YouSaid · the spoken record

Lawrence Cunningham

lines on the record: 55
first: 2022-01-20
most recent: 2022-01-20
sittings or episodes: 1
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“But to maintain friendships, I will exhume only cases from the distant past. And so he says, in their glory days, General Motors, IBM, Sears, and U.S. Steel sat atop huge industries. I've done podcasts on General Motors, IBM. I haven't done Sears. I mean, and actually US steel. Okay, so maybe I can add those to the lists. Their strengths seemed unassailable, but the destructive behavior I deployed above eventually led to each of them to fall to depths that their CEOs and directors had long had not long thought impossible. Here's this one time. Their one-time financial strength and their historical earning power proved no defense. So he says they all became arrogant, bureaucratic, and complacent. Avoid arrogance, bureaucracy, and complacency. The three ABCs of business decay. Now we get to...”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“And if you can't predict what tomorrow will bring, you must be prepared for whatever it does. And then he revisits this idea of advice for life after Buffett, but really it's advice to how we can prevent the decay of our own business. My successor will need one particular strength, the ability to fight off the ABCs of business decay, which are arrogance, bureaucracy, and complacency. When these corporate cancers metastasize, even the strongest of companies can falter. The examples available to prove the point are”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Then many businesses that are constrained by the limited potential of the single industry in which they operate And he repeats this, so I'm going to repeat this. He says, when bills come due, only cash is legal tender. Don't leave home without it. He's telling us why we should always have lots and lots of cash. The reason for our conservatism, having a bunch of cash, which may impress some people as extreme, is that it is entirely predictable that people will occasionally panic. So panic, future panic is predictable, but it is not at all predictable when they will panic. Though practically all days are relatively uneventful, tomorrow is always italicized, uncertain. I felt no special apprehension on December 6, 1941, the day before Pearbor, or September 10th, 2001.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“To most managements over our history this strategic alternative has proved to be very helpful, a broad range of options sharp in decision making. The gains we've realized from marketable securities, so his point is like, this is really smart, actually. The gains we've realized from marketable securities have helped us make certain large acquisitions that would otherwise have been beyond our financial capabilities. So the fact that we can then choose to take our profit and buy pieces of other wonderful businesses, the returns from that decision created so much money, then we made so much money that we can then go out and buy either more stocks or more individual businesses that we could have not afforded if we hadn't pursued that first opportunity. Yes. In effect, the world is Berkshire's oyster, a world offering us a range of opportunities far beyond those realistically open to most companies. On top of that, and this is the ending of this section, on top of that, we can profitably scale to a far larger size.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“With great promise. So that's again his playbook is the same thing here. He's going to tell you why he chose this and what the advantages are over. If you just had your own business, like he just owned one business and a business owes all a lot of cash. That's a great idea. Maybe you don't want to reinvest it at other things. You know, maybe you just want to keep it for family wealth, whatever you want to do. But his point is like, I have all these businesses that throw off cash and then I can just move that money to the next best opportunity. And he considers that a huge structural advantage of the conglomerate form. So he says, moreover, we are free of historical biases created by lifelong association with a given industry and are not subject to pressures from colleagues. Having a vested interest in maintaining the status quo. This is important. If horses had controlled investment decisions, there would have been no auto industry. Another major advantage we possess is the ability to buy pieces of wonderful businesses, stocks, that's not a course of action open.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“I hope, first of all, I hope I do founders for the rest of my life. But if I didn't, this is another, and this is a, I don't know, just an interesting path. Anyways, I'm just bringing this to your attention because he writes out, he's like, well, here's why you might want to conglomerate. And this is from somebody that built one of the most successful conglomerate of all time. So let's see what he has to say about that, why he chose his structure. So what do Charlie and I find so attractive about Berkshire's conglomerate structure? To put the case simply, if you conglomerate, if the conglomerate form is used judiciously, it is an ideal structure for maximizing long-term capital growth. A conglomerate such as Berkshire is perfectly positioned to allocate capital rationally and at minimum cost. Our structural advantages are formidable. We can, without incurring taxes, are much in the way of other costs, move huge sums from businesses that have limited opportunities for incremental investment to other sectors.