Berkshire Hathaway Quotes

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If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But, if each of us hires people who are bigger than we are, we shall become a company of giants.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
Culture, more than rule books, determines how an organization behaves.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
But then it dawned on me that the opinion of someone who is always wrong has its own special utility to decision-makers.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
stocks of companies selling commodity-like products should come with a warning label: “Competition may prove hazardous to human wealth.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
On the Ideal Business - Buffett: “Something that costs a penny, sells for a dollar and is habit forming.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Many shall be restored that now are fallen and many shall fall that are now in honor.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
If your employees, including your CEO, wish to give to their alma maters or other institutions to which they feel a personal attachment, we believe they should use their own money, not yours.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
If investors only had to study the past, the richest people would be librarians.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
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’s difficult to teach a new dog old tricks.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
Our favorite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint. Peter Lynch aptly likens such behavior to cutting the flowers and watering the weeds.
Warren Buffett (Berkshire Hathaway Letters to Shareholders)
After you have enough for daily life, all that matters is your health and those you love.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
People are trying to be smart—all I am trying to do is not to be idiotic, but it’s harder than most people think.
David Clark (Tao of Charlie Munger: A Compilation of Quotes from Berkshire Hathaway's Vice Chairman on Life, Business, and the Pursuit of Wealth With Commentary by David Clark)
The right manager can have an absolutely huge impact. Find people with brains, energy and integrity,
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Yet the industry asks for more money from investors every year. The idea is to find investments that give you money, not take it.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
One of Buffett’s annual themes is the value of learning. He noted that life properly lived is learning, learning, learning all the time. He observed that being wrong is when he learns the most.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Talking to Time Magazine a few years back, Peter Drucker got to the heart of things: “I will tell you a secret: Dealmaking beats working. Dealmaking is exciting and fun, and working is grubby. Running anything is primarily an enormous amount of grubby detail work . . . dealmaking is romantic, sexy. That’s why you have deals that make no sense.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
There is no tougher job in corporate America than running an airline: Despite the huge amounts of equity capital that have been injected into it, the industry, in aggregate, has posted a net loss since its birth after Kitty Hawk. Airline managers need brains, guts, and experience—and
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
The danger of relying on historical statistics or formulas is that you end up betting on a 14-year-old horse with a great record but is now ready for the glue factory.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Value is what a business is worth. Price is what you have to pay to get it.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Charlie’s dictum: “All I want to know is where I’m going to die so I’ll never go there.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
(Don’t ask the barber whether you need a haircut.)
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
Munger claimed that it is because professors are so enamored by modern portfolio theory. For the man with a hammer, every problem looks like a nail.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Ben Franklin’s advice: “Keep your eyes wide open before marriage and half shut thereafter.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Despite our policy of candor, we will discuss our activities in marketable securities only to the extent legally required. Good investment ideas are rare, valuable and subject to competitive appropriation just as good product or business acquisition ideas are.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
Buffett gave two criteria for evaluating the performance of management: 1) How well do they run the business? and 2) How well do they treat the owners?
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Tom Murphy, CEO of Capital Cities/ABC and considered by Buffett to be the best business manager in the country, prays every day to be humble.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett continued, saying that MPT has no utility. It is elaborate with lots of little Greek letters to make you feel you are in the big leagues. The
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett pointed out that when the investment tide goes out, you will see who has been swimming naked.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
A line from Bobby Bare’s country song explains what too often happens with acquisitions: “I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
Munger noted that high profits on capital often rely on information inefficiencies.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Warren recommended doing what turns you on. Munger agreed, saying he’d never done anything really well that he didn’t like to do.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett noted that he likes to put a lot of money in things he feels strongly about. Diversification makes no sense for someone who knows what they are doing.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
To finish first you have to first finish.
