YouSaid · the spoken record

Warren Buffett

lines on the record: 194
first: 2019-09-08
most recent: 2019-09-08
sittings or episodes: 1
sources: podcast

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“For fifty four years Charlie and I have loved our jobs. Daily we do what we find interesting, working with people we like and trust. And now our new management structure has made our lives even more enjoyable. With the whole ensemble, that is with a jit, that's somebody that they hired, and Greg running operations, a great collection of businesses, a Niagara of cash generation, a cadre of talented managers, and a rock solid culture, your company is in good shape for whatever the future brings. Warren Buffett, February 23rd, 2019. And that is where I'll leave the story.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“It is beyond arrogance for American businesses or individuals to boast that they have done it all alone. The tidy rows of simple white crosses at Normandy should shame those who make such claims. There are many other countries around the world that have bright futures. About that we should rejoice. Americans will be both more prosperous and safer if all nations thrive”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“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 $108 trillion. An amount almost impossible to comprehend. Remember, earlier in this letter, how I describe retained earnings as having been the key to Berkshire's prosperity. So it has been with America. In the nation's accounting, the comparable item is labeled savings and save we have. If our forefathers had instead consumed all they produced, there would have been no investment, no productivity games, and no leap in living standards. Charlie and I happily acknowledged that much of Burkshire's success has simply been a product of what I think should be called the American tailwind.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Our country's almost unbelievable prosperity has been gained in a bipartisan manner. Since nineteen forty two, we've had seven Republican presidents and seven Democrats. In the years they serve, the country contended at various times with a long period of viral inflation, a 21% prime rate, several controversial and costly wars, the resignation of a president, a pervasive collapse in home values, a paralyzing financial panic, and a host of other problems all engendered scary headlines all now history.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“That's 40,000%. Suppose you had foreseen this increase in panic at the prospect of runaway deficits and of a worthless currency. This is he's talking about something he learned. To protect yourself, you might have eschewed stocks and opted instead to buy gold. And what would your protection have delivered you? You would now have an asset worth about $4,200 or less than 1% would have been realized from a simple unmanaged investment in American business. And this is kind of the next statement, is what Warren Buffett has staked his entire career on. You got to have some kind of beliefs that you're willing to bet on. The magical medal was no match for the American medal.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“That is a gain of 5,288 for one. Meanwhile, a million dollar investment by a tax-free institution of that time, say a pension fund or college endowment, would have grown to about $5.3 billion. Let me add one additional calculation that I believe will shock you. If that hypothetical institution had only paid 1% of assets annually to various quote-unquote helpers, and he obviously doesn't think they're helping, such as investments managers and consultants, its gain would have been cut in half to $2.6 billion. That's what happens over 77 years when the 11% annual return actually achieved by the S&P 500 is recalculated down to 10%. Those who regularly preach doom because of government budget deficits, as I regularly did myself for many years, might note that our country's nation's national debt has increased roughly four.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“All American males and led President Lincoln to openly ponder whether a nation so conceived and so dedicated could long endure. In the nineteen thirties, Americans suffered through the Great Depression, a punishing period of massive unemployment. Nevertheless, in nineteen forty two when I made my purchase, the nation expected post war growth, a belief that proved to be well found. In fact, the nation's achievement can best be described as breathtaking. Let's put my numbers to that claim. If my one hundred fourteen dollars had been invested in a no fee SP five hundred index fund and all dividends had been reinvested, my stake would have been grown to be worth pretaxes six hundred six thousand dollars.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“1942, the United States had grown from 4 million people, about one half of 1% of the world's population, into the most powerful country on Earth. That's the first 277-year periods. In that spring of 1942, though it faced a crisis, the US and its allies were suffering heavy losses in a war that we had entered only three months earlier. Bad news arrived daily. Despite the alarming headlines, almost all Americans believed that on march eleventh that the war would be won. Nor was their optimism limited to that victory. Leaving aside congenital pessimists, Americans believe that their children and generations beyond would live far better lives than they themselves had. The nations under citizens understood, of course, that the road ahead would not be a smooth ride. It has never has been. Early in its history our country was tested by a civil war that killed four percent of”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“World War II by getting from Congress the right to ignore seniority in choosing generals And finally, this is the