’re programmed so you don’t lose a lot of
    money. Our best ideas haven’t done better than others’ best ideas, but we’ve lost
    less. <b>We’ve never gone two steps forward and then one step back – maybe just a
    fraction of a step back.</b>
• • course the place to look when you’re young is the inefficient
    markets.
• • "We own one currency position right now that will surprise you – we’ll tell you
    about it next year."
    
    I wonder what that is. Hope I remember it next year to find it out.
• • "We had the most benign hurricane season imaginable last year. When hurricanes
    occur, we’ll pay out a lot of money. We hope over time to more or less break even on our underwriting. When you see last year’s profit, look at it as an offset to future losses."
• • Compensation is not rocket science. We have very simple systems to compensate
    our people. We don’t make it complicated. We don’t pay them for things that are
    happening that they have nothing to do with.
• • <b>We favor businesses where we really think we know the answer. If we think the
    business’s competitive position is shaky, we won’t try to compensate with price.
    We want to buy a great business, defined as having a high return on capital for a
    long period of time, where we think management will treat us right. We like to
    buy at 40 cents on the dollar, but will pay a lot closer to $1 on the dollar for a
    great business.</b>
• • If oil goes from $30 to $60, there’s no reason to pay [an oil company executive]
    for that. If they have low finding costs, which they can control, I’d pay them like
    crazy for that. That is the job you hire them for. To hand them huge checks for
    something they have no control over is crazy, and it’s equally crazy to penalize
    them if oil prices go down. If oil prices went down and my CEO had low finding
    costs, we’d pay him like crazy.
• • I have never seen anything as automated
    as that Iscar operation. I think they view it as a disgrace if any human hand has to
    do anything.”
• • If I were working with a very small sum – you all should hope this doesn’t happen
    – I’d be doing almost entirely different things than I do. <b>Your universe expands –
    there are thousands of times as many options if you’re investing $10,000 rather
    than $100 billion, other than buying entire businesses. You can earn very high
    returns with very small amounts of money. Everyone can’t do it, but if you know
    what you’re doing, you can do it. </b>We cannot earn phenomenal returns putting $3,
    $4 or $5 billion in a stock. It won’t work – it’s not even close.
• • What has caused this extreme record to go on for such a long time? I would argue
    that it started with a young man reading everything when he was 10 years old,
    becoming a learning machine. He started this long run early. Had he not been
    learning all this time, our record would be a mere shadow of what it is. And he’s
    actually improved since he passed the age at which most other people retire. Most people don’t even try this – it takes practice. So it’s been a long run, with extraordinarily concentrated power by a man who is a ferocious learner. Our system ought to be more copied than it is. The system of
    passing power from one old codger to another is not necessarily the right system at all.
• • It reminds
    me of the joke about why the woman told the census taker that the man of the
    house was in jail for embezzlement. Because she didn’t want to admit that her
    dad was a comp consultant.
• • Munger: Margin of safety means getting more value than you’re paying. There
    are many ways to get value. It’s high school algebra; if you can’t do this, then
    don’t invest.
• • Munger: Two things matter: if the quality of the business is good enough, it can
    carry bad management. The reverse isn’t true, though. It’s very rare for a great
    manager to take over a bad business, say the textile business, and make it great.
    You shouldn’t look for Warrens.
• • Many people are very smart, but are
    not wired to think about things that haven’t happened before.
• • For a long time, most
    directors were sort of like potted plants. Management had its agenda and didn’t
    want input on major matters and Charlie and I can testify that we’ve had very
    little success in influencing big issues. If someone’s spent 20-30 years rising to
    become CEO, they don’t want a board telling them what to do. It’s changed a
    little bit today in terms of process.
• • When a significant deal comes along, it’s a chance for the board to weigh in and