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“So then he's got this section that's really interesting. It talks about why you might want to build a conglomerate. He goes into the, of course, like he always does. He has this great historical understanding. He goes into why conglomerates in the 1960s, say for what Henry Singleton was doing, where usually a mass of mediocre businesses. But he's like, you might want to actually build a conglomerate. And so sometimes I have these fantasies where you have these alternate futures. And I see some people that are applying Buffett and Munger's ideas to software businesses or just technology in general. I'm like, wow, that's kind of cool. You have this collection of high margin businesses that you keep adding to that throw off cash and you buy more and you're kind of like basically running buffet's playbook, but now and”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“And he brings that up another time, and I'm just going to reread this paragraph. I'm going to read the paragraph. This is more on the American miracle. And he's talking about when this beginning of George Washington, the year that he became president. So he says, in 1788, to go back to our starting point, there really wasn't much here except for a small band of ambitious people and an embryonic governing framework aimed at turning their dreams into reality. Today, the Federal Reserve estimates our household wealth at one hundred and eight trillion, an amount almost impossible to comprehend.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Just look around you. See the 75 million owner-occupied homes, the bountiful farmland, the 20 million vehicles, the hyperproductive factories, the great medical centers, the Talent Field Universities. You name it. They all represent a net gain for Americans from the barren lands, primitive structures, and meager output of seventeen seventy six. Starting from scratch, America has amassed wealth totaling ninety trillion dollars in two hundred forty years.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“So then he has an entire section on history, which I found interesting, and he talks about the fact that we are all benefiting. In his case, Berkshire benefited because he's got this huge, he calls it the American miracle, which is like a tailwind that increases, has increased their invention. Basically, if he started in another country, him and Charlie together, same people in a different country, he's not going to get the results. He can do the exact same things, but the fact is some of this had to do with events that happened way before us. And this is just a hell of a way to put this. And he says, one word sums up our country's achievements. Miraculous. From a standing start, 240 years ago, a span of time less than triple my days on Earth, Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Even for introverted type A people that chase achievement except for a small percentage that are sociopaths, like human relations are important to even those people. And I know because I'm one of those people. So it's just, I love the fact that Warren, like he's writing this in a letter to shareholders, the people that hire him to make him more money. And he's saying, I'm going to make some decisions, and I hope you support me in this that will not increase my returns, but will increase my enjoyment of life. That works for me, and I want to, instead of just writing about finances, I'm going to try to teach you that so maybe you can use it in your life. I just love that. I love it.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Makes little sense for us to give up time with people we know to be interesting and admirable, for time with others we do not know who are likely to have human qualities far closer to average We have found splendid business relationships to be so rare and so enjoyable that we want to retain all we develop. I feel that is a, like that's true for me. I bet you it's true for you. If you ask yourself, do I want to have splendid relationships that really splendid relationships are rare, right? And that, so I know they're rare and I enjoy the ones I have. I want to keep the ones I have. We want to retain all we develop. And this is true for personal too, because if you go and see, like, there's people that interview people in nursing homes or right before they're going to die. One regret on deathbed regret, if you can think about it that way, that happens over and over again. It's like, I wish I kept in touch with my friends. And so there was something in one of the books I read. I can't remember this. I did this recently, like a month ago or something like that. And so, you know, you get older, you're busy with work, you're busy, especially when you have family of kids. Like you have very limited time. And in my case, usually your friends are spread out throughout the country, sometimes the world. And so I read something in one of the books.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“important to me. I am not unique in that at all. We are inherently social creatures. The people we have around us, the people we live with, the relationship we have, the friendships, the people we have to see at work or at school or it's important to filter these people to make sure because they're going to affect your life. So the point is, so we know it's a fact that the relationships you have with other people affect your happiness and enjoyment of life. Chasing a few more dollars, which is what he just said, these relationships produce good, though perhaps not optimal financial results, right? Chasing a few more dollars, especially after you're already rich, will not affect your happiness. So this to me is so clearly the wise choice.