last section I'm gonna cover. It's called the American Tailwind. This is on March 11th. It will be 77 years since I first invested it and now we're back to Buffett, by the way. Since I first invested in an American business. The year was 1942 and I was 11. I went all in investing $114 that had been accumulating since age six. What I bought was three shares of city service preferred stock. I had become a capitalist, and it felt good. Now let's travel back through the two seventy seven years periods that preceded my purchase, so from today to 77 years ago, the time he bought his first stock, now he's going to other 77 years back, right? That leaves us starting in the year 1788, a year prior to George Washington's installation as our first president. Could anyone have imagined what their new country would accomplish in only 377-year lifetimes? That's an interesting way to look at it. During the two 77-year periods prior to the...”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Skill was concentrated in one person, not seven, and his skill improved and improved as he got older and older. During fifty years, instead of deteriorating like the skill of a basketball player. Munger closes out this section on Buffett. He says, Berkshire has had a big task ahead, turning a tiny stash into a large and useful company, or had a big, he's talking about at the beginning. And it solved that problem by avoiding bureaucracy and relying much on one thoughtful leader for a long, long time, as he kept improving and brought in more people like himself. Compare this to a typical big corporation system with much bureaucracy at headquarters and a long succession of CEOs who come in at about age fifty nine pause little thereafter for quiet thought and are soon forced out by a fixed retirement age. I believe that versions of the Berkshire system should be tried more often elsewhere, meaning he wants us to take these ideas in our own life, and that the worst attributes of bureaucracy should much more often be treated like the cancers they so much resemble. A good example of bureaucracy fixing was created by George Marshall when he helped”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“And then now he's going to go into what I referenced earlier, like what others call obsession, Buffett calls focus. So this is Munger still writing about what he's observed in how Buffett has built his business. He says, in particular, Buffett's decision to limit his activities to a few kinds and to maximize his attention to them and to keep doing so for 50 years was a Lollapalooza. Buffett succeeded for the same reason Roger Federer became good at tennis. Buffett was, in effect, using the winning method of the famous basketball coach John Wooden. John Wooden won most regularly after he had learned to assign virtually all playing time to his seven best players. That way, opponents always faced his best players instead of his second best, and with the extra playing time, the best players improve more than normal so it has this virtuous cycle again. In his case, the exercise of”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“So he says, what was Buffett aiming at as he designed the Berkshire system? Well, over the years, I diagnosed several important themes. And he's going to give us some ideas we can steal and take in our own lives. Number one, he particularly wanted continuous maximization of the rationality, skills, and devotion of the most important people in the system, starting with himself. Number two, he wanted win-win results everywhere in gaining loyalty by giving it, for instance. Number three, he wanted decisions that maximize long term results, seeking these from decision makers who usually stayed long enough in place to bear the consequences of decisions, so skin in the game again. four. He wanted to minimize the bad effects that would almost inevitably come from a large bureaucracy at headquarters. Repeated that again. five. He wanted to personally contribute like Professor Ben Graham to the spread of wisdom.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“That come with moving too slow. And then this is the impact that Charlie has had on Warren in Berkshire. From my perspective, though, Charlie's most important architectural feat was the design of today's Berkshire. The blueprint he gave me was simple. Forget what you know about buying fair businesses at wonderful prices and instead buy wonderful businesses at fair prices. That's what allowed them to scale. Altering my behavior is not an easy task. Ask my family. I had enjoyed reasonable success without Charlie's input. So why should I listen to a lawyer who had never spent a day in business school? But when I had attended three, so he's being a little tongue-in-cheek there, but Charlie never tired of repeating his maxims about business investing to me, and his logic was irrefutable. Consequently, Berkshire has been built to Charlie's blueprint. My role has been that of general contract with the CEOs of Berkshire's subsidiaries doing the real work as subcontractors.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Next page. We tend to let many of our subsidiaries operate on their own without our supervising and monitoring them to any degree. That means we are sometimes late in spotting about the downside to it, but what's the trade-off? Why is he doing that? He's discussing the trade-off he's making. That means we are sometimes late in spotting management problems that are both operating in capital decisions are occasionally made with which Charlie and I would have disagreed had we been consulted. Most of our managers, however, use the independence we grant them magnificently, rewarding our confidence by maintaining an owner-orienting attitude that is invaluable and too seldom found in huge organizations. We would rather suffer the visible costs of a few bad decisions than incur the many invisible costs that come from decisions made too slowly. So you're saying, hey, we would rather suffer visible costs, a few bad decisions, than incur the invisible cost.