I listened in on the Berkshire Hathaway annual shareholders meeting that streamed live from Los Angeles last Saturday (May 1) hosted by two investment gurus, Charlie Munger (97-year-old Republican) and Warren Buffet (90-year-old Democrat), the iconic leaders.
Buffett's personal wealth is well over $100 billion. He keeps trying to give it away but the more he gives, like the oil in the widow's lamp (2 Kings 4), the more his wealth increases. His partnership with Munger has survived 60 years of clashing points of view. They still occupy the same modest houses they lived in when they met. Yes, the are both doing sensationally. Healthy people are wealthy people and wealthy people live long and prosper.
While Mr. Buffett's investment strategy started out as a cigarette butt philosophy that he explained as, "If you buy stock at a sufficiently low price, there will usually be some hiccup in the fortunes of the business that gives you a chance to unload at a decent profit, even though the long-term performance of the business may be terrible. A cigar butt found on the street that has only one puff left in it may not offer much of a smoke, but the 'bargain purchase' will make that puff all profit."
Munger persuaded him to change to a different strategy. According to William Green, their adopted strategy is like spear fishermen. They wait by the stream for the big juicy salmon to come along and spear it. If one doesn't come along, read, play golf and bridge, read some more and enjoy the company of your friends, but always be patient until the next big juicy salmon (companies with sustainable competitive advantages and good management) shows up. Investing is not about instant wins and losses like gamboling, it's about long-term success.
They are not fans of crypto-currency that they characterize as "rat poison - the pursuit of the uneatable by the unspeakable"
Neither of them inherited great wealth, won the lottery or struck oil. As self-made men, the secret of their success is enticing people to turn over their money to them and rewarding their investors by researching and picking stocks with great prospects. No one who had ever trusted them with their money has ever lost their investment. If you had $1,000 when they started in 1964, it would now be worth $26 million. If you invested $1,000 today for each of your children (which I encourage you to do), only God knows what your gain will be in 20 years from now, but I guarantee that it will be more than $1,000.
In an effort to encourage his children (Susan Alice Buffett, Howard Graham Buffett, and Peter Buffett) to lead their own lives, Buffett decided to give away all their money to charity rather than pass it on to his children and never involve any of them in the business. In fact, in addition to their upbringing and education, they only received $100,000 each and nothing more - a gift that was not earned, but enough to fund whatever they wanted to do.
The older children initially squandered their inheritance, but the youngest (Peter) became a successful musician and invested his $100,000 in his father's company which is now worth over $200 million. The two oldest children eventually got it together and Susan is a dedicated philanthropist serving on several not-for-profit boards including "Girls Inc."
At this year's stockholder's meeting, Buffett and Munger, looking as vigorous as ever, were joined by two vice chairs Gregory Abel, Greg and Ajit Jain. While I could never afford to even own one share of BRK A, currently valued at $412,000, I bought "BRK B" a year ago for $211 and its now valued at $288 per share, a substantial gain. If you are interested in investing in the stock market and want someone else to pick your stocks, BH is certainly the most predictable portfolio you can buy into. It has been and will be a good place to park money. The company is valued at $650 billion and during the first quarter of 2001, they made $7 billion in profits and their stocks went up 30 percent. If you kept your money in a savings account, you would have earned virtually nothing.
In addition to their commitment to always do the right thing, they advise people in power positions to grow talent, take care of their customers and employees and everything else will take care of itself. Mr. Buffett also suggests that you should never get carried away with your emotions when you either invest or divert. There is a logic to this. Don't be motivated to grow wealth for materialistic selfish purposes but so you can do some good in the world. Your passion is never going to change the world as much as your dollars.
The world can quickly change in dramatic ways. If something exists, at some point it will not exist. Even the sun will not exist someday. None of the top 20 largest companies in the world 30 years ago are on the list today. How many of the top 20 companies in the world will be on the list 30 years from now? Will Apple still lead the pack?
He admonishes us to treat each other with decency and kindness and only do business with ethical people who you can trust. So don't take advice from people who are just trying to tell you what you want to hear. Insist on their honest opinions. Admit and accept your mistakes, learn from them, and move on. A great hitter in baseball only gets three hits for every 10 times at bat.
We live in a multiracial and multicultural society, commit to diversity, and hire the best people for the job. "I don't care whether the cat is black or white, as long it catches mice."