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

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“So, this echoes Bezos' idea that you should invest in things that won't change. So he says, obviously all businesses change to some extent. Today's seize is different in many ways from what it was in 1972 when we bought it. It offers a different assortment of candy, employs different machinery and sells through different distribution channels. But the reasons why people today buy box chocolates and why they buy them from us rather than someone else are virtually unchanged from what they were in the 1920s. So that's what he means about what's actually going to stay the same when the C family was building the business. Moreover, those motivations are not likely to change over the next 20 or even 50 years. That's a good point.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Is the low cost flywheel of Geico that comes up a bunch? There's nothing esoteric about Geico's success. The company's competitive strength flows directly from its position as a low-cost operator. Low costs permit low prices and low prices attract and retain good policyholders. The final segment of a virtuous cycle is drawn when policyholders recommend us to their friends. Geico gets more than one million referrals annually, and these produce more than half of our new business. An advantage that gives us enormous savings in acquisition expenses, and that makes our costs still lower. So it just goes over and over and over again.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“That fractional ownership So, yeah, Charlie used to think that this expense percentage outrage on my use of Berkshire's corporate jet, the indefensible that's in the HQ. Cost. So he says, seriously, costs matter. Charlie and I make no promises about Berkshire's results. We do promise you, however, that virtually all the gains Berkshire makes will end up with shareholders. We are here to make money with you, not off of you.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Seriously, costs matter. Warren Buffett. That's a quote from Warren Buffett. Everyone talks about revenue. No one ever talks about costs. These costs may be lower than that of those of any other large American corporation. Our aftertax headquarter expense amounts to less than two basis points. I was wrong. It's 1 50th of 1%, not one-tenth of 1%. Measured against net worth. Even so, Charlie used to think this expense percentage outrageously high, blaming it on my use of Berkshire's corporate jet. So this is another funny part about it because, again, he doesn't hide the fact that he's not hiding his flaws. So he railed against corporations spending too much money on corporate jet, saying it's too expensive. Berkshire starts doing well. He buys a corporate jet. Then it starts doing better. He trades that jet for a different jet. And Charlie hates this. He says, what are you doing? And so they named the jet the indefensible because he's like, listen, I just like it. It's very convenient. But yes, it's more expensive than it needs to be. He winds up getting rid of it because he buys net jet.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Of difficulty doesn't count. He bought, he went up making tons of money on Nebraska furniture merch. Think about it. It's one giant store that resells carpet and other furniture. But he knows about it. And he bought it, first of all, at a good price. I think he paid $55 million for it or whatever the case was. But that's a perfect example of this. It's very simple and straightforward. Other people had to make it more complicated. He's going to make the money's going to flow to his bottom line the same way. Then if he had to buy a chain of furniture stores, which he also does that. I'm not saying they're mutually exclusive, but he probably does make more money from Nebraska furniture market than the investments in running an entire chain.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Why are you picking your 20th best guess? Go for number one. Again, that's very counterintuitive. It goes against everything other normal people do with their money. It's very, very, I don't know. I understand it's risky advice, but I think it's the correct advice. If you have some kind of information advantage and you're running a business and you own a large percentage of that business and it's working, what other investment is going to generate more money than that? Very few, if any. So you kind of have to know too much of a good thing can be wonderful, his whole point. And again, it kind of goes to, it may go against your natural human instinct, but the degree of difficulty doesn't count. That's another good idea that he has in this shareholder letter. He says, investors should remember that their scorecards is not computed using Olympic diving methods. Degree of difficulty doesn't count. If you were right about a business who value is largely dependent on a single key factor that is both easy to understand and enduring, the payoff is the same as if you would correctly analyze an investment alternative characterized by many constantly shifting and complex variables.