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“One to invest in just because Charlie and I can clearly see dramatic growth ahead for an industry does not mean we can judge what its profit margins of return on capital will be as a host of competitors battle for supremacy. At Berkshire, we will stick with businesses whose profit pictures for decades to come seems reasonably predictable. Even then we will make plenty of mistakes. Another example. We will never become too dependent on the kindness of strangers. Too big to fail is not a fallback position of Berkshire. Instead, we will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity. He's talking about his margin of safety again. Moreover, that liquidity will be constantly refreshed by a gusher of earnings from our many and diverse businesses.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Is the important part people putting people into homes though a desirable goal shouldn't be our country's primary objective keeping them in their homes should be the ambition Okay, so now I want to get to the part where Warren's telling us how to apply the thinking of Charlie Munger. So he says, long ago, Charlie laid out his strongest ambition. All I want to know is where I'm going to die so I'll never go there. That bit of wisdom was inspired by Jacobi, the great Prussian mathematician who counseled, invert, always invert as an aid to solving difficult problems. Here are a few examples of how we apply Charlie's thinking at Berkshire. Charlie and I avoid businesses. Charlie and I avoid businesses to futures we can't evaluate no matter how exciting their products may be. In the past, it required no brilliance for people to foresee the fabulous growth that awaited such industries as automobiles in 1910, aircraft in 1930, and television sets in 1950. But the future then also included competitive dynamics that would decimate almost all of the companies entering those industries.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“And this is, he leads to his thoughts on home ownership, which I really appreciate. Home ownership is a wonderful thing. My family and I have enjoyed my present home for 50 years with more to come. But enjoyment and utility should be the primary motive for purchase, not profit or refi possibilities. And the home purchase ought to fit the income of the purchaser. The present housing tobacco should teach homebuyers, lenders, brokers, and governments some simple lessons that will ensure stability in the future. Home prices should involve an honest to good down payment of at least 10% and monthly payments that can be comfortably handled by the borrower's income. That income we should be carefully”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“So it says this 1997 2000 fiasco should have served as a canary in the coal mine warning for the larger conventional housing market. But investors, governments, and rating agencies learned exactly nothing. Instead, an eerie rerun of that disaster, the same mistakes were repeated with conventional homes in the 2004 to 2007 period. Lenders happily made loans that borrows couldn't repay out of their incomes, and borrowers just as happily signed up for meetos payments. Both parties counted on house price appreciation to make this otherwise impossible arrangement work. It was Scarlett O'Hara all over again. I'll think about it tomorrow. The consequences of this behavior are now reverberating through every corner of our economy.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“So he describes it as borrowers who shouldn't have borrowed being financed by lenders who shouldn't have lent. Moreover, impossible to meet monthly payments were being agreed to by borrowers who signed up because they had nothing to lose. The resulting mortgage were usually packaged. They were securized and sold to Wall Street firms to unsuspecting investors. This chain of folly had to end badly.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay. Okay, so I just read the principles, the four principles. This is Warren is describing, these are my notes now. Warren is describing the subprime mortgage crisis that happened in a manufactured homes almost 10 years earlier. Okay, so that book that I'm going to be reading, the one that he bought the business on, they are like the largest producer of manufactured homes, right? And they stayed out of, there was a subprime mortgage crisis like, let's see, 10 years before the subprime mortgage crisis. There's a subprime mortgage crisis in manufactured homes 10 years before the one that played on conventional housing. And this is another example of how the human species fails to learn from history. So he's describing this. He says at that time, much of the industry employed sales practices that were atrocious, writing about the period somewhat later. I described it as being involved as involving borrowers, his memory. He's talking about this is in the 90s. This is people borrowing to buy manufactured homes.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Regardless of the macro environment, anchor yourself around your principles. There's a reason horses have blinders on. Those are notes I left myself. So in good years and bad, Charlie and I simply focus on four goals. One, maintain Berkshire's Gibraltar-like financial position, which features huge amounts of excess liquidity near-term obligations that are modest and dozens of sources of earnings and cash. Two, widen the moats around our operating businesses. They give them durable competitive advantages. Three, acquiring and developing new and varied streams our earnings. Four, expanding and nurturing the cadre of outstanding operating managers who over the years have delivered Berkshire's exceptional results. So one of my favorite, let me see if I can find it for you. The audio is not going to be the best. But this whole...”