    discuss the economics of what’s going on. But the CEO doesn’t bring a deal
    unless he wants it done and so he stacks the deck.
• • We’re not looking for someone to teach – we’re looking for someone who knows how to do it.
• • I get letters all the time from people who have been taken advantage of in
    financial transactions. It’s sad. <b>A lot isn’t fraud – just the frictional costs and the
    baloney. </b>Charlie and I have had very good luck buying businesses and putting
    our trust in people – it’s been overwhelmingly good, but <b>we filter out a lot of
    people. People give themselves away and maybe it’s an advantage being around
    awhile and seeing how people give themselves away by what they talk about and
    what’s important and not important to them.</b>
• • Buffett: Let’s say you decide you want to buy a farm and you make calculations
    that you can make $70/acre as the owner. How much will you pay [per acre for
    that farm]? Do you assume agriculture will get better so you can increase yields?
    Do you assume prices will go up? You might decide you wanted a 7% return, so
    you’d pay $1,000/acre. If it’s for sale at $800, you buy, but if it’s at $1,200, you
    don’t.
    Buffett: If you’re going to buy a farm, you’d say, “I bought it to earn $X growing
    soybeans.” It wouldn’t be based on what you saw on TV or what a friend said.
    It’s the same with stocks. Take out a yellow pad and say, “If I’m going to buy
    GM at $30, it has 600 million shares, so I’m paying $18 billion,” and answer the
    question, why? If you can’t answer that, you’re not subjecting it to business tests.
• • We have to understand the competitive position and dynamics of the business and
    look out into the future. With some businesses, you can’t. The math of investing
    was set out by Aesop in 600 BC: a bird in the hand is worth two in the bush. We
    ask ourselves how certain we are about birds in the bush. Are there really two?
    Might there be more? We simply choose which bushes we want to buy from in
    the future.
• • Anything times zero is zero and I don’t care how good the record is in every other
    year if one year there’s a zero. We’re looking for someone who is wired in such a
    way as to see risks that haven’t occurred and be cognizant of risks that have
    occurred. Charlie and I have seen guys go broke or close to it because 99 of 100
    of their decisions were good, but the 100th did them in.
• • Buffett: In most stock deals, the CEO thinks about what he’s getting, but not what
    he’s giving. You have to make sure you think about this. I can’t ever think of a
    discussion [when I was on a board] of weighing what you’re giving away vs. what
    you’re getting in a stock deal. If more value is being given away, then don’t do it!
    When I gave away 2% of Berkshire to buy Dexter shoes, it was one of the
    dumbest things ever. Not 2% of Berkshire then, but 2% of Berkshire today!
    Munger: Fortunately, you’ve made some good decisions.
    Buffett: Or half of you wouldn’t be here. It gets swept under the rug.
• • Buffett: When they make certain kinds of comments, what they laugh about, if
    they say “it’s so easy.” It’s not so easy. We rule out people 90% of the time.
    <b>Maybe we’re wrong sometimes, but what’s important is the ones we let in.</b>
• • Munger: It reminds me of the young guy who went up to Mozart and said, “I’d
    like to write symphonies.” When Mozart said, “You’re too young,” the young
    man replied, “But you were young when you started.” Mozart pointed out, “Yes,
    but I wasn’t asking anyone else for advice on how to do it.”
• • Munger: We have no system for estimating the correct value of all businesses.
    <b>We put almost all in the “too hard” pile and sift through a few easy ones.
    Buffett: We know how to recognize and step over one-foot bars and recognize
    and avoid seven-foot bars.</b>
• • We owned a bank that went to acquire a smaller bank. The CEO of the smaller
    bank held out for a high price and various terms and conditions and, because he
    was taking stock, had one last condition for the acquiring bank: “Promise never to
    do a deal this dumb in the future.”
• • I couldn’t have told you which of the three would be
    the best, but the one thing I was sure of was that they were going to be<b> sensational
    stewards of money and do what was right for clients rather then try to make 2x in
    commissions in a given year.</b> Anytime someone who takes what I think is an
    unfair fee structure because they can get it, I rule them out.
• • It’s a real
    owners board.
    