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
We’d buy great businesses with excellent management at a fair to bargain price and leave them alone.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Alas, my “fiddle playing” will not get me to Carnegie Hall — or even to a high school recital. Berkshire, on your behalf and mine, will send the Treasury $3.3 billion for tax on its 2003 income, a sum equaling 2½% of the total income tax paid by all U.S. corporations in fiscal 2003.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
There are essentially five things public corporations can do with a dollar earned: reinvest in the business, acquire other businesses or assets, pay down debt, pay dividends, and/or buy in shares. Deciding
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
In modern portfolio theory, beta is used as a measure of the volatility and, thus, the risk of an investment. However, Buffett sees the use of beta as nonsense, emphatically stating, “Volatility is no measure of risk to us.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett also noted that book value is seldom meaningful in analyzing the value of a business. Book value simply records what was put into the business. The key to calculating value is determining what will come out of the business.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
From this irritating reality comes The First Law of Corporate Survival for ambitious CEOs who pile on leverage and run large and unfathomable derivatives books: Modest incompetence simply won’t do; it’s mindboggling screw-ups that are required.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
Charlie Munger, vice chairman of Berkshire Hathaway, is a major proponent of this idea. “You’re not entitled to take a view,” he cautions, “unless and until you can argue better against that view than the smartest guy who holds that opposite view.
Ozan Varol (Think Like a Rocket Scientist: Simple Strategies You Can Use to Make Giant Leaps in Work and Life)
There’s a widespread conviction, spoken and unspoken, that the road to riches is trimmed in Ivy and the reins of power held by those who’ve donned Harvard’s crimson, Yale’s blue and Princeton’s orange, not just on their chests but in their souls. No one told that to the Fortune 500. They’re the American corporations with the highest gross revenues. The list is revised yearly. As I write this paragraph in the summer of 2014, the top ten are, in order, Wal-Mart, Exxon Mobil, Chevron, Berkshire Hathaway, Apple, Phillips 66, General Motors, Ford Motor, General Electric and Valero Energy. And here’s the list, in the same order, of schools where their chief executives got their undergraduate degrees: the University of Arkansas; the University of Texas; the University of California, Davis; the University of Nebraska; Auburn; Texas A&M; the General Motors Institute (now called Kettering University); the University of Kansas; Dartmouth College and the University of Missouri–St. Louis. Just one Ivy League school shows up.
Frank Bruni (Where You Go Is Not Who You'll Be: An Antidote to the College Admissions Mania)
students need only two well-taught courses—How to Value a Business, and How to Think About Market Prices. Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now. Over time, you will find only a few companies that meet these standards—so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines: If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value. Though it’s seldom recognized, this is the exact approach
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
Warren Buffett, the legendary investor and one of the wealthiest men in the world, has used exactly the attributes we’ve explored in this chapter—intellectual persistence, prudent thinking, and the ability to see and act on warning signs—to make billions of dollars for himself and the shareholders in his company, Berkshire Hathaway. Buffett is known for thinking carefully when those around him lose their heads. “Success in investing doesn’t correlate with IQ,” he has said. “Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.
Susan Cain (Quiet: The Power of Introverts in a World That Can't Stop Talking)
The first $100,000 is a bitch, but you gotta do it. I don't care what you have to do—if it means walking everywhere and not eating anything that wasn't purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.” ​— ​Charlie Munger, Vice Chairman Berkshire Hathaway
Alex Hormozi ($100M Offers: How To Make Offers So Good People Feel Stupid Saying No)
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. Therefore, we never try to anticipate the arrival or departure of either disease. Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. As
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett quoted Marshall Fields: “We waste half of the money we spend on advertising . . . the problem is we just don’t know which half.” From
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Being able to think and invest very long term and not worry about current earnings or Wall Street analysts can be a major competitive advantage in certain businesses. Acquire
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
the real key is to be able to figure out what the average profitability of the business will be over the long term and how strong the business moat may be. Buffett’s
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
One ratio that Buffett is known to track is the total market cap to GDP. Recently, it was at 125%, which is a level approached in 1999 during the Internet bubble. Another
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett observed that they do have filters. A key one is whether they have a good idea of how the business is going to do over the next five or 10 years.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
the single biggest outcome of the Internet has been little understood: buyers are the winners.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
I think that one should recognize reality even when one doesn’t like it; indeed, especially when one doesn’t like it.