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm going to skip over the section, but just know that he lost $11 billion in net worth in one year. During the financial crisis, and one way to temper your reaction is by inducing a bit of context. And he's like, listen, we've been through a lot of crap in the 20th century alone. We dealt with two great wars, a dozen or so panics and recession, inflation that led to 21.5% prime rate, Great Depression in the 1930s, unemployment ranging from 15 to 25% for many years. America's had no shortage of challenges. So this is a challenge. This 2008 sucks, but it happens. We have to be prepared for that.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Is his opinion that brain passions and integrity are greater than a resume. Susan came to Borsheim's. This is a jewelry store they bought. 25 years ago, it's a $4 now saleswoman. Though she lacked a managerial background, I did not hesitate to make her CEO in 1994. She's smart. She loves the business and she loves her associates. That beats having an MBA degree anytime. And aside, Charlie and I are not big fans of resumes. Instead, we focus on Brain's passion and integrity. Another one of our great managers is Kathy Barron, who has significantly increased business wires earnings.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Profit is the reward of a great business, and it's okay that if it can't be reinvested to make more. Long term competitive advantage in a stable industry is what we seek in a business. If that comes with rapid organic growth, great. But even without organic growth, such a business is rewarding. We will simply take the lush earnings of the business and use them to buy similar businesses elsewhere. There's no rule that you have to invest money where you earned it. That's what I mean. Sometimes you just get to the point where it's like the business is performing as much as it can. Reinvesting is not going to bring more money. Indeed, it's often a mistake to do so. That's an interesting thought, right? Truly great businesses earning huge returns on tangible assets can't for any extended period reinvest a large portion of their earnings internally at higher rates of return. They're already at maximum efficiency. You got to put that money elsewhere. And that's okay. That's a good thing. It's a great thing.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“The professor that says this is not penalized financially if you go out and do this. After all, if you are in the shipping business, again, that's why I always say you always look for revealed preferences as to the state of preferences, meaning look at people's actions, not what they say. After all, if you're in the shipping business, it's helpful to have all of your potential competitors be taught that the earth is flat. Maybe it was a good thing for its investors that Walter didn't go to college.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“To my knowledge, no business school teaching EMT made any attempt to study Walter's performance and what it meant for the school's cherished theory. Instead, the faculties of the schools went merrily on their way presenting EMT as having the certainty of scripture. Typically, a finance instructor who had the nerve to question EMT had about as much chance of a major promotion as Galileo had of being named. Tens of thousands of students were therefore sent out into life believing that on every day the price of every stock was right, and that attempts to evaluate businesses that is in stocks were useless. Walter, meanwhile, went on overperforming. His job made easier by the misguided instructions that had been given to those young minds. Remember, if somebody's telling you”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“He's talking about this guy named Walter, who he learned from. So, anyways, the guy was investing stocks for 47 years. So, anyways, I first publicly discussed Walter's remarkable record in 1984. At that time, EMT, more on efficient market theory, was a centerpiece of investment instruction in most Major Business Schools. This theory, as then most commonly taught, held that the price of any stock at any moment is not demonstrably mispriced, which means that no investor can be expected to overperform the stock market averages using only publicly available information. When I talked about Walter 20 years ago, his record forcefully contradicted this dogma. And what did members of the academic community do when they were exposed to this new and important evidence? Unfortunately, they reacted in all too human fashion. Rather than opening their minds, they closed their eyes.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“How that will play out in markets is impossible to predict, but to expect a soft landing seems like wishful thinking. So again, the best protection against anything is a profitable, unleveraged business or a portfolio of them. So now he's going to talk more about the difference between theory and practice and why I think it's another reason why I would recommend reading biographies of practitioners a set of business books. Practitioners, I think learning from them is just a better idea because academic ideas don't correlate to P&L it's an idea but a practitioner had to back up his ideas with money and either he had to risk losing money or making money So there's a lot more you can learn from that. So he says”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“So he's saying there's trouble head for the US, no one knows when, and no one knows how. The best protection is a profitable, unleveraged business or a portfolio of them like Berkshire has. So he says, in effect, we've used up our bank account and turned it to our credit card. He's talking about the country now. And like everyone who gets in hawk, the U.S. will now experience reverse compounding as we pay ever increased amounts of interest on interest. He doesn't like that. I want to emphasize that even though our course is unwise, Americans will still love better in 10 or 20 years than they do now today. Per capita wealth will increase, but our citizens will also be forced every year to ship a significant portion of our current production abroad merely to service the cost of our huge debtor position. It won't be pleasant to work part of each day to pay for the overconsumption of your ancestors. What a way to think about it. I believe that at some point in the future, U.S. workers and voters will find this annual tribute so onerous that there will be severe political backlash.