    Every board member had a significant percentage of his net worth in
    the company and every decision was made for business reasons.
• • Munger: The concept of a hurdle rate makes nothing but sense, but a lot of people
    using this make terrible errors. I don’t think there’s any substitute for thinking
    about a whole lot of investment options and thinking about the returns from each.
    The trouble isn’t that we don’t have one [a hurdle rate] – we sort of do – but it
    interferes with logical comparison. If I know I have something that yields 8% for
    sure, and something else came along at 7%, I’d reject it instantly. It’s like the
    mail-order-bride firm offering a bride who has AIDS – I don’t need to waste a
    moment considering it. <b>Everything is a function of opportunity cost.</b>
• • <b>I think you should read everything you can.</b> In my case, by the age of 10, I’d read
    every book in the Omaha public library about investing, some twice. Y<b>ou need to
    fill your mind with various competing thoughts and decide which make sense.</b>
    Then you have to jump in the water – take a small amount of money and do it
    yourself. Investing on paper is like reading a romance novel vs. doing something
    else. [Laughter] You’ll soon find out whether you like it. The earlier you start,
    the better.
• • <b>I remain big on reading everything in sight. And when you get the opportunity to
    meet someone like Lorimer Davidson, as I did, jump at it. </b>I probably learned
    more in that four hours than in almost any course in college or business school.
• • But every now and
    then, things really get out of whack. But the gradations in between are too tough.
    If you own great businesses, you should just hold on most of the time, maybe sell
    if the valuations get extremely high and buy more if they get really cheap like in
    the early 1970s.
• • Buffett: I’ve been on 19 boards and seen a zillion presentations projecting a
    certain IRR [internal rate of return]. If the boards had burned them all, they’d
    have been better off. The IRR is based on what the CEO wants. The numbers are
    made up.
    Munger: I have a young friend who sells private partnership interests to investors,
    and it’s hard to get returns in that field. I asked him, “What returns do you tell
    them you can get?” He said “20%.” I said, “How did you come up with that
    number?” He said, “If I told them anything lower, they wouldn’t give me the
    money.”
    Buffett: There’s no one in the world who can earn 20% on big money. It’s
    amazing how gullible pension funds and other investors are. They want it so
    badly that they’ll believe even total nonsense.
• • <b>Volatility does not measure risk. </b>The problem is that the people who have written
    about and taught volatility do not understand risk. Beta is nice and mathematical,
    but it’s wrong. Past volatility does not determine risk.
    Take farmland here in Nebraska: the price of land went from $2,000 to $600 per
    acre. The beta of farms went way up, so according to standard economic theory, I
    was taking more risk buying at $600. Most people would know that’s nonsense
    because farms aren’t traded. But stocks are traded and jiggle around and so
    people who study markets translate past volatility into all kinds of measures of
    risk. The whole concept of volatility is useful for people whose career is
    teaching, but useless to us.
    <b>Risk comes from the nature of certain kinds of businesses by the simple
    economics of the business, and from not knowing what you’re doing. If you
    understand the economics and you know the people, then you’re not taking much
    risk.</b>
• • I have a job to do and I’ll do it.
• • Buffett: Charlie and I have made money in a lot of different ways, some of which
    we didn’t anticipate 30-40 years ago. <b>You can’t have a defined roadmap, but you
    can have a reservoir of thinking, looking at markets in different places, different
    securities, etc.</b> <b>The key is that we knew what we didn’t know. We just kept
    looking. </b>We knew during the Long Term Capital Management crisis that there
    would be a lot of opportunities, <b>so we just had to read and think eight to ten hours
    a day. We needed a reservoir of experience. </b>We won’t spot every one, though –
    we’ve missed all kinds of things.
• • Munger: We’d argue that what’s taught is at least 50% twaddle, but these people
    have high IQs. We recognized early on that very smart people do very dumb
    things, and we wanted to know why and who, so we could avoid them.
• • But you need something in the way you’re programmed so you don’t lose a lot of
    money. Our best ideas haven’t done better than others’ best ideas, but we’ve lost
    less. <b>We’ve never gone two steps forward and then one step back – maybe just a
    fraction of a step back.</b>
• • We don’t buy businesses with much thought of world trends, but we do
    think about businesses subject to foreign competition, with high labor content and
    a product that can be shipped in.
    I bought into an airline [US Air] with high seat-mile costs of 12 cents. It was
    protected, but that was before Southwest showed up with 8-cent costs.
• • Buffett: We are willing to lose $6 billion in one catastrophe, but our insurance
    business over time is not very risky. If you own a roulette wheel, you sometimes
    have to pay 35-to-1, but that’s okay. We would love to own a lot of roulette
    wheels.
• • Munger: And of course <b>the place to look when you’re young is the inefficient
    markets. </b>You shouldn’t be trying to guess if one drug company is going to have a
    better pipeline than another.