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Know what will increase human happiness and enjoyment of life and what won't and yet we chase things that we know don't and we make this mistake over and over again. We've got to learn from the experience of other people. We have to. Now, we would rather stay put, even if it means slightly lower returns. One reason is simple. We have found splendid business relationships to be so rare and so enjoyable that we want to retain all that we develop. This decision is particularly easy for us because we feel that these relationships will produce good, though perhaps not optimal financial results. Considering that we think it makes little sense for us to give up time with people we know to be interesting and admirable for time with others we do not know and who are likely to have human qualities far closer to average.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Which is this giant business they wanted buying, offering it widely but with no success. Upon reading of the strikeout, I wrote Ralph Shea, Scott Fetzer's CEO, expressing an interest in buying the business. I had never met Ralph, but within a week we had a deal. Unfortunately, Scott Fetzer's letter of engagement with the banking firm provided it a $2.5 million fee upon sale, even if it had nothing to do with finding the buyer. They did a steal independent of the people he hired. Scott Fetzer still has to pay $2.5 million even though they didn't find the buyer. I guess the lead baker felt he should do something for his money. So he graciously offered us a copy of the book on Scott Fetzer that his firm had prepared. With his customary tack, Charlie responded, I'll pay $2.5 million not to read it.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“And then he's going to close him here. I will not pester you. If you have any possible interest in selling, I would appreciate your call. I would be extraordinarily proud to have Berkshire, along with the key members of your family, own and then he leaves because he wrote this letter to somebody what the name of the business is blank. So I don't know what that is. He left it blank. So we'd be very proud. He's like, listen, I'm not going to bother you. You want to sell? Let's get it done. Just give me a call. And I'd be very proud to be partners with your family. Again, this is so good. I believe we would do very well financially. And I believe you would have just as much fun running the business over the next 20 years if you've had during the past 20. Sincerely, Warren E. Buffett.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“imitations of peer companies. And so that was so fascinating. It's not in this book, I guess was edited out, but when you read Warren's shareholder letters, that mindless imitation of peer companies, he goes through over and over again. He's like, did you know in the 1960s, everybody thought they needed to own an oil company regardless of if, and I'm making this up, I don't know. He did use this. I don't know the time frame. I don't have it in front of me. He would just use the example. Why did every bank own an oil company? Why did every this own this? It's just like, why? Because one person did it. They saw this other company buy it. So then that founder or that CEO went to their board of directors like, hey, we need one too. And so he goes into this. He says, rationality frequently wilts when the institutional imperative comes into play.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Of businesses, Charlie and I have not learned how to solve difficult business problems. What we have learned is how to avoid them. We've done better by avoiding dragons than by slaying them. Number three, the My Surprising Discovery. The overwhelming importance in business of an unseen force that we might call the institutional imperative. So I got to pause there in the back of this book is a very helpful cheat sheet is the way I would call it. If you're going to read his shareholder letters, there's a bunch of concepts that he repeats over and over again. And then Lawrence defines them simply for us in the back. So this is his definition of this institutional narrative before I pick up in this section, okay? A pervasive force in an organization that leads to irrational business decisions from resistance to change, absorption of corporate funds in suboptimal projects or acquisitions, indulgence of the cravings of senior executives and mind.