David Clark (Tao of Charlie Munger: A Compilation of Quotes from Berkshire Hathaway's Vice Chairman on Life, Business, and the Pursuit of Wealth With Commentary by David Clark)
Every year Buffett explains that he wants Berkshire to have great long-term shareholders and that splitting the stock would only work against that.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
The valuation picture is very much affected by our zero-based interest rate structure. Clearly, stocks are worth far more when government bonds yield 1% than when they yield 5%.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
So instead of copying, understand why they made the decisions they did. Then apply those insights to your own decisions and your own position.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Both Buffett and Munger are betting on higher, and maybe a lot higher inflation in the years to come.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
good quality corporate bonds yielding 10% or better with great call protection.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
In thinking about markets, it is important to remember that markets are there to serve you, not instruct you.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett chimed in that running a budget deficit of 10% of GDP is not sustainable.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Diversification is a protection against ignorance, a confession that you do not know the businesses you own.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
It is much easier to pick the relative strength of Coca-Cola than it is to pick a winner in software.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Yet he knew that stocks would be better than bonds or cash over the long run.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
What matters most to him are micro factors, as opposed to the macro factors that so often get all the attention. He loves to know all the details of a business.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
For his successor, Buffett emphasized that proven capital allocation abilities would be the key.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett’s formula for happiness is simple: “Do what I like with people I like.” He noted that he learned early in life that his favorite employer was himself. It avoids aggravation.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
With artificial intelligence, Buffett observed that more change will be coming. Almost certainly it will cause less employment in certain areas while being good for society overall.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Instead, he takes those coupons from his low-return bond and—if inclined to reinvest—looks for the highest return with safety currently available.  Good money is not thrown after bad.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
Buffett chimed in that most buybacks are done at any price, which makes no sense. Very rarely do you see metrics to govern the prices paid. Buybacks above intrinsic value destroy value.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
At their best, conglomerates enable the tax efficient transfer of cash from businesses that cannot use the money intelligently to those that can. Berkshire is a very rational conglomerate.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett wanted to make sure that Nebraska got their sales tax. He was adamant about making sure that Berkshire paid—not more taxes than it had to, but the taxes that it was responsible for.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Warren Buffett, chairman of Berkshire Hathaway and investor of legendary repute: "Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.
Taylor Larimore (The Bogleheads' Guide to Investing)
Buffett believed the rating agencies are good businesses: there are few competitors, they affect a large segment of the economy and they don’t require much capital (though they are still very much attackable).
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
He recommended realism in defining one’s circle of competence and discipline to stay within the circle. He added that it helps to insulate yourself from popular opinions. You’re better off sitting and thinking.6 Coping
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett reminded folks that to buy a stock is to buy part ownership of a business. Don’t get hung up on daily price quotes. Instead, think about business performance and what you would pay for the business, just as you would a farm.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Slug it out one inch at a time, day by day. At the end of the day—if you live long enough—most people get what they deserve.
David Clark (Tao of Charlie Munger: A Compilation of Quotes from Berkshire Hathaway's Vice Chairman on Life, Business, and the Pursuit of Wealth With Commentary by David Clark)
As Munger put it, “Basically, we’re a hedgehog that knows one big thing. If you generate float at 3% per annum and buy businesses that earn 13% per annum with the proceeds of that float, we have figured out that’s a pretty good position to be in.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Munger contends that by selling quality merchandise very close to cost, the stores built such a loyal customer base that it qualifies as a franchise. "If you get hooked on going to Costco with your family, you'll go for the rest of your life," he said.22
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
Buffett believes that real risk comes from the nature of certain kinds of businesses, by the simple economics of the business and from not knowing what you’re doing. If you understand the economics and you know the people, then you’re not taking much risk. For
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett also shared some of his classic bits of wisdom about growing wealth. Spend less than what you make. Know and stay within your circle of competence. The only businesses that matter are the ones you put your money in. Keep learning over time. Don’t lose. Insist on a margin of safety.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
As a value investor, your ideal situation is to find a company increasing its intrinsic value. Ideally, the company would be one with a declining stock price, thus creating an even better bargain as time unfolds. No one has employed these principles more effectively than Buffett and Munger.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett explained that buying a business is much like buying a bond with no maturity and with a blank coupon. You must write in the coupon, and the accuracy of that coupon is the essence of intelligent investing. If you cannot guess the coupon with any accuracy, then do not invest in the business.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
But it is Charlie's philosophy that a first-rate man should be willing to take at least some difficult jobs with a high chance of failure. And just as he decries making money "with lily white hands," he believes that giving time, talent, and risking his reputation is just as important as contributing money.
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
I thought of my favorite business analogy—the mouse who says let me out of the trap, I've decided I don't want the cheese.' There are a million business traps. You can get sloppy, you can get alcoholic, you can get megalomania, you can not understand your own limitations. There are a million ways to gum it up.