• • We learned about foreign labor competition in our shoe business. It
    reminds me of Will Rogers, who said he didn’t think man should have to learn
    easy lessons in such a hard fashion. You should be able to learn not to pee on an
    electrified fence without actually trying it.
• • Munger: And of course the place to look when you’re young is the inefficient
    markets. You shouldn’t be trying to guess if one drug company is going to have a
    better pipeline than another.
• • It’s not as easy as it looks to buy these big positions. When we were
    buying Coca-Cola, we bought every share we could – we bought 30-40% of the
    volume, yet it still took us a long time to accumulate our position. However, we
    like it better when we have these problems now than when we didn’t earlier.
    Buffett: We usually feel we can buy 20% of the daily volume and not move the
    market too much. That means if we want to buy $5 billion, we have to wait for
    $25 billion to trade and not a lot of stocks trade that much.
• • Choosing your heroes is very important. Associate well,
• • I don’t think the railroad industry will be a lot more exciting, but the competitive
    position of the railroads has improved somewhat since 20 years ago. There’s
    been progress on labor issues and an improved competitive position vis-à-vis
    truckers. Higher oil prices hurt railroads, but hurt truckers more by a factor of
    four. What was a terrible business 30 years ago, operating under heavy
    regulation, has become decent and could be better over time. But it will never be
    a fabulous business – it’s too capital intensive.
• • Munger: And of course t<b>he place to look when you’re young is the inefficient
    markets. </b>You shouldn’t be trying to guess if one drug company is going to have a
    better pipeline than another.
• • I want to give the claim checks to someone who can follow generally what I
    would do myself if I were to do it myself.
• • I’m not sure who we sold our silver too, but whoever bought it was a lot smarter
    than I was. I bought it too early and sold it too early, but other than that it was a
    perfect investment. [Laughter] Charlie had nothing to do with it – it was all me.
• • <b>What are the best ways for a 10-year-old to earn money?</b>
    That was a subject I gave a lot of thought to when I was 10. You’re probably a
    little young to deliver papers. I got half my capital from that – I liked it because I
    could do it by myself. You can do it when you’re 12 or 13. I tried 20 different
    businesses by the time I got out of high school. The best was a pinball-machine
    business, but I wouldn’t recommend it now. <br><br>I saw a study that correlated business success with a range of variables like
    grades, parents, whether one attended business school – and they found<b> it
    correlated best with the age at which you first started in business. You see this in
    athletics and music as well.</b>
• • We would not necessarily view metals investing as protection against inflation.
    The best protection is your own earnings power, whether the currency is in
    seashells or paper money. A first-class surgeon or teacher will do alright in terms
    of commanding the earning power of other people. The second best protection is
    owning a wonderful business, not metals or raw materials or minerals.
    The truth is, if you own Coca-Cola or Snickers bars or anything that people are
    going to want to give a portion of their current income to keep getting, and it has
    low capital-investment requirements, that’s the best investment you can possibly
    have in an inflationary world.
• • Look for what people don’t want to do for themselves. Ask around, see what
    other kids have done.
• • We normally don’t want to do deals with partners. If we like a deal, we want to
    do it all. We have a lot of money, so we don’t need a money partner. As for a
    knowledge partner, we don’t want to do a deal where we’re relying on someone
    else.
• • Munger: When I was young, I read The Richest Man in Babylon, which said to
    under-spend your income and invest the difference. Lo and behold, I did this and
    it worked. <b>I got the idea to add a mental compound interest too, so I decided I
    would sell myself the best hour of the day to improving my own mind, and the
    world could buy the rest of the time. It sounds selfish, but it worked.</b>
• • As for what could trigger this and when, who knows? Who had any idea that
    shooting an archduke would start Word War I?
• • Munger: The accounting being enormously deficient contributes to the risk. If
    you get paid enormous bonuses based on profits that don’t exist, you’ll keep
    going. What makes it difficult [to stop] is that most of the accounting profession
    doesn’t realize how stupidly it’s behaving. One person told me the accounting is
    better because positions are marked to market and said, “Don’t you want real-time
    information?” I replied that if you can mark to market to report any level of
    profits you want, you’ll get terrible human behavior. The person replied, “You
    just don’t understand accounting.”
• • I was worried about Charlie’s hearing so I asked a doctor about it. He said to test
    Charlie’s hearing by standing across the room and saying something. So I stood
    at the opposite side of the room and said, “I think we ought to buy GM at $30.” I
    got no reaction so I moved halfway across the room and said it again. Still no
    answer, so I went very close to him and said it and Charlie replied, “For the third
    time, yes!”
• • Buffett: When we went to close out Gen Re’s derivatives book, we took a $400
    million loss on a portfolio that was “marked to market” by the prior management