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“That's why I think personal finance advice for entrepreneurship is really, really flawed. In many cases, it goes against the grain. If you have a wonderful business, what did Andrew Carnegie tell us? Study how all the world's great fortunes have been built. It's not a scattershot approach. He says, put all your eggs in one basket and watch that basket. Buffet is doing that. Munger is doing that. They have an insane amount of skin in the game. They put almost all of their family's assets into their company. So again, what happens if you put all your family's asset into a company that's going to go bankrupt? Don't do that. But if you know that you have a good business, you know it's profitable. Especially if it's a private business, you have information about your business no one else has. Why are you investing in other things?”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“On the other hand, if you are a know something investor, which is what him and Charlie are, and able to understand business economics and to find $5 to 10 sensibly priced companies that possess important long-term competitive advantages, conventional diversification makes no sense for you. That's why they talk so much crap about it. 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 20th favorite rather than simply adding the money to his top choices. The businesses he understands best and that present the least risk along with the greatest profit potential. In the words of the Prophet May West, too much of a good thing can be wonderful, so I'm going to run over my point because it's one of the craziest things that I learned from reading these shareholder letters is that Warren Buffett for a long time has had over 99% of his net worth in Berkshire.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Another example it only takes a few. The quote I always say from them, I think it's from Charlie Munger. Might be from Buffett, but it only takes a few wonderful businesses in a lifetime to become wealthy. Charlie and I decided long ago that in an investment lifetime, it's just too hard to make hundreds of smart decisions. That judgment became even more compelling as Berkshire's capital mushroomed and the universe of investments that could significantly affect our results shrank dramatically. Therefore, we adopted a strategy that required a strategy that required our being smart and not too smart at that only a few times. They don't think we get it right on a few businesses and even a few great businesses are going to pay for many, many mistakes.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“And their own, I think their headquarters is like one-tenth of 1% of costs. So some are doing 10. He's given an example of 1%. They're 10 times less than that. That's insane. They are long on cash right now. This may help explain how they look at such situations. Okay, so this is happening in 1983. Right now, markets are difficult, but they can and will change in unexpected ways and at unexpected times. We've heard this before. In the meantime, we will try to resist the temptation to do something marginally because we are long on cash. There's no use running if you're on the wrong road. And what I meant by that is right now in present day at the time I'm recording this are long in cash. So something they've done many times throughout.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, I love this idea that he looks at it, he says, listen, there's no correlation between the high corporate cost and good corporate performance, which means just because you're spending more money on operations doesn't mean you're going to make more money. At some companies, corporate expenses run 10% or more of operating earnings. This tithing that the operations thus makes to headquarters not only hurts earnings, but more importantly slashes capital values. He's telling us to be frugal again. If the business that spends 10% on headquarter cost achieves earnings at its operating levels identical to those achieved by the business that occurs only 1%, meaning one business is spending 10% on overhead, one business is spending one. Shareholders of the first enterprise suffering 9% loss in the value they're holding simply because of corporate overhead. Charlie and I have observed no correlation between high corporate costs and good corporate performance. In fact, we see the opposite. We see the simpler low cost operation as more likely to operate effectively than its bureaucratic brethren.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, he's funny. These are the kind of businesses they don't like and they don't want to invest in. A line from a country song expresses our feelings about new ventures, Sad Analytic startups, turnarounds. They've talked about that, are auction-like sales. When the phone don't ring, you'll know it's May. So they don't want to invest in that.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“$90 million selling candy in profit. Like, it's something crazy like that. It's amazing to me. I always forget. You kind of, and that's another great thing about reading all these shareholder letters. He just talks constantly about numbers of businesses. You're like, oh, yeah, I have this business over here, something you never heard of that manufacturer, something that you need in house construction. Guess what? They made $300 million last year. There's the largest seller of carpet in America makes like $5 billion a year. The numbers are just amazing when you think of the size, how big markets are. You kind of forget that there's a lot of unsexy businesses that make tons and tons of money. And a lot of them Burshire owns.