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so now we are 25 years. This is where Warren says to say I've been running Berkshire for 25 years. Let's go and look back. What are the mistakes that I've made? So he says it's a good idea to review past mistakes before committing new ones. So let's take a quick look at the last 25 years. So I'm going to pull out a couple here. These are the four that I found most important that would be number one, good people operating in textile markets fail. Number two, you will do better by avoiding problems than solving them. Three, institutional dynamics cause irrationality. And that's predictable. Number four, only work with people you trust and admire. Number one, good jockeys will do well on good horses but not on broken down nags. The same managers employed in a business with good economic characteristics would have achieved fine records, but they were never going to make any progress while running in quicksand. So he's repeating that lesson he taught us earlier. Instead of fixing a leaky boat, jump into a new vessel. After 25 years of buying and supervising a great variety of variety”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“By going back and pulling an idea from history. And he's like, did you know, would you believe that a few decades back, they were growing shrimp at Coke? You sell sugar water. What did the hell are you growing shrimp for? Why are you diversifying? And so his point is loss of focus is what worries Charlie and me the most. And his point is even great businesses are not immune for the inevitable temptations. Like they will fall into that somewhere, somewhere in that very smart company, very successful company, someone had the idea, hey, you know, we need to do selling more bottles of Coke. Let's farm shrimp. And if you think about why this is inevitable, it's because the potential amount of distractions that the modern world serves up is infinite.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“I've skipped ahead many pages, and look, we're right back at this main idea. You gotta resist the inevitable temptations. And the reason he repeats the importance of focus and concentration so much is because the temptations are inevitable. And smart people fall into them over and over again. Smart people make mistakes and they do that in a very predictable manner. The way I think about this is just it made me laugh out loud when I read it. A few weeks ago I read that book Unstoppable about Siggy, the guy that winds up surviving Auschwitz and then building, coming to it, he's like a penniless immigrant and winds up dying with like a net worth in the hundreds of millions when he comes to America and builds a bank and an oil company and all this other stuff. And he just said something, he says it in Yiddish and it's a aphorism, but it translates into even smart chickens shit on their own feathers. And just how with laughter when I came across that part in the book, but this idea that you just have to resist the inevitable temptations. And so Warren demonstrates this point.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“His definition of ending prematurely is a term I define as any age short of three digits. And so I thought that was interesting. There was a fantastic, I saw this fantastic meme. It was an Olympic gymnast. And she was asked the question, like, what's an acceptable excuse for her not to go to the gym and practice every day? And her response, she said, death. And really think about what she's saying and what Warren's saying is if you love what you do, the only exit strategy is death.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Plenty of unintelligent capital allocation takes place in corporate America. There's many instances where he's writing to shareholders, so he's like, they talk about the culture of Berkshire. And then eventually him and Charlie won't be around, but don't worry like we have things set in place so that your wealth should be preserved. And so he says, you need not.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“He talks about the fact that even with you develop the skills necessary to build a successful business, that successful business is going to throw off a lot of cash. You still have to teach yourself. You have to learn what is best to do with the cash that your company produces, and that's a different skill set, and it's one that's very hard to learn. And he says, the heads of many companies are not skilled in capital allocation. Their inadequacy is not surprising. Most bosses rise to the top because they excelled in one area, such as marketing, production, engineering, et cetera, et cetera, once they become CEOs, they face new responsibilities. They must now make capital allocation decisions, a critical job that they may have never tackled, and that is not easily mastered. To stretch this point, it is as if the final step for a highly talented musician was not to perform at Carnegie Hall, but instead to be named chairman of the Federal Reserve. In the end, and what's the result?”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Another main theme that Warren teaches to us in different ways is you always shoot for quality. Shoot for quality in people and shoot for quality in businesses. Our goal is to find outstanding businesses. It must be noted that your chairman, always a quick study, required only 20 years to recognize how important it was to buy good businesses. So saying learn from my mistake. Took me 20 years and Charlie Munger pushing me in this direction to finally realize, oh, I'm making mistakes here. In the interim, I searched for bargains and had the misfortune to find some. My punishment was an education in the economics of shortline farm implement manufacturers, third-rate department stores, and New England textile manufacturers.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“When Lan said what probably sixty years ago, my whole life has been spent trying to teach people that intense concentration for hour after hour can bring out in people resources they didn't know they had.