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Not all of our businesses are destined, this is him telling us to pick the market we are in wisely. Not all of our businesses are destined to increase profits. When an industry's underlying economics are crumbling, talented management may slow the rate of decline. Eventually, though, eroding fundamentals will overwhelm managerial brilliance. As a wise friend told me long ago, if you want to get a reputation as a good businessman, be sure to get into a good business. So that's just another way to say find a tailwind instead of fighting a headwind.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Like they lose money. He doesn't like that I love this idea of viewing your work as an unfolding movie, not a still photograph. Never heard this before. I like it. Here's a paragraph about it. When analyzing Berkshire, to be sure, be sure to remember that the company should be viewed as an unfolding movie, not as a still photograph. Those who focused in the past on only the snapshot of the day sometimes reach erroneous conclusions. So think about your work as an unfolding movie. You're not going to know how it turns out to after you're gone or after you stop doing it. Warren and Charlie never thought it would be this large and their decentralized structure helps them enjoy their work. Charlie Mun”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Up, you won't just placate him. We've made that search at Berkshire. We now have 11 directors, and each of them combined with members of the family owns more than 4 million of Berkshire stock. So it talks about all 11 directors purchase their holdings in the market just as you did. We've never passed out options or restricted shares. Charlie and I love such honest to goodness ownership. After all, whoever washes a rental car. Thus, the upside for Berkshire for all 11 is proportionally the same as the upside for any Berkshire shareholder. So they're going to keep him in your line, right? And it always will be. The downside for Berkshire directors is actually worse than yours because we carry no directors and officers liability insurance. Therefore, if something really catastrophic happens on our director's watch, they're exposed to losses that will far exceed yours. It's extremely important. The bottom line with our directors, you win, they win. Big. You lose, they lose big. Our approach might be called owner capitalism. We know of no better way to engender true independence. He's just really talking about skin in the game. Your incentives have to be aligned and too much of corporate America is saying people can make bad decisions. They don't have an ownership stake. They get huge bonuses, then they leave, and then the shareholders are impoverished or not impoverished.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, so he's got this idea of owner capitalism. I want to share this with you. Some big chunks I pulled out here. I'm on my soapbacks now only because the blatant wrongdoing that has occurred has betrayed the trust of so many millions of shareholders. Hundreds of industry insiders had to know what was going on and publicly nobody said a word. So he's talking about like there's no corporate governance and it really annoys him and that the boards are stacked with just yes men when they shouldn't be doing that. True independence, meaning the willingness to challenge a forceful CEO when something is wrong or foolish is an enormously valuable trait in a director. It is also rare. The place to look for it is among high grade people whose interests are in line with those of the rank and file shareholders and are in line with a big way. So what he's saying is they need to have skin in the game so a large percentage of their net worth needs to ride on if CEO is making the right decision or not. Because if your large percentage of your net worth is riding on his ability to make a good decision and you think he's going wrong, you're going to speak.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Like, what is truly happening here? And what's chance that I can't figure out? Maybe you don't know it either. No one can predict the future. Be wary of those that claim this imaginary skill. Charlie and I don't know today what our business will earn next year. We don't even know what they will earn next quarter. We are suspicious of the CEOs who regularly claim they do know the future. And we become downright incredulous if they consistently reach their declared targets. Managers that always promise to make the numbers will at some point be tempted to make up the numbers. Just a good more basic life advice for us.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“So, good chances are it's too complex that even the people running it don't understand, which we saw. The derivative genie is now well out of the body, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. This is six or so years before what he just said is going to happen will happen. And it reminds me of one of my favorite quotes from one of my favorite books, a book that fundamentally shifted how I view life when I realized it's called It's a Big Short by Michael Lewis, way better booked than it is a movie. I'd recommend reading it, but I'm going to read it to you. It says on the surface, these big Wall Street firms appeared robust. Below the surface, Eisman, this is Steve Eisman, one of the guys that makes over a billion dollars betting against...”