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
don't remember when Berkshire started growing to a point at which he was in a different league," said Emilie. "I think my parents were really private. They didn't want publicity. My dad was a creature of habit so everything was exactly the same. We never had a feeling we were growing up in some rich household.
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
Charles Munger, right-hand adviser to Warren Buffett, the richest man on the planet, is known for his unparalleled clear thinking and near-failure-proof track record. How did he refine his thinking to help build a $3 trillion business in Berkshire Hathaway? The answer is “mental models,” or analytical rules-of-thumb4 pulled from disciplines outside of investing, ranging from physics to evolutionary biology. Eighty to 90 models have helped Charles Munger develop, in Warren Buffett’s words, “the best 30-second mind in the world. He goes from A to Z in one move. He sees the essence of everything before you even finish the sentence.
Timothy Ferriss (The 4-Hour Body: An Uncommon Guide to Rapid Fat-Loss, Incredible Sex, and Becoming Superhuman)
A few major opportunities clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind, loving diagnosis involving multiple variables. And then all that is required is a willingness to bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past."5
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
What Charlie finds interesting when thinking back about all this progress is how few big business decisions were involved in creating billions of dollars out of less than $40 million, fewer than one every three years. "1 think the record shows the advantage of a peculiar mind-set-not seeking action for its own sake, but instead combining extreme patience with extreme decisiveness.
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
I do wish, however, that Ms. Olson would give me some credit for the progress I’ve already made. In 1944, I filed my first 1040, reporting my income as a thirteen-year-old newspaper carrier. The return covered three pages. After I claimed the appropriate business deductions, such as $35 for a bicycle, my tax bill was $7. I sent my check to the Treasury and it — without comment — promptly cashed it. We lived in peace.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
The hiring rules are strictly followed, no matter who the applicant. Not long after she graduated from Harvard, Molly Munger applied at Munger, Tolles for an associate's position. She interviewed with Carla Hills, but Hills did not offer her a job, allegedly because Molly had not made the Harvard Law Review. Apparently in Hills estimation, that meant Molly's credentials weren't quite up to Munger, Tolles's standards.4
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
In a fascinating digression, Buffett noted that “the fact that you are being obsoleted does not mean you should go into the successor business.” As an example, he explained that if you were a person of vision in the passenger train business in 1930, you might have seen the coming of the airplane. But the answer was not to get into the airline business, which is a terrible business. The answer was to get out of the passenger business altogether.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
If you've thought that investment advisors were hired to invest, you may be bewildered by this technique. After buying a farm, would a rational owner next order his real estate agent to start selling off pieces of it whenever a neighboring property was sold at a lower price? Or would you sell your house to whatever bidder was available at 9:31 on some morning merely because at 9:30 a similar house sold for less than it would have brought on the previous day? p213
Warren Buffett (Berkshire Hathaway Letters to Shareholders)
Munger replied: People are always saying to Berkshire, 'Gee, why don't you write a lot more volume in relation to capital? Everyone else is doing it. The rating agencies say that you can write twice as much in annual volume as you have capital.' And they look at our $10 billion in insurance capital and say, 'That's $20 billion a year. What are you doing writing only $1 billion?' But then . . . somebody else comes in and asks, 'Why did everybody get killed last year but you?' Maybe the questions are related.
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
Marshall recalled that one evening he needed to talk to Charlie about a business situation, so he went over to the Mungers' June Street home. Marshall had five children of his own so he knew what a busy household was like, but even he was surprised that Charlie could concentrate under the circumstances. Charlie was sitting in a big chair, and "One kid was climbing on his shoulder, another was pulling his arm. Another was yelling. It was bedlam, but he didn't send them out or correct them. It didn't bother him a bit.
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
In a revealing aside, Buffett admitted that years ago he was terrified of public speaking. He got physically ill at the thought. He said he even signed up for a $100 Dale Carnegie course but cancelled the check when he got home. Later, he did a communication course in Omaha. Doing it with others in the same boat helped him to “get outside of himself.” He’s very glad he did it, noting that effective communication is under taught, and recommended that many could benefit by forcing themselves to learn public speaking at an early age.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
financial markets will become divorced from reality — you can count on that. More Jimmy Lings will appear. They will look and sound authoritative. The press will hang on their every word. Bankers will fight for their business. What they are saying will recently have “worked.” Their early followers will be feeling very clever. Our suggestion: Whatever their line, never forget that 2+2 will always equal 4. And when someone tells you how old-fashioned that math is ---zip up your wallet, take a vacation and come back in a few years to buy stocks at cheap prices.