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“So he's using the example of C's candies as a franchise. Important, this is important ownership of Seese has taught us much about the evaluation of franchises. We've made significant money in certain common stocks because of the lessons we've learned at C. is definitely a franchise. It's not like, oh, I'll have a seize candy bar. Oh, they don't have it. I'll take your next one. No, they want C's. And as a result, people are willing to pay more for that product. It's amazing how much money you can make at candy. When they bought it, I think it was like They were making like $4 million a year at C's. I think it looked up last year. They made like...”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Franchise has a product that's needed or desired. It's thought of by its customers to have no close substitute. And I can't just give the dollar I was going to give you to somebody else and get the exact same thing. And three, it's not subject to price regulation. So that's what you should be going for. Okay”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Profitability, but they cannot inflict mortal damage. So those are important characteristics. Okay, now he moves on to describing what most businesses fall into, and that's just like a business. In contrast, a business earns exceptional profits only if it's a low-cost operator or if it's supply of its product of services tight. Tightness and supply usually does not last long. With superior management, a company may maintain its status as a low-cost operator for a much longer time, but even then unceasingly faces the possibility of competitive attack. And a business, unlike a franchise, can be killed by poor management.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, let me just finish reading what he talks about a business that looks more like a franchise than a business and not a franchise like I'm buying a McDonald's franchise. He says, let's take a quick look at the characteristics separating the two classes of enterprise, keeping in mind, however, that many operations fall in some middle ground and can be best and can be best be described as weak franchises or strong businesses. So this is going to lay out what a franchise is. An economic franchise arises from a product or service that one is needed or desired. Two, is thought by its customers to have no close substitute, and three, it's not subject to price regulation. The existence of all three conditions will be demonstrated by a company's ability to regularly price its product or service aggressively and thereby earn high rates of return on capital. Most commodity businesses have no control over what they're going to charge. Moreover, franchises can tolerate mismanagement. In net managers may diminish if franchises”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“The fact is that newspaper, television, and magazine properties have begun to resemble businesses more than franchises in their economic behavior. Now we're in the 90s. Already there's a continued softening of some media companies. There's going to be increased competition with the internet. But he says, but the main point here applies to all different kind of businesses. So the idea is like...”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“So there'd be an accident if the car even hit the tiniest pothor slumber of ice. The roads of business are riddled with potholes, a plan that requires dodging them all as a plan for disaster. It's impossible. In the final chapter of Intelligent Investor, Ben Graham forcefully rejected the Dagger thesis. This is a quote from the book. Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, margin of safety. Forty two years after reading that, I still think those are the right three words. He talks a lot about avoiding commodity businesses, and this is a great quote on that. In a business selling a commodity type product, it's impossible to be a lot smarter than your dumbest competitor.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“So he says in 1990, even before the recession dealt its blow, the financial sky became dark with the bodies of failing corporations. The disciples of debt assured us that this collapse wouldn't happen. Huge debt, we were told, would cause operating managers to focus their efforts as never before. Much as a dagger mounted on the steering wheel of a car could be expected to make its driver proceed with intensified care. Will acknowledge that such an intention getter would produce a very alert driver, but another certain consequence would be deadly and unnecessary.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“We hope in another 25 years to report on the mistakes of the first 50. If we are around in 2015 to do that, you can count on this section occupying many more pages than it does. And directly related to them not taking tail risk is the fact that they made it to 2015. How cool is that And the very next year, we're dealing with businesses that did not follow, they were not conservative, like Warren suggests to do. So he's telling us here that your business should have a buffer to deal with future uncertainty.