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so he says he's talking about credit swaps. And then, well, let me just read it. Even experienced investors and analysts encounter major problems in analyzing the financial condition of firms that are heavily involved with derivatives contracts. When Charlie and I finish reading the long footnotes detailing derivative activities of major banks, the only thing we understand is that we don't understand how much”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“I love stories like that. That's fantastic. I love entrepreneurship. A funny way to think about controlling costs. We cherish cost consciousness at Berkshire. Our model is the widow who went to the local newspaper to place an obituary notice. Told there was a 25 cents word charge she requested. Fred Brown died. She was then informed that there was a seven-word minimum. Okay, the bereaved woman replied. Make it Fred Brown died golf clubs for sale. Okay, this was interesting. This is six years before, about six years before the subprime mortgage crisis. And if Warren and Charlie can't figure it out, what I'm about to read you, it's a good chance that the bank didn't know that either.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“She went to the merchandise mart on a buying expedition. There she picked up a dozen each of this and that and then went home and set up operations in her basement. Her plan was to conduct in-home presentations like Tupperware parties to small groups of women gathered at the homes of their friends while driving to her first presentation though Doris almost talked herself into returning home, convinced she was doomed to fail. But the women she faced that evening loved her and her products, and they purchased $175 of goods. Working with her husband Jay, Doris did fifty thousand dollars of business the first year. Today, only 22 years later, she did more than $700 million of business annually.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Starting a business in like the Rose Blumpkin, like no education, barely speak English, has to escape from a country, comes here with 500 bucks and builds giant business. There's another example. The largest acquisition we initiated in 2002 was the Pampered Chef, a company with a fascinating history dating back to 1980. Doris Christopher was then a 34-year-old suburban Chicago home economics teacher with a husband, two little girls, and absolutely no business background. Wanting, however, to supplement her family's modest income, she turned to thinking about what she knew best, food preparation. Why not she wondered, make a business out of marketing kitchenware, focusing on the items she herself found most useful? To get started, Doris borrowed three thousand dollars against her life insurance policy. That was all the money ever injected into the company.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“So, just because they won the World Series, he made more in four days than they made all year. Eddie understood that Howie Lugbats was unimportant. What counted instead was hooking up with the cream of those on the playing field. I've learned from Eddie. At Berkshire, I regularly hand bats to many of the heaviest hitters in American business. Another great more great writing, a great story. It's fantastic. Oh, this is another fantastic story. There's so many stories of entrepreneurs.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“In addition to being a great teacher, Ben was a wonderful friend. My debt to him is incalculable. He loves baseball analogies. Here's another one. This is actually really interesting. My managerial model is Eddie Bennett, who is a bat boy in 1919 at age 19, Eddie began to work with the Chicago White Sox, who that year won the World Series. The next year, Eddie switched to the Brooklyn Dodgers, and they too won their league title. Our hero, however, smelled trouble. Changing Burroughs, he joined the Yankees in 1921, and they promptly won their first pennant in history. Now, Eddie settled in, shrewdly seeing what was coming. In the next seven years the Yankees won five titles. What does this have to do with management? It's simple. To be a winner, work with winners. In nineteen twenty seven, for example, Eddie received seven hundred dollars for one eighth World Series share voted him by the legendary Yankee team of Babe Ruth and Lou Garrick. This sum, which Eddie earned by working only four days because New York swept a series, was roughly equal to the full year pay then earned by Batboys who worked with ordinary associates.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Metaphor you're there. Something that we're trying to do on founders for sure by studying all these biographies is he's saying here, a few hours studying from a master prove more valuable than 10 years of supposedly original thinking. So he says a bit of nostalgia. It was exactly 50 years ago that I entered Ben Graham's class at Columbia. During the decade before it, I had enjoyed, make that loved analyzing, buying, and selling stocks. But my results were no better than average. Beginning in nineteen fifty one, my performance improved. No, I hadn't changed my diet or taken up exercise. The only new ingredient was Ben's ideas. Quite simply a few hours spent at the feet of the master proved far more valuable to me than ten years of supposedly original thinking.