Warren Buffett (Berkshire Hathaway Letters to Shareholders, 2023)
When he met Buffett, Munger had already formed strong opinions about the chasms between good businesses and bad. He served as a director of an International Harvester dealership in Bakersfield and saw how difficult it was to fix up an intrinsically mediocre business; as an Angeleno, he observed the splendid prosperity of the Los Angeles Times; in his head he did not carry a creed about "bargains" that had to be unlearned. So in conversations with Buffett over the years he preached the virtues of good businesses. By 1972, Blue Chip Stamps, a Berkshire affiliate that has since been merged into the parent, was paying three times book value to buy See's Candies, and the good-business era was launched.7
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
Basically, Graham breaks the art of investing down into two simple variables – price and value. Value is what a business is worth. Price is what you have to pay to get it. Given the stock market’s manic-depressive behavior, numerous occasions arise where a business’ market price is distinctly out of line with its true business value. In such instances, an investor may be able to purchase a dollar of value for just 50 cents. Note that there is no mention here of interest rates, economic forecasts, technical charts, market cycles, etc. The only issues are price and value. I should also note that Graham emphasizes a large margin of safety. The strategy is not to buy a dollar of value for 97 cents. Rather, the gap should be dramatic so as to absorb the effects of miscalculation and worse-than-average luck.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)
Buffett was asked why he hadn't bought more Costco shares, considering that Munger owns shares and is on the board of directors. "Yeah, you hit on a good one here," Buffett replied. "We should've owned more Costco, and probably if Charlie had been sitting in Omaha, we would've owned more Costco. Charlie was constantly telling me about this terrific method of distribution, and after 10 years or so I started catching on to what he was saying, and we bought a little of Costco at Berkshire. "We actually negotiated to buy more. I made the most common mistake that I make . . . We started buying it, and the price went up, and instead of following it up and continuing to buy more. . . . If Costco had stayed at $15 a share or so, where we were buying it, we would've bought a lot more. But instead it went to 15⅛ and who could pay 15⅛ when they'd been paying $15—it wasn't quite that bad. But I have made that mistake a lot of times, and it's very irritating."23
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
Eventually, Charlie and Rick became fifty-fifty owners of a controlling block of stock in the company, with its management owning the rest. After some time passed, a situation arose where Guerin needed to cash out of the investment. "I still was very poor. We had an informal understanding that one would take the other out if either needed to get out. I went to Charlie and said I need to use that money elsewhere. He said fine, figure out what you want." Guerin looked over the accounting statements and thought about it. "I told him it was worth $200,000. Charlie said 'No, you're wrong about that.' I said to myself, Oh darn,' because I needed $200,000. He said, 'It's worth $300,000.' And he pulled out a check and wrote it. I would have been delighted with $200,000. I would have been the happiest man on earth. It was an opportunity for him to show me how stupid I was," Guerin said with a chuckle. "Charlie has a saying, 'Think about it a little more and you will agree with me because you're smart and I'm right.
Janet Lowe (Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger)
Buffett declared the best inflation hedge is a company with a wonderful product that requires little capital to grow. As a test, he invited each of us to look at our own earning ability. In inflation, your compensation can go up without any additional investment. As a business example, Buffett noted that when See’s Candy was purchased in 1971, it had the revenues of $25 million and sold 16 million pounds of candy annually with $9 million in tangible assets. Today, See’s sells $300 million of candy with $40 million of tangible assets. Berkshire needed to invest only $31 million to generate a more than 10-fold increase in revenues. In aggregate, Buffett noted that Berkshire has earned $1.5 billion in profits at See’s over the years. See’s inventory turns fast, has no receivables and has little fixed investment – a perfect inflation hedge. Buffett allowed that if you have tons of receivables and inventory, that’s a lousy business in inflation. The railroad and MidAmerican Energy both have these undesirable characteristics, but that is offset by their utility to the economy and subsequent allowable returns. Buffett rued that there simply aren’t enough “See’s Candys” to buy. Buffett added that being an investor has made him a better businessman and that being a businessman has made him a better investor.(125) Munger noted that they didn’t always know this inflation-business element, which shows how continuous learning is so important.
Daniel Pecaut (University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting)