I work hard to not quote or invoke Warren Buffett too often. His wisdom is ubiquitous and he doesn’t need another preacher. But I came across some unique insights from Mr. Buffett through a third party that I feel compelled to share.
These notes came from Jason Ke Wang (@Wangkejason), a graduate student earning his MBA at Stanford. I met Jason at our offices as he was in the middle of an incredible tour visiting many of the biggest names in investing: Bogle, Lou Simpson, Joel Greenblatt, and of course Buffett. He was generous enough to share his notes with me and allow me to share them here.
Buffett answered 16 questions across two and a half hours, and I was struck by several pearls that I hadn’t heard before (although I am sure he has mentioned elsewhere). Lots of what he said was similar to other statements he has made in public appearances and letters, but these ideas (or at least the wording of them) stuck out. Emphasis is always mine.
On sourcing investment ideas:
“Found Berkshire in Moody’s Manual for Industries. You may think that today competition has increased and information is easily available but I used the same approach to find Korean stocks a few years back. Read the Korean stock manual one Sunday afternoon and found 15-20 stocks that way”
I love that old methods can still work. People are still lazy.
One of my favorites was this thought on the importance of speaking, writing, and communicating well.
At your age the best way you can improve yourself is to learn to communicate better. Your results in life will be magnified if you can communicate them better. The only diploma I hang in my office is the communications diploma I got from Dale Carnegie in 1952… “Without good communication skills you won’t be able to convince people to follow you even though you see over the mountain and they don’t”
On crisis management:
– If you have a city of 330,000 people (the number of people Berkshire employs) there are bound to be some people who are doing wrong. Try very hard to set the tone at the top. Send a two page letter to all employees every two years:
“We have all the money we need. We also have the best reputation one could possibly have. If you lose money, that’s something which is easy to earn back. But if you lose reputation, it is extremely difficult to earn that back. Act in a way such that if your actions were published in the local newspaper you would not be ashamed of your neighbors and friends reading that story. Play in the center of the field. I am old and cannot see the boundaries at the edge, don’t venture there”
– If a problem does occur there are four things you need to do
1. Get it right – get the facts right
2. Get it fast – move to action swiftly
3. Get it out – get it completely out of the system
4. Get on – move on
– Never let a problem sit unattended to
Long Term Capital (LTCM) – “they were right about everything except human emotion”
– Only way to stop a panic in today’s times is to have someone say with absolute authority, “I will do whatever it takes to make this right.”
– “The next panic will most likely come from a cyber/nuclear/biological or chemical attack on the US. The ability of psychotics, religious fanatics etc. to impact people has tremendously increased since 1945 (atomic bombing of Hiroshima and Nagasaki)”
– “The US will always bounce back. Our system really works, if you have cash during a time of panic, BUY”
– The auto industry has been the one of the most important industries during Buffett’s investing career. He has extensive knowledge of auto. Despite that he doesn’t feel comfortable buying auto stocks. Instead he chose to buy an auto dealer with 78,000 dealerships across the US. Simply because five years from now, he doesn’t know which model will sell but he does know that the auto dealer will sell it. This is the same story in tech, Buffett does not know who the leader will be.
“Every year I go the Microsoft Summit and face people with 180 IQs and tell them that if you asked me to choose between giving up a $10mn airplane and a $100 computer, I would choose the airplane. Why then, do you still charge me only $100 for the computer. You 180 IQs are not that smart.”
“It is very important to associate with people who are better than you, you will move in that direction. It’s just smart to do that. Not just people who are better in terms of IQ but also people who are better in terms of character”
As always, some great advice from Buffett. Thanks again to Jason for sharing.