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“This is such a great quote. Nothing sedates rationality, like large doses of effortless money. The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the bar. They know that overstaying the festivities, that is, continue to speculate in companies that have gigantic valuations relative to cash they are likely to generate in the future will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one hell of a party. Therefore, the giddy participants all plan to leave just seconds before midnight. There's a problem though. They are dancing in a room in which clocks have no hands. See what I mean? These are shareholder letters. Like he's a really good writer though. That was a really interesting.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“If we have a strength, it is in recognizing when we are operating well within our circle of competence and when we are approaching the perimeter. Predicting the long-term economics of companies that operate in fast changing industries is simply far beyond our perimeter. If others claim predictive skill in those industries and seem to have their claims validated by the behavior of the stock market, we neither envy nor emulate them. Instead, we just stick with what we understand. If we stray, we will have done so inadvertently, not because we got restless and substituted hope for rationality. Fortunately, it's almost certain there will be opportunities from time to time for Burshard to do well within the circle that we've staked out. It's so hard to say no. They're saying the no to the majority of things that they say. No, no, no, no, no. It goes against our predisposition for action.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Warren's Buffett. I love it. So, this is another, this may, I don't, this is close to one of my favorite ideas out of all shareholder letters. Warren Buffett's advice on the mindset to have when you're running your business. Just run your business as if, one, you own 100% of it. Two, this is really unique idea. It is the only asset in the world that you and your family have or will ever have. And three, you can't sell or merge it for at least a century.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“So it says, we are paying in a way that makes sense for both our owners and our managers. We distribute merit badges, not lottery tickets. In none of Berkshire's subsidiaries do we relate compensation to our stock price, which our associates cannot affect in any meaningful way. Instead, we tie bonuses to each unit's business performance, which is the direct product of the unit's people. When that performance is terrific, as it has been at Geico, there's nothing Charlie and I enjoy writing more than writing a big check. So, you're going to get paid based on what you can actually control. That's actually a good idea.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Prospective purchasers, which is everybody's investing over long term, should much prefer sinking prices. So he said, so smile when you read a headline that says investors lose as market falls. Edit it in your own mind to disinvestors lose as market falls. But investors gain. Though writers often forget this truism, there's a buyer for every seller, and what hurts one necessarily helps the other. This is another idea I like of his when you're setting compensation, distribute merit badges and not lottery tickets.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“He takes in this next example. He takes a normal human reaction and reverses it. In a lot of cases, this is a good strategy. I referenced that earlier. If you expect to be a net saver during the next five years, should you hope for higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are always elated when stock prices rise and depress when they fall. So it's normal. You own stocks, even though you're going to continue to buy them in the future, you're not realizing you're excited they're going up, but now you just, you can buy less of them. You should be hoping they go up in the future, but down now. She says they are laden with stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the hamburgers, they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“That pitch would mean a trip to the Hall of Fame, swinging indiscriminately would mean a ticket to the miners. If they're in the strike zone at all, the business pitches we now see are just catching the lower outside corner. If we swing, we will be locked into lower returns. But if we let all of today's balls go by, there could be no assurance that the next one we see will be more attractive to our liking. Perhaps the attractive prices of the past were the aberrations, not the full prices of today. Unlike Ted, we can't be called out if we resist three pitches that are barely in the strike zone. Nevertheless, just standing there day after day with my bat on my shoulder is not my idea of fun. So unfortunately, he's a prisoner of his own success.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so it says this next section is Y given its current size, it would be hard for Berkshire to grow substantially a $500 million profit at what add just 1% to Berkshire's performance, and there are way more $500 million opportunities than, say, $10 million opportunities. And then I said, but I think this metaphor also applies to picking the businesses you operate, stick to where your natural strengths are. So it says, we try to exert Ted Williams, this is the famous baseball player. We try to exert a Ted Williams kind of discipline. In his book, The Science of Hitting, Ted explains that he carved the strike zone into 77 cells, each the size of a baseball, swinging it only at balls in his best cell he knew would allow him to bat 400, which is like a really high percentage in baseball. Reaching for balls in his worst spot, the low outside corner of the strike zone would reduce him to 230, so way worse. In other words, waiting for the”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source