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Perhaps we could have judged that it'll be a 99% probability that higher leverage would lead to nothing but good. Correspondingly, we might have seen only a 1% chance that some shock factor external or internal would cause a conventional debt ratio to produce a result failing someone between temporary anguish and default, meaning he's done. We wouldn't have liked those 99 to 1 odds and never will. A small chance of distress or disgrace cannot, in our view, be offset by a large chance of extra returns. If your actions are sensible, you are certain to get good results. In most such cases, leverage just moves things away. Charlie and I have never been in a big hurry. We enjoy the process far more than the proceeds, though we have learned to live with those also”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“This is him telling us that he doesn't take, and Bershard doesn't take tail risks, another way to think about that is risk ruin. It's an absolute ruin, a risk that you might make money, let's say 99% chance to make a billion dollars, but you have a 1% chance to lose everything. He's not taking that risk. Our consistently conservative financial policies may appear to have been mistaken, but in my view, we're not. In retrospect, it is clear that significantly higher though still conventional leverage ratios at Berkshire would have produced considerable better returns, right? So if we had more leverage, we would have made more money. That's true, he's saying.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“That was the first example. Number two, just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds. And another example, the behavior of peer companies, whether they are expanding, acquiring, setting executive compensation, or whatever, will be mindlessly imitated. So that's the examples of institutional imperative. And the ones you want to avoid. Institution will resist changing current direction. Work will expand to fill up time and fill up financial resources and the behavior of peer companies are sure to be imitated. So that's what impedes somebody, a smart person from making rational decisions.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“And so he's going to give examples of what the institutional imperative is. He says, I thought that decent intelligent and experienced managers would automatically make rational business decisions. But I learned over time that isn't so. Instead, rationality frequently wilts when the institutional imperative comes into play. For example, as if governed by Newton's first law of motion, an institution will resist any change in its current direction.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“A further related lesson. Easy does it. After 25 years of buying and supervising a great variety of businesses, Charlie and I have learned not or have not learned how to solve difficult business problems. What we have learned is to avoid them. That's a good idea, right? To the extent we've been successful, it is because we've concentrated on identifying one foot hurdles that we could step over rather than one foot hurdles that we could step over rather than acquiring any ability to clear seven footers. The finding may seem unfair, but in both business and investment, it is usually far more profitable to simply stick with the easy and obvious than it is to resolve the difficult. Most surprising discovery the overwhelming importance in business of an unseen force that we might call the institutional imperative”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“And he says, This leads right into a related lesson. Good jockeys do well on good horses, but not on broken down nags. I've said many times when a management with a reputation for brilliance tackles a business with reputation for bad in economics. It's a reputation of the business that remains intact. He repeats that a lot. I've said it to you probably two or three times too, so we got to remember that. I just wish I hadn't been so energetic in creating examples.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Don't forget, your goal here is to build a wonderful company, not just like a commodity business the same as everybody else. And if you are in a business like that, use some of Buffett's ideas to add the differentiation, even if it's just on cost. I could give you another personal example of bargain purchase folly, but I'm sure to get the picture. It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price. Charlie understood this early. I was a slow learner. But now when buying companies or common stocks, we look for first-class businesses accompanied by first class management.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“First, the original bargain price probably will not turn out to be such a steal after all. In a difficult business, no sooner is one problem solved than another surfaces. Never is there just one cockroach in the kitchen. Second, any initial advantage you secure will be quickly eroded by the low return that the business earns. For example, if you buy a business for $8 million that can be sold or liquidated for $10 million immediately, then you can realize a high return. But if the investment will disappoint if the business is sold for $10 million in 10 years from now, you just basically lost a lot of money. That's fine. You can make 2 million really fast or you can make 2 million really slow. You need to be optimizing for making it fast. Time is the friend. This is one of the most important quotes in the entire shareholder letters. Time is the friend of the wonderful business and the enemy of the mediocre.