    and auditors – and I’m not criticizing our auditor. Any auditor would have said
    the same.<b> I wish I could have sold to the auditors instead!</b>
• • Munger: It’s too tough. We can’t solve that one. We try to look for easy
    problems. We don’t try tough things. Sometimes life hands you a very tough
    -30-
    problem you have to wrestle with – not financial problems for us, but personal
    ones.
• • I think the idea of running vehicles on corn is one of the dumbest ideas I’ve ever
    seen. Governments, under pressure, do crazy things, but this is among the
    craziest. Raise the cost of food so you can run these autos around? You use up
    just about as much hydrocarbons making ethanol as it produces, and its cost
    doesn’t even factor in the permanent loss of topsoil. I love Nebraska to the core,
    but this was not my home state’s finest moment.
• • Take a dry cleaning business that owes $15. Their books show a $15 accounts
    payable and the other company shows an offsetting $15 accounts receivable. But
    there are only four big auditing firms, so in many cases, if they’re auditing my
    side, the same firm may be valuing or attesting to the value of what’s on the
    books of the person on the other side. I will guarantee you that if you add up the
    marks on both sides, they don’t add up to zero. We have 60 or more derivative
    contracts, and I’ll bet the other side isn’t valuing them like we are. I have no
    reason to mark the value up – we don’t get paid for that. If I value it at $1 million
    on our side, the other side should be marking it at minus $1 million, but I
    guarantee the numbers are widely different. Auditors should check both sides of
    derivative trades and the “marks” should sum to about zero. They don’t.
    Munger: As sure as God made little green apples, this will cause a lot of trouble.
    This will go on and on, but eventually will cause a big dénouement.
• • Buffett: If you take the percentage of bonds and stocks held by people who could
    change their minds tomorrow based on what the Fed does, etc., it’s gone up a lot.
    I call it an electronic herd, who change what they do every day or minute. The
    turnover of stocks has gone from 40% to over 100%, and the turnover of bonds
    has gone up dramatically as well. There’s nothing evil about it, but it’s a different
    game and there are consequences. If you’re trying to beat the other fellow on a
    day-to-day basis and you’re watching the news or the other fellow, and you think
    he’s going to push the sell button, you’ll try to push it quicker.
    When Charlie and I were at Salomon, they talked about 5- or 6-sigma events, but
    that doesn’t mean anything when you’re talking about real markets and human
    behavior. Look at what happened in 1998 and in 2002. You’ll see it when people
    try to beat the markets day by day.
• • Buffett: I believe the odds are good that global warming is serious. There’s
    enough evidence that it would be foolish to say there’s a 99% chance it isn’t a
    problem. In this case, you have to build the ark before the rains come. If you
    have to make a mistake, err on the side of the planet. Build a margin of safety to
    take care of the only planet we have.
• • Munger: When people talk about sigmas in terms of disaster probabilities in
    markets, they’re crazy. They think probabilities in markets are Gaussian
    distributions, because it’s easy to compute and teach, but if you think Gaussian
    distributions apply to markets, then you must believe in the tooth fairy. It reminds
    me of when I asked a doctor at a medical school why he was still teaching an
    outdated procedure and he replied, “It’s easier to teach.”
• • History doesn’t repeat itself, but it rhymes. We’ll have something that rhymes.
• • I think Planned Parenthood is a terrific organization. I really think it’s too bad
    that for millennia women, not only in the U.S. but over the world, have
    involuntarily had forced upon them the bearing of babies, generally by
    governments run by men. [Applause]
    I think it’s an important issue that doesn’t have a natural funding constituency –
    it’s not like putting your name on a hospital. I think if we’d had a Supreme Court
    with nine women on it from the beginning, I don’t think a question like yours
    would even be asked. I think it’s wonderful that women can make reproductive
    choices. I hope you’ll respect my opinion as I do yours. [More applause]
• • It’s in the national interest to give loans to the deserving poor. But the moment
    you give loans to the undeserving poor or the stretched rich, you run into trouble.
    I don’t see how people did it and still shaved in the morning, because looking
    back at them was a face that was evil and stupid.
• • <b>I think </b>Planned Parenthood is a terrific organization. <b>I really think</b> it’s too bad
    that for millennia women, not only in the U.S. but over the world, have
    involuntarily had forced upon them the bearing of babies, generally by
    governments run by men. [Applause]
    <b>I think</b> it’s an important issue that doesn’t have a natural funding constituency –
    it’s not like putting your name on a hospital. <b>I think </b>if we’d had a Supreme Court
    with nine women on it from the beginning, <b>I don’t think </b>a question like yours
    would even be asked. <b>I think it’s wonderful that women can make reproductive
    choices. I hope you’ll respect my opinion as I do yours. [More applause]</b>
• • It will be at least a couple of years before real estate recovers. In some areas of the
    country, the [housing] inventory overhang is huge. The people who were
    counting on flipping the homes are going to get flipped, but in a different way.

