DJCO Shareholder Meetings Flashcards
How did Charlie use the money earned during foreclosure boom?
Made great big bets during panic and hold them for long periods.
How did Berkshire create a big empire?
- Remained within circle of competence
- Waited patiently for great companies at fair prices. Great companies trade at high prices almost all of the time except in panic situation (either market related or industry/company specific).
- It is not easy for people to sit back for 5 years without doing anything.
- Two decisions a year (on average) for over 50 years.
- A few good decisions over a long period of time.
- Sit for long period of time. You don’t need many opportunities to get rich.
When valuing a company, what discount rate should we use?
Use long term government bonds to compare different assets.
Use your opportunity cost (including future opportunity cost) to govern your decision.
How do we reduce standard errors in decision making?
1 - We spend a lot of time thinking. We look more like academicians than businessmen.
2 - Take lesser number of high quality decisions.
3 - Sift life through a few opportunities and seize them when time comes. We don’t mind long periods in which nothing happens.
4 - Hate multi-tasking. It will not give you the highest quality of thought man is capable of doing.
How do you buy banks?
1 - There are more banks than bankers.
2 - You need to know how shrewd the management is.
3 - Banking is a field where its easy to delude yourself into reporting big numbers that aren’t really being earned.
4 - Without deep insights into banking, one should avoid it.
5 - The temptation to do something stupid in banking are way greater. Sitting on top of cash makes you take risk you really shouldn’t take.
Advice about predicting the commodity markets and earning from it?
1 - I have never been able to predict accurately. We have tended to get into good businesses and then take the bumps as they fall.
2 - Specialise in in identifying good businesses (note to self)
How much diversification do you need?
If investing for 30-40 years, you can do just fine with 3 stocks with average holding period of 3 to 4 years.
Sometimes the market gives you equivalent of Uncle Horace. When they do you have to have the gumption and determination to seize the opportunity shrewdly.
Conduct your life so that you can handle the 50% decline with aplomb and grace. Don’t try to avoid it. It will come. If it doesn’t come, you are not being aggressive enough.
About learning from books, which books are the best?
Biographies. Especially of dead people who achieved much in life.
Peter Kaufman - Five ‘aces’ for picking an exceptional investment manager
1 - Total integrity
2 - Deep deep fluency on whatever he says he is going to do
3 - Fee structure that is actually fair in both directions
4 - Uncrowded investment space
5 - Long runway. Reasonable young age.
What are your chances of doing well by paying 1 or 2 percent plus 20 off the top?
Absolutely zero.
So hard in competitive world. No big advantage esp when buying securities in billion after reading sell-side research. Its delusional.
What is the most important rule of fishing?
Fish where the fishes are.
How would you teach Munger system of mental models to children?
Most important to get fluency of using the models. There is no advantage in getting it done fast.
What did you recognise about GE that you got out?
Part of the problem is they rotate executives through different assignments. I don’t think that works as well as keeping people in one business for a long time.
Can someone achieve 50% return today if he ran $1 million?
A very smart man who is
- patient and aggressive in combination
- willing to work hard
- to root around in untraveled places like thinly traded stocks and other odd places
Productivity of Margin trading
Why would you risk what you have and what you need for what you don’t have and don’t need?