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Under most circumstances, but insanity if one is already rich. Oh, so now he's going to give us his mistakes of the first 25 years of running Berkshire. And this is the condensed version. I love this idea. My first mistake, of course, was in buying control of Berkshire. Though I knew it business textile manufacturing to be unpromising, I was enticed to buy because the price looked cheap. Stock purchases of that kind have proved reasonably rewarding in my early years, though by the time Berkshire came along in 1965, I was becoming aware that the strategy was not ideal.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so now we're all the way almost in the 1990s. Woohoo. All right. So make money, but don't forget you're a living life. It is a better way to spend your time with people you enjoy instead of people you won't, even if people you wouldn't enjoy could make you money. He says, indeed, it is possible we could earn even greater after-tax returns by moving rather frequently than one investment to another. Many years ago, that's exactly what Charlie and I did. Now we would rather stay put, even if that means slightly lower returns. Our reason is simple. We have found splendid business relationships to be so rare and so enjoyable that we want to retain all we develop. This decision is particularly easy for us because we feel these relationships 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. That would be akin to marrying for money.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Naturally, the disservice done students and global investment professionals who have swallowed MT has been an extraordinary service to us and other followers of Graham in any sort of a contest, financial, mental or physical, it's an enormous advantage to have opponents who have been taught that it is useless to even try. Ooks.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Newman Corp, where he used to work. Buffett partnership, which is where his company before he started Berkshire. And Berkshire illustrates just how foolish EMT is. There is plenty of other evidence too. Yet proponents of the theory have never seemed interested in discordant evidence of this type. True, they don't talk quite as much about their theory today as they used to, but no one, to my knowledge, has ever said they was wrong, no matter how many thousands of students have been sent forth misinstructed. EMT, moreover, continues to be an integral part of the investment curriculum at major business schools. Apparently, a reluctance to recant and thereby to demystify the priesthood is not limited to theologians.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“He talks about this is going to make for a small discussion on EMT, which is efficient market theory. He says this doctrine became highly fashionable, indeed almost holy scripture in academic circles during the 1970s. Essentially said that analyzing stocks was useless because all public information about them was appropriately reflected in their prices. What a weird. That's just bizarre. In other words, the market always knew everything. As a corollary, the professors who taught EMT said that someone throwing darts at the stock tables could select a stock portfolio having prospects just as good as one selected by the brightest, most hardworking security analysts. Amazingly, EMT was embraced not only by academics, but by many investment professionals and corporate managers as well. Observing correctly that the market was frequently efficient, they went on to conclude incorrectly that it was always efficient. The difference between those proposals is night and day. In my opinion, the continuous 63-year arbitrage experience at Graham”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't think he don't necessarily think he blamed. I mean, John obviously CEO. So if something happened in the business, it's his responsibility to know. But I don't know if he endorsed the illegal behavior, but he certainly was the one held responsible for it. Okay, so now he's going to talk about more about his opinion about how wrong efficient market theory is. And this section just reminds me the importance of knowing the difference between what people say something is versus what you actually observe it to be. And language can be very imprecise. And sometimes humans mislead on purpose. And so his point is, it's like, let's just look at what they're saying to us. Is that theory hold up in the real world? So he says, um...”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, so same thing here. Like he invests $700 million in Saddleman Brothers. But I read Michael Lewis's book, Laras Poker. And this guy, John Gutfried, who warned references all the time, like this is him making a big mistake. So he says, the closest association we've had with John Gutfried, CEO of Salomon, during the past year has reinforced our admiration for him, but we continue to have no great insights about the near intermediate or long-term economics of the investment banking business. This is not an industry in which it's easy to forecast future levels of profitability. So they invest $700 million in Salem Brothers. A few years later, Salem Brothers gets caught rigging treasury bond bids. John gets kicked out and Warren has to serve as the CEO, or maybe the chairman. He's the interim CEO, something like that. But he has to date, he has to leave Berkshire and do this for several months. So again, just another illustration that no one's perfect. He didn't want this to happen and it happened. And sometimes you're bad.