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• 巴菲特：10月，我也许会再到中国

• 巴菲特－－我为何不看好美元？

• 巴菲特说：“我们喜欢让股东摆出所有者姿态的想法。他们的行为经常像绵羊一样
• 大人应该教小孩什么？巴菲特说：“告诉他们，他们只有一个脑子和一个身体。两者要兼顾并使其效用最大化，这样当他们50、60、70岁时，他们将有一笔真正的财富。你最重要的财富是你自己。要发展、维持和提高自己。”
• 你是如何成为一个成功的投资家的？巴菲特说：“有生活信念，不贪婪。不受流行观点影响。你坐着思考商业特点和可能的收益就会富裕起来。阅读大量年度报告。”
• 你如何定义成功？巴菲特警告说：“如果你所做的一切只是通过被动地握有股票来实现财富的，那你的人生将是失败的。当你到我这个年纪时，如果希望爱你的人真的爱你，你就是成功的。这是你无法买到的东西。要想被爱就应值得被爱。你得到的总是会多于你给予的。”
• “如果我出生在孟加拉，或两百年前，这些就不会发生了。”他说，因此他非常乐意交税，并认为给富人减税是不公平的做法。他甚至在《华盛顿邮报》上发表观点，批评布什政府的提案，这些提案可能会导致巴菲特的交税比例仅为其秘书的十分之一。在被问及为什么他很少做这样的事情时，巴菲特回答说：“一个说话过多的富人在一些方面会非常不讨人喜欢。”

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• 一名害羞的妇女在提问前抱歉地说自己只有一股，巴菲特鼓励她说，他是她的伙伴，“我们俩拥有这家公司的多数股份”。
• 说话坦率且为人谦逊的巴菲特
• 与沃伦·巴菲特共度周末以及其他在股东会议上的不寻常经历

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• 家庭是人生和社会的细胞，亲情爱情永远是生活的中心。不知道感激父母的人，也不会感激他人，更不会感激社会所给与他的一切。父母的养育之恩不能忘，在尽可能的条件下，尽尽孝心，有时，对父母一个关切的问候，和送给他们的千元礼物等值。
• 家不是讲理的地方，而是讲爱的地方。生活中有人相伴，是可与不可求，万分幸福的事，要十分珍惜。

• 巴菲特感叹道，在你的一生中，如果有人能够不惜个人安危来帮助你，那你就是个成功人士了。当你年龄一大把，还为家人所爱，你就是个成功人士了。
  
      当你不是以金钱，而是以人格魅力，结交了许多知心朋友，你就是个成功人士了。令人惊奇的是，他谈到的成功的标志是，幸福家庭，身体健康，拥有友情，独独没有提到的，倒是那些人们通常公认的成功标准--拥有巨资和事业有成。