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“So, what they're saying is, you know, you know your business, whether you're building yourself or you're investing in it, you have some unique specific set of knowledge about that business. So if you trust your own judgment, put your resources into that. It's not less safe doing that than investing in 20 businesses that you know nothing about. One's knowledge and experience, and this is the whole point of why I bring up the focus so much and repeat myself over and over again. One's knowledge and experience are definitely limited, and there are seldom more than two or three businesses at any given time in which I personally feel myself entitled to put full confidence. And again, this whole important point that is repeated over and over again, the importance of focus, importance of concentration, you don't even have to, it's not even my opinion. Let's go to who I feel is one of the greatest entrepreneurs to ever do it. Edwin Land, founder of Polaroid, Steve Jobs Hero, and he says,”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about, and in the management of which one thoroughly believes. So let's review that real quick because he's going to continue on this quote. The right method, in their opinion, is put large sums into enterprises with one knows something about. And investing in managers and entrepreneurs and founders and hopefully yourself that one thoroughly believes. It is a mistake to think that one limits one risk by spreading too much between enterprises, about which one knows little and has no reason for special confidence.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“But this inability to focus is endemic, especially in today. I think it's been with humans forever, but especially in where we're just served up multiple millions of distractions every day. But the place where it's not endemic is the history of entrepreneurship. It's very clear. You've got to focus first. You want to do all this other stuff. Do it after. Do it later. You definitely can't do it at the beginning. That's just crazy to me. And so we're going to see this idea of concentrating, focusing, concentrating not only your energy and your time, but also your resources. He's going to quote something that happens almost somebody talking almost 100 years ago. This is John Maynard Keynes. Every time I read orange shareholder letters, he brings this guy up, and every time I bring up the fact that I have a biography of Keynes that I haven't gotten due, but I will eventually turn into a podcast in the future, says John Mayner Keynes, whose brilliance as a practicing investor matches brilliance and thought, wrote a letter to a business associate in 1934 that says it all. And this is what Warren wanted to bring to our attention. As time goes on,”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Does that make any sense to you? And so I told him, I was like, listen, I couldn't for the life of me, I could not imagine a Steve Jobs, Jeff Bezos, and Enzo Ferrari, and Edwin Land, David Ogarby, spending 40 hours a month in the early days of building their business on something not related to their business. I was like, listen, if you want to invest in those things, find the smart move is find somebody that's really into it and then just give them your money to invest. But you really think you're not paying any penalty for diverting 40 hours of your attention away from your business a month? You're insane if you believe that.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Be your favorite. The business you understand best in the words of the Prophet May West. Too much of a good thing can be wonderful. And really, the way I think about all these lessons that Warren is talking about, he's essentially his main lesson is focus. If you go through the history of entrepreneurship, the importance of concentrating and focus is obvious. It repeats over and over again. And yet this is a mistake that's very common. I've just talked to a friend of mine. He just raised a bunch of money for a startup. And all he wanted to talk about was NFTs and crypto. And so I asked him, I was like, how much time are you, like, he sounded rather to me, sounded rather knowledgeable on this stuff? And I was like, how much time are you spending on this? And he's like, I don't know, like 10, 15 hours a week reading about it and learning about it. And personally, I think these subjects are interesting to talk about. They bring up unique visions of the potential future. But I just told him, I was like, you know how crazy that is? Like, you essentially don't think about it as like I'm spending 10 hours a week on this. So in a month, you're spending 40 hours researching something that has nothing to do with your business. A business that's growing but not yet profitable.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Right on the other hand, if you are a no something investor, able to understand business economics and to find five to ten sensibly priced companies, so he's still talking about from an investor's perspective, even for a founder, it could just be one, right? If Jeff Bezos never made another investment, but Amazon, he's still fabulously wealthy, even though he invests in quite a few other things. So says, you just need five to ten censorly priced companies. I possess important long-term competitive advantages. Conventional diversification would make no sense to you. It is apt simply to hurt your results and increase your risk. I cannot understand why an investor of that sort elects to put money into a business that is his twentieth favorite, rather than simply adding that money to his top choice. The businesses he understands best this is the part that most founders fall into, the businesses he understands best and that present the least risk along with the greatest profit potential, that is his”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“And he says the reason you want to do this is because no nothing investors can actually outperform most investment professionals. Paradoxically, and he's saying that just because you don't know much about investing, right, that doesn't mean you're dumb. And this is such a good summary conclusion to that one paragraph. Paradoxically, when dumb money acknowledges its limitation, it ceases to be dumb. So if you know, hey, I don't have some unique skill. I can't just pick a bunch of stocks and businesses like Warren can. So let me just buy the index. And so then this is his now, he just gave us two other examples, right? And now this is his chosen path. And the note I jotted down right under this is that most founders fall into this category because if you just need one successful business, the business that you own to make yourself wonderfully rich and successful.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“What kind of investment classes would fit into that? Some investment strategies require wide diversification. Is significant risks exist in a single transaction? Overall risks should be reduced by making that purchase one of many mutually independent commitments. So he's going to say this is really the path of venture capitalists. You may consciously purchase a risky investment if you believe that your gain considerably exceeds your loss. And if you can commit to a number of similar but unrelated opportunities, most venture capitalists employ this strategy. Another situation requiring wide diversification occurs when an investor who does not understand the economics of specific businesses nevertheless believes it's in his interest to be a long-term owner of American industry. That investor should both own a large number of equities and space out his purchases. So he's saying that what's the widest form of diversification? You own the entire market through an index fund.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Again, if all of your eggs are in one basket, you damn sure are going to watch that basket. This is a point that he's making here. So in that book, Invent and Wonder, Invent and Wander, excuse me. I think it's founders number 155. All of Jeff Bezos' shareholder letters combined. The second section is edited transcripts of some of his best talks. This is what he says. I need eight hours of sleep. I think better. I have more energy. My mood is better. And think about it. As a senior executive, what do you really get paid to do? You get paid to make a small number of high quality decisions. If I make like three good decisions a day, that's enough. And they should be just as high quality as I can make them. Warren Buffett says he's good if he makes three good decisions a year, and I really believe that. And so then Warren gets into when diversification is needed and when it is not, because sometimes it's a smart strategy. And so he's going to talk about like what...”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so this is the idea that it's really important to focus on a few high quality decisions as opposed to thinking that you're smart enough to make hundreds of good decisions. So he says Charlie and I decided long ago that in an investment lifetime, it is too hard to make hundreds of smart decisions. Therefore, we adopted a strategy that required our being smart and not too smart at that, only a very few times. We'll now settle for one good idea a year, and I'm going to tell you why this is Jeff Bezos arrived at the same conclusion that Warren's arriving at here. This strategy we've adopted precludes our following standard diversification dogma. Many pundits would therefore say the strategy that our strategy must be riskier than that employed by more conventional investors. We disagree. Portfolio concentration, meaning most of your assets in a handful of small businesses, right? Raises both the intensity with which an investor thinks about a business and the comfort level he must feel with its economic characteristics before buying into it.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“So when we own portions of outstanding businesses with outstanding management, our favorite holding period is forever. We continue to think that it is usually foolish to part with an interest in a business that is both understandable and durably wonderful. Business interests of that kind are simply too hard to replace. It's hard to find a business that you understand and it is durably wonderful.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Rich. First, he said that's not how we want to spend our lives. What's the point in us getting rich if we're doing something we don't want to do? The goal is to do both. One, figure out how you want to spend your life. And two, find out how to get rich doing that. This is a discussion I was having with a friend the other day. It's usually not what you do. It's how you do it. If you look at almost any profession, you have the example I used in this conversation that just came to mind is like, you know, you have realtors that make no money and you have realtors that make millions. You have podcasters that make no money. You have podcasters that make hundreds of millions of dollars. And eventually there'll be a billionaire off of podcasting. You have investors that don't make any money and investors that make tons. It's not what you do, it's how you do it. So to me, it's like, no, let's figure out how to do both. Let's figure out how do I want to spend my life and then figure out, and then that's actually the hard question, right? And then from there, once you're focused on that, how can I get rich at doing that? And then this section, the note I left myself, is this is a reminder that good ideas are rare when you find one bet heavily and don't.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Financial, and that's the way it's supposed to be. Okay, so this might seem a little odd because it's just one sentence here. Really, what I feel is my obligation to you is like, I have to jot down because I'm not just reading this book, right? Every book I read now is seen through the eyes of the hundreds of other books and stuff we've been studying for the last four years. And so he's talking about like arbitrage and paying attention to the active market and just he's not interested in that. And so I just want to pull out one sentence and then I'll tell you the idea that popped in my mind. It says this is not how Charlie nor I wish to spend our lives. What is the sense in getting rich just to stare at a ticker table? If you don't, and I want to add that if you don't like staring at a ticker table all day. Some people probably like doing that, right? And so the thought that pops to my mind is I'm reading this whole section, which again, that's the only sentence I'm going to pull out for you, is that you can do both, meaning one, figure out how you want to spend your life, because that's what he just said. What's the point in getting”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“And then he continues on about this idea where some part of your business philosophy is not going to be financial. And that's the way it should be. And so we referenced this earlier. It's like, I don't care if I can get a couple more percentage points. I'm not selling a business that I own. A determination to have and to hold, which Charlie and I share, obviously involves a mixture of personal and financial considerations. To some, our stand might seem highly eccentric. Charlie and I have long followed David Ogilvy's advice. Develop your eccentricities while you're young. That way when you get old, people won't think that you're gaga. Certainly, our posture must seem odd. To many in that arena, both companies and stocks are seen only as raw material for trades. Our attitude, however, fits our personalities and the way we want to live our lives. Winston Churchill once said, You shape your houses and then they shape you. We know the manner in which we in which we wish to be shaped. So I just love that idea. Some part of your business philosophy will not be.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Mr. Market has another endearing characteristic. He doesn't mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic depressive his behavior, the better for you. This is another important point he makes. Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom that you will find useful. If he shows up some day in particularly foolish mood, you are free to either ignore him or take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren't certain that you understand and can value your business far better than Mr Market, you don't belong in the game, as they say in poker. If you've been in the game thirty minutes and you don't know who the patsy is, you're the patsy.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“and really his main point here is I think the importance of controlling your emotions. Even though the business that the two of you may have economic characteristics that are stable, Mr. Market's quotations will be anything but. For sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can only see the favorable factors affecting the business. When in that mood, he names a very high price because he fears that you will snap up his interest. At other times he is depressed and can see nothing but trouble ahead for both the business”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so this is an idea that's widely known, but I think is important in case some people don't know it. And in case you do, it's important to revisit. And it's his introduction to his Mr. Market idea. This is the idea he learned from Ben Graham. So it says when we're investing, we view ourselves as a business analyst, not as market analyst, not as macroeconomic analysts, and not even as security analysts. Eventually, our economic fate will be determined by the economic fate of the businesses that we own, whether our ownership is partial or total. Ben Graham, my friend and teacher, long ago described the mental attitude towards market fluctuations that I believe to be the most conducive to investment success. He said that you should imagine market quotations as coming from a remarkably accommodating fellow named Mr. Market, who is your partner in a private business. Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“The moment and do your own thinking. In the 54 years we have worked together, him and Charlie, we have never foregone an attractive purchase because of the macro or political environment or the views of other people. In fact, these subjects never come up when we make decisions.