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Hold out letters. I just wanted to understand because I know he didn't get burned by that, and I've heard about it before, and I wanted to understand why. We are just the opposite of those who hurry to sell and book profits when companies perform well, but who tenaciously hang on a business is a disappoint. Peter Lynch aptly likened such behavior to cutting the flowers and watering the weeds. Our holdings of Freddie Mac are the maximum allowed by law. So he winds up getting rid of that a few years later. Actually, about... 12 years from now, 10 years? Maybe we're on there.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“You're in charge of it. You see what I'm saying? Like you're not. Buffet's not like somebody could tell Buffett what to do. At the end of the day, the ownership, he's responsible for the performance of Berkshire. And he keeps himself in line with this, which I'll talk about later. But he keeps a very large percentage of his own net worth. Essentially, he has almost all of, I mean, it's a large, obviously net worth, but it's in one asset and that's Berkshire. It's pretty crazy, the love of skin and the guy has, I guess my point. So that was a long, I need to get to where we're talking about. So it says in 1988 we made major purchases of Freddie Mac and Coca-Cola. We expect to hold these securities for a long time. In fact, when we own outstanding business without standing management, it's our favorite holding period is forever. That's what I mean. It's like, why did he, he says this forever, why did he sell it? So what I just told you happened in the future, years after where I'm at in the actual...”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Smooth regular earnings from a very large base to start with. This is Buffett talking. And so if people are thinking about it that way, they're going to do things maybe in accounting, as it turns out to be the case in both Freddie and Fanny, but also in operations that I regard as unsound. And I don't know when it will happen. I don't even know for sure it will happen. If it will happen, it will happen eventually if they just keep that policy. And so we decided we just decided to get out. When he questioned the lender about decision, so he also asked him, why are they diversifying to hold, they invest in bonds like a cigarette maker? And so Buffett's like, he asked Mantra, why did you do that? He did not like the response. He says, they gave me some half-baked explanation about how to increase liquidity, which was just nonsense.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“For Fannie Mae and Freddie Mac, and then eventually sells before they obviously explode a few years later. And he's not usually, he doesn't usually buy things to try to sell like that. So anyways, after he sells, he's asked why. And he said he became concerned about their management. Remember, he needs honest and managers with integrity. And he felt the management there stop being such. He says they were trying to and proclaiming that they could increase earnings per share in some low double digit range, something of that sort, Buffett said. And anytime a large financial institute starts promising regular earning increases, you're going to have trouble, you know? Management's promises seemed impossible to keep, and the doubt it casts on their ability to make scrupulous decisions in the future was enough for Buffett to sell. I mean, it isn't going to man to be able to run a financial institution where different interest rates scenarios will prevail on all that is to produce some kind of”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“I have a long note here. He buys Freddie Mac stock and says we'll hold forever. He sells a few years before the financial crisis. Why? Asked if he sold stocks because the stocks were no longer good investments, Buffer responded that he didn't know they weren't going to be good investments.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so superb ministers are too scarce a resource to be discarded simply because the cake gets crowded with candles. Moreover, our experience with newly minted MBAs has not been that great. Their academic records always look terrific and the candidates always know just what to say. But too often they are short on personal commitment to the company and general business savvy. It is difficult to teach a new dog old tricks. So he uses time as a filter. If this guy, if this woman has successfully run this business, most of them started their business and done it for a very long time. It's likely that they have knowledge that you cannot replicate just by going to get an MBA for a few years.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“I love that. They understand the chaos and the randomness that they're operating in. All right, time as a filter. Again, experience over time is greater than academic education. At Berkshire, associations like these last a long time, we do not remove superstars from our lineup merely because they've attained a specific age. Now he's going back to CEOs and managers. Whether the traditional 65 or the 95 years of age reached by Mrs. B on the eve of Hanukkah in 1988. So bird managers are too scarcer resources to be scarce simply because a cake gets crowded with candles. Moreover, is what I mean about experience over time is more valuable than academic education. And again, why would they read all these biographies? In fact, one of the books I just ordered that he read, he talks about in his one of his shareholder letters later on, he reads this guy's autobiography and then buys the guy's business. Clayton Holmes. I'll get there in a minute. Or I don't even know when. It's in some time in the future.