• 　巴菲特的合伙人投资公司是在1956成立于他的家乡奥马哈，当时的成员只有有限的7名，大家费了好大的劲才筹集了10500美元资金，巴菲特作为总合伙人，总共才投入了100美元，我们可以看到10500美元这是个多么小的数目，这么小的数目能干什么？能让这位将来纵横美国股坛的巴菲特有什么空间可以充分施展其才华?不用担心，对于巴菲特来讲这都不是问题，那么对于巴菲特来讲什么是问题呢？事实上，巴菲特此时所思所想却是一个很让人意外的问题，那么他在想什么呢？这一点连笔者也觉得很有意思，此时此刻的巴菲特却被一种看似古怪的忧虑困扰着，是什么困扰着他，他怕什么－－“他是害怕到最后自己的企业变得过于庞大，从而金钱会将他的孩子们腐蚀了。”这简直就象是一个玩笑！如果此时有人说他古怪是不是不觉得过份呢？但在他的合伙人投资公司刚刚成立的当初，巴菲特的的确确是被这种忧虑困扰着。他在给他的一位叫杰里.奥兰斯朋友的信中说：“我很害怕到最后自己的企业变得过于庞大，从而金钱会将我的孩子们腐蚀了，目前这还没有成为一个问题，但是乐观地来看，它是会发生的，我想了半天也没有什么结果。我敢肯定自己的确不想留给孩子们大堆的金钱，除非等我老点，等我有时间看看这些孩子是否已经成材后再这样做。然而，留给他们多少钱，剩下的钱怎么办等等诸如此类的问题让我大伤脑筋”。“让他大伤脑筋”－－是不是此时有的朋友可能在暗暗微笑？一个企业在创业之初是多么的艰难！？有多少问题在等着人们去处理？又有多少难关在等着人们去跨跃？还有多少险境在等着人们去摆脱？人们哪能有那样的时间去想这类问题？可巴菲特却在为将来那没影的金钱在“大伤脑筋”，这该怎么让人去理解和解释呢？
• 此时的巴菲特只有26岁，他也不过是有着中等的积蓄和并不稳定的收入，要是其他人对自己尚未挣到的百万财富有如此忧心的话，那么这个人会招到别人的讥笑是件很平常的事，但对巴菲特而言，这可不是在虚张声。他相信自己一定会很富有，这并不仅仅是一种显示成功的富有，而是富有得让人不知如何处理才好。他所担心的是如何花费他那还没见影的“金钱”以及如何摆脱那还没见影的“金钱”对他孩子们的腐蚀。朋友们，这是一个何等的愿望，何等的自信啊！？这里面有多少令人不可思意的地方？有多少令人不可理解的地方？但这就是巴菲特，这就是一个从没想过会失败的巴菲特！他的自信程度足以让任何人生畏。
• 在巴菲特的业绩还只处于初等水平的时候，他这种令人敬畏的自信心正是激励他努力拼搏的动力，同时也是他赢得别人充分信任与有力支持的力量源泉。如果他不甘心只作一个奥马哈的平凡股票经纪人的话，他就需要资本，要有大量的资本。然而如果巴菲特要筹集资本，除了他那令人惊愕的自信以外，还有什么能使投资者信任他呢?还有什么能使投资者把自己用心血积攒起来的血汗钱交给那么一个年龄往往比自己小很多的年青人呢?要知道巴菲特没有作为独立操作者的辉煌业绩，他没有任何明文表达的东西可以说明他值得大家信任。而且他不仅仅要求能自由运用客户的资金，他还想绝对地控制它。他不希望任何人过问他在股票上所做的决策。从以上这些情况来看，已不是客户对巴菲特的什么信任问题，而是巴菲特对客户们的近乎于苛刻的要求了！然而现实的情况就是象巴菲特所希望的那样，客户们心甘情愿地任他所为。这一切都说明了什么？我们可以想像，如果不是巴菲特内心深处的强烈自信和清醒的规划而得到了公众的信任，那么还有什么能博得大家的信任呢？他的性格中一定具有那样一种鲜明的东西在鼓舞着引导着公众，如果不是人们从他的为人与个性当中看到了某些他们本身所没有的东西，看到了某些对未来的可求与希望，事情的发展就绝不会是那样一种结果。
• 表现出了不屈的个性与对自我的绝对自信
• 他有他自己的投资哲学，这种哲学是他的个性、 能力、知识、品位和目标的表达。因此，任何两个极为成功的投资者都不可能有一样的投资哲学。
• 几乎从不对任何人说他在做些什么。对其他人如何评价他的投资决策没情趣也不关心
• 工作是为了刺激和自我实现，不是为钱。