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Hear TV commentators opine on what the market will do next. I am reminded of Mickey Manel's scathing comment. You don't know how easy this game is until you get into the broadcasting booth. And so he wraps up the section here. My two purchases were made in 1986 and 1993, what the economy, interest rates, or stock market might do in the years immediately following, so that'd be 1987 and 1984, was of no importance to me in making those investments. I can't remember what the headlines or pundits were saying at that time. Whatever the chatter, corn would keep growing in Nebraska and students would flock to NYU. And so this is where the organization's book really benefits because over a decade later, he revisits that same idea. And I'm just going to read one paragraph. It's really a summary of what he just, this lesson he was just trying to teach us. And my summary of the summary is don't be prisoners.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“Value and is going to go in the other direction and wipe you out. So he says half of all coin flippers will win their first toll toss. None of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never, and he italicizes this word, is never a reason to buy it. The fact that a given asset has appreciated in the recent past is never a reason to buy it. With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. And this is one of my favorite sentences. He repeats this over and over again. Games are won by players who focus on the playing field, not by those whose eyes are glued to the scoreboard. This is his fifth point, I think. Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“And so he's like, listen, what is the cache that you think this thing's going to throw off in the future? Now, he's going to say, some people don't do this. Some people say, I bought it for a million dollars. I don't care what it makes. I know in two years from now, or I think in two years from now, I'll sell it for $2 million. And so he's like, that's speculation. That's not investing. If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. So I don't know if I can't remember if this is a highlight in this book I read or if it's something I heard him say, but he talked about the reason he prefers investing over speculation is because he feels speculating is like he feels it's like dancing at a party and you have to leave by midnight, but there's no clocks in the room. And so his point is like you can't predict when what you're speculating on is going to cease increasing.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“And he buys some commercial real estate by NYU in New York. And he just essentially what he's saying is like, listen, don't listen to them. I'm going to give you two examples. This is not complicated. It's not easy to do, but it's not complicated. Don't overcomplicate it. So it's really, he's giving us two stories of fundamentals. I'm going to tell you his takeaways. I don't have to read through the price he paid for the NYU or the farm or anything like that. And so he says, listen, I tell these tales to illustrate certain fundamentals of investing. Remember, he's talking about buying a farm and buying commercial real estate next MYU. Number one, you don't need to be an expert in order to achieve satisfactory investment returns. But if you aren't an expert, you must recognize your limitations and follow a course that's certain to work reasonably well. Focus on the future productivity of the asset that you are considering. So in this case, it's a farm in Nebraska and real estate in New York. If you don't feel comfortable making a rough estimate of the asset's future earnings, then don't do it. Just forget it and move it.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“About the fact that it's better to avoid theories that are clearly wrong, but very popular. Most institutional investors in the early 1970s regarded business value as of only minor relevance when they were deciding the prices at which they would buy or sell. This now seems hard to believe. However, these institutions were then under the spell of academics at prestigious business schools who were preaching a newly fashioned theory. The stock market was totally efficient and therefore calculations of business value and even thought itself were of no importance in investment activities. We are enormously indebted to those academics. What could be more advantageous in an intellectual contest whether bridge, chess, or stock selection than to have opponents who have been taught that thinking is a waste of energy? And so Buffett's counterpoint in the section he buys a farm with his son in Nebraska”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source
“We can afford to lose money, but we can't afford to lose even one shred of reputation. There's plenty of money to be made in the center of the court. He spends a great deal writing about corporate culture. It was very interesting. There's actually an entire section at the end of the book where he goes into detail about Buffett's, excuse me, Berkshire's corporate culture, and in that section, Charlie Munger gives the best overview of the Buffett system. I'll see if I can find it linked somewhere online. I do quote from it, so I'll see if I can find it. But reading the whole section is worth it. But this is just an example of that. And he says, Culture's self-propagate bureaucratic procedures beget more bureaucracy. And really think about that. It's like you get more of what you do. And so cultures self-propagate. This is going to remind me something I heard Charlie say in a, at the Berkshire Hathaway shareholder meeting, he says, listen, I can't give you a formula because I don't use one. Business schools will give you a bunch of formulas that don't work. And so this is Buffett writing in 19.”
2022-01-20 · Founders · #227 The Essays of Warren Buffett · IDENTIFIED FROM THE TRANSCRIPT · source