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“If anybody tells you this is the key, just follow this and you're going to be successful. They're lying to you. It's way too complex. That's why I think if you look at the actions of Buffett and Munger, they're famous for reading a lot of biographies. And I think they do that. I mean, they can be learning from literally anybody in the world, and they definitely do. And they still choose to read life stories. So essentially what we're doing here on this podcast. Same thing. It's because you understand that these situations are dynamic and exposing yourself to a variety of dynamic situations. You pick up all kinds of useful ideas that you might not even use five years, 10 years down the line. But when something does pop up where the ideas of other people's life's experience are helpful, like you're going to be glad that you read these books and listen to these podcasts.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“I love this quote. He's talking about accounting rules, but I think this applies to the creation and management of businesses as well. There's many ways to succeed at it. The business world is simply far too complex for a single set of rules to effectively describe economic reality for all enterprises.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“This is why Berkshire continues to run their business conservatively and avoid high levels of debt and leverage. So it says, We do not wish it to be only likely that we can meet our obligations. We wish that to be certain. It's the margin of safety. Thus, we adhere to policies both in regard to debt and all other matters that will allow us to achieve acceptable long-term results under extraordinary adverse conditions rather than optimal results under a normal range of conditions. You just got them telling us that you can't predict the degree or when they will occur, like these contractions. So I can't run a business that only works on their normal conditions. I have to run it under extraordinary adverse conditions as my default. Good business or investment decisions will eventually produce quite satisfactory economic results with no aid from leverage. Therefore, it seems to us to be both foolish and improper to risk what is important for some extra returns that are relatively unimportant. Our opinions about debt have remained constant.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Charlie and I have seen so much of the ordinary business that we can truly appreciate a virtuoso performance. So one thing that he talks about in almost every, actually in every letter is he's constantly giving credit to the managers, usually by name. Over and over again. So that's what they're saying. It's like, listen to our managers, the people, the CEOs running the businesses that we own, they're all SARS. And the reason we know they're all SARS is because most of the businesses that we observe, it's average. Which, of course, makes sense This is advice from Dave Ogovie. Charlie and I have long followed David Ogovie's advice. Develop your eccentricities while you're young. That way when you get old, people won't think that you're going gaga”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Our goal is more modest. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. So he's saying the next section is basically saying, hey, most businesses are poorly poorly run or averagely run. And that's expected. No one said that it's supposed to be easy. It's not easy. So he says, our major contribution to the operations of our subsidiaries is applause, but it is not the indiscriminate applause of Apollyanna. Rather, it is informed applause based on the two long careers we have spent intensively observing business performance and managerial behavior.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“Watch your costs is what he's telling us there. This is a lesson from studying human nature. Fear and greed will forever occur in investment communities. Common stocks, of course, are the most fun. When conditions are right, that is, when companies with good economics and good management sell well below intrinsic business value, stocks sometimes provide grand slam ho runs. But we currently find no equities that come close to meeting our tests. This statement in no way translates into a stock market prediction. We have no idea and never have had an idea whether the market is going up, down, or sideways in the near or intermediate term future. What we do know, however, is that occasional outbreaks of those two super contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable, and the market aberrations produced by them will be equally unpredictable, both as to duration and degree.”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source
“The difference between Geico's costs and those of its competitors is a kind of moat that protects a valuable and much sought after business castle. No one understands this moat around the castle concept better than Bill Snyder, chairman of Geico. He continually widens the moat by driving down costs still more, thereby defending and strengthening this economic franchise. So he's talking about Bill Snyder later, this guy named Tony. I thought, what the heck? I thought Tony, oh, that's the chairman. I think Tony's the CEO at this point. Okay, so”
2019-09-08 · Founders · #88 Warren Buffett's Shareholder Letters— All of them! · IDENTIFIED FROM THE TRANSCRIPT · source