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• 我觉得巴菲特之所以伟大，不在于他在75岁的时候拥有了450亿的财富，而在于他年轻的时候想明白了许多事情，然后他用一生的岁月来坚守。人的一生都很短暂，你在越年轻的时候越想明白这个事情，可能以后的财富越多。最伟大的投资家也会随着岁月消失，但某些投资的原则却亘古不变
• 这在我们只是一个职业，这个职业是什么？别人把财富交给我们，它是一副重担，我们愿意为这副重担承担责任，做好是应该的，没有什么了不起的，人生就是这样。
• 觉得上帝利用他的身体、头脑、智慧完成了一件应该让他完成的事情而已，所有的荣耀都是上帝的！这可能就是他的价值观、人生观与财富观。
• 我说如果1956年巴菲特募集十万零五千美金，成立合伙人公司的时候，你有幸在这十万美金当中占了一万美金，到1962年越战开始，你想马上就要打仗了赶快把钱拿回来吧，就算六年间巴菲特帮你赚了6倍。到了1964年巴菲特收购伯克希尔公司，你看即便打仗巴菲特还是做得很好啊，当然，你可能总结的原因主要是因为仗是在越南打的。即便死的美国人越来越多，反战的力量越来越强，但战争不会打到美国本土，巴菲特的投资不会受到影响，所以，这次我要给他下个重注，比如买入100万美金的伯克希尔股票。但到1972年越战结束的时候，又将赶上1973年至1974年仅次于1929年至1932年的大衰退期，道琼斯指数由1051点下跌45%至577点，“顶尖50”下跌率达70%-90%。你是否能坚守自己的投资？！即便能坚持，你也还要再经受以色列与阿拉伯的“赎罪日战争”，以及由此导致的石油禁运，石油价格由6美圆上涨到23美圆。如果还能坚持，你还要可能面对打核大战的风险，如果要打核大战（通常认为冷战结束时间在苏联解体之时，之前核战争理论上随时可能发生），美国就不会像越战时期本土不受到攻击，巴菲特的投资一定会面临极大的风险。按我们一般的理解上述的任何一个原因都可能导致你决定卖出伯克希尔股票。假如你的跟随巴菲特的投资之路到此结束，比持有到今天其收益恐怕相差十万八千里。
• 实际上投资是比什么呢？是比谁看得远
• 孤独的乌龟跟时间竞赛，说到投资大家都想到兔子跑得快可以赚到很多钱，但在我们的理念中，我们不希望成为兔子（尽管它跑得快），我们希望成为乌龟。北方有句土话“千年的王八，万年的龟”。兔子跑得快，但是它只能活三年，乌龟爬得慢，但是它可以活千年、万年，它会一直爬下去，遇到风险头缩回来，没有风险我再爬回去；碰到老虎它咬我，我可以缩回来，我们希望是这样的。但说老实话，长期投资最难的实际上是一些意想不到的事情甚至是一些即便你想到但也必须经历的磨难。

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• 你只有通过长年、大量的努力，才能实现卓越。不是一般的努力，而是艰苦又严格的那种。比如巴菲特，人们都知道，他非常自律，把大量的时间用于研究潜在投资目标的财务报表。对你来说，好消息是有没有天赋并不重要，天赋与卓越之间关系不大，甚至根本无关。你完全可以改变命运，甚至达到卓越。科学家在多个领域里得到了惊人相似的结论。要知道，有天赋不意味有著智慧，不意味著有上进心，不意味著有个性特点。它只是一种与生俱来的能力，可以让人把某件事做得特别好

• 当年巴菲特在挑选接班人的时候，有几个简单的条件，第一条是独立思考，第二条是稳定的情绪，第三条是对人类和机构投资者的行为有深刻理解，其实这也是巴菲特对投资行为的理解，也可以称之为投资经典注解。
• 独立思考，不仅是指一种智慧，更是一种能力，一种抗干扰能力和定力

• 稳定的情绪代表了一种肚量，为什么小河容易有漩涡，而大海却显得很平静，当一个人可以容纳更多的东西的时候，就不会被眼前的琐事和利益所左右，因此显得情绪很稳定，但稳定的情绪并非装出来的，而是一种历练和修为的结果，你见的多，自然便不会对很多事情感到意外，所以也就没有那么多肆意的情绪存在。 

          当稳定的情绪成为一种习惯，你的生活便会处于一种安详之中，日子不是因为憧憬而美丽，而是因为安静踏实而幸福。所以稳定的情绪不仅仅对于工作，对于生活也同样相当重要，
• 拥有和信守正直诚信的品格，追求和保持美好纯洁的情感，遵守良好的道德标准和清晰的是非观念，也许是成就幸福生活的唯一通

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