· Was comfortable holding illiquid stocks
· Used to buy fair companies at wonderful price. Munger taught him to buy wonderful companies at a fair price.
· Took 20 years annual reports and dumped it on Washington Post CEO. It was like doing an MBA
· Warren was asked at what price will you tender the shares in buyback. He said 11.5$, they announced tender at 11.375 as if to mock him.
· He got angry – bought as many shares as possible to get control and changed management. This was in Berkshire Hathaway – sinking textile company.
· He was running a financial firm. In 1969, he realized that financial firms are unscrupulous, trying to rip someone else off, so he closed that and became full time chairman of Berkshire Hathaway.
· He then bought an insurance company which is profitable and also has float. Used float to invest in other companies.
· Believed a lot in power of compounding.
· Made lots of mistakes – only 12 key decisions were most important. Hit rate of 4%.
· Understood business world very much; did not understand physical world.
· Was a loner, was immersed in his own mind – If your sentences were long, you lost him.
· Used to advise and took money from friends and relatives. 109000$ he started with, in a couple of years it became 7m$
· By age of 35, he was running 45m$ fund.
· All 3 children have foundations.
· Berkshire Hathaway owners are like a family. Everyone there is long term.
· Even employees are long term. And shareholders also – once you get that share, you just sit with it for a long time.
· Susie buffett fixed him – made him from Republican to Democrat – civil rights etc. Buffett was always entrepreneurial. He liked to be his own boss – so liked delivering newspapers.
· Voracious reader. Had finished reading all books
· Had a fucking amazing memory. Could rattle off insane numbers. But human side was very rash, immatured.
· Over time with age, learnt human side better, but slower with numbers. But his slow is OUR SUPER FAST.
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Warren Buffett
1) Best way to not make mistakes is to avoid problems. A clever person thinks he can solve problems. A wise person avoids problems.
2) Sit on your ass and do a lot of reading. Immense reading – only way to know what works and what does not work.
3) Do not multi-task. The person who can spend time on one thing reading and thinking about it, will be much better off.
4) Why do even smart people make big mistakes – ego, greed, jealousy. Overconfidence – overestimating your abilities or know it all tendencies and underestimating what can go wrong.
5) A good part of our success is that we spend a lot of time thinking35 ... We think the best way to minimize risk is to think36 ...the best way to think about investments is to be in a room with no one else and just think."
6) Munger: "Smart, hard-working people aren't exempted from professional disasters resulting from overconfidence. Often they just go aground in the more difficult voyages on which they choose to embark based on self-appraisals in which they conclude that they have superior talents and methods
7) We try to avoid any kind of imitation of other people's behaviour. And those are the factors that cause smart people to get bad results
8) Munger: "A lot of people with high IQs are terrible investors because they've got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotion under control. You need patience and discipline and an ability to take losses and adversity without going crazy. You need an ability to not be driven crazy by extreme success.
9) Try to consistently not be stupid, rather than try to be very intelligent.
10) If something isn't working isn't it better to first try to find out why it doesn't work before you try to fix it? = To decide what will cure bad cognition, it will help to know what causes it
11) ...In other words, knowledge is very helpful and there are certain ways of understanding life that improve outcomes
12) Invert, always Invert
13) Charlie...has always emphasized the study of mistakes rather than successes, both in business and other aspects of life.
14) When Charlie thinks about things, he starts by inverting. To understand how to be happy in life, Charlie will study how to make life miserable; to examine how business become big and strong, Charlie first studies how businesses decline and die; most people care more about how to succeed in the stock market, Charlie is most concerned about why most have failed in the stock market.
15) Buffett: "If my job was to pick a group of 10 stocks in the Dow Jones average that would outperform the average itself, I would probably not start by trying to pick the 10 best. Instead, I would try to pick the 10 or 15 worst performers and take them out of the sample, and work with the residual. It's an inversion process...Start out with failure, and then engineer its removal.
16) Thinking Backwards Is A Great Tool For Solving Problems
17) For example, instead of asking how you can achieve a goal, ask the opposite question: What don't I want to achieve? What causes the non-goal? How can I avoid that? What do I now want to achieve? How can I do that?"
18) For instance, if you want to help India, the question you should consider asking is not: 'How can I help India?' Instead, you should ask: How can I hurt India?' You find what will do the worst damage, and then try to avoid it
19) INVERT, ALWAYS INVERT
20) Munger: "The mental process that really has worked for me my whole life, and I use it all the time, is turning everything into reverse. I figure out what I don't like instead of figuring out what I like in order to get what I like. I sometimes think straight forward too, of course. But thinking of what I didn't like and how I can avoid it has just worked wonders for me.
21) Buffett: "If you want to achieve a great time for swimming the 100 meters, it's a lot smarter to swim with the tide than it is to work on your stroke.
22) Part of the reason that we have a decent record is that we pick things that are easy. Other people believe they're so smart they can take on things that are really difficult. That proves to be more dangerous...We have ducked a lot of problems other people have willingly taken on.
23) In both business and investments it is usually far more profitable to simply stick with the easy and obvious than it is to resolve the difficult
24) Munger: "If there's any secret we have, it's ignorance removal. If it weren't for the fact that we were so good at removing ignorance, we'd be nothing today. And the nice thing is we still have a lot more ignorance left to remove.
25) Arthur Schopenhauer said, 'The wise in all ages have always said the same thing, and the fools, who at all times form the immense majority, have in their way too acted alike, and done just the opposite; and so it will continue'122...And to add a comment from a wise friend, And the percentages don't change, despite an ever increasing access to information.'
26) Repetition is the mother of learning
27) Something may seem better than it really is depending on what you've been used to. Our minds are designed to detect and react to change. We don't experience or judge a thing by itself but in contrast to some anchor—something that is available, we've experienced recently, expected or got used to—and if the new thing is a slight improvement we see it as better than it objectively really is.
28) You need to choose a spouse who believes in you and will give you that unconditional love. The best way to find a spouse like this, I think, is to be lovable."
29) And the most efficient way is to learn from wise people —those who already have figured out what works and not and their lessons
30) Munger: "Learn everything you possibly can from your own personal experience, minimizing what you learn vicariously from the good and bad experience of others, living and dead. This prescription is a sure-shot producer of misery and second-rate achievement."
31) Buffett: "The trick is to learn most lessons from the experiences of others."147
32) Munger: "The harder lessons you can learn vicariously rather than through your own hard experience, the better148...That is a much more pleasant way to learn."
33) Munger: "I think history's very helpful. It enables you to keep things in perspective...So the history of civilization —and the history of finance and investing—is very useful
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