Tags: Warren Buffett | Charlie Munger | Berkshire Hathaway | quotes

Motley Fool: Best Buffett, Munger Quotes from Annual Meeting

Motley Fool: Best Buffett, Munger Quotes from Annual Meeting
Warren Buffett, CEO of Berkshire Hathaway (Photo: AP file)

By    |   Thursday, 12 May 2016 11:50 AM

Warren Buffett, famed billionaire CEO of Berkshire Hathaway, took the stage alongside Vice Chairman Charlie Munger last weekend at the company’s annual meeting to answer questions from shareholders and analysts.

The Q&A lasted five hours, according to Motley Fool, which compiled a list of the highlights from the meeting, some which appear here:

1.    Donald Trump’s possible presidency:
Buffett: We've operated under price controls, we've had 52% federal taxes applied to our earnings... we've had regulations come along... If either Donald Trump or Hillary Clinton becomes president, and one of them is very likely to be, I think Berkshire will continue to do fine.

2.    Berkshire's long-term goals:

Buffett: We just focus day after day, year after year, decade after decade, on trying to add sustainable and growing earning power to Berkshire.

3.    Berkshire's transition to buying capital-intensive businesses like railroads, pipelines and specialty chemicals makers:

Munger: If we'd been able to continue doing that [acquiring highly profitable, capital-light businesses], we would have loved to do it, but when we couldn't, we went to plan B. And plan B's working pretty well; in many ways, I've gotten so I sort of prefer it.

Buffett: When something's forced on you -- might as well prefer it ... The alternative [to buying capital-intensive businesses] would be to go back to working with very tiny sums of money, and that really hasn't gotten a lot of serious discussion between Charlie and me.

4.    Avoiding bias in decision-making:
Munger: We try to avoid what is always the worst anchoring effect ... which is our previous conclusions.

5.    Including benefits in a cost/benefit analysis (specifically, drinking fattening flavored sugar-water made by long-term holding Coca-Cola):
Munger: People who ask questions like that one always make one ghastly error that's really inexcusable: They measure the detriment without considering the advantage. That's really stupid; that's like saying we should give up air travel because a hundred people die a year in air crashes. That would be crazy: The benefit is worth the risk.

6.    Risks linked to derivatives like options, conduits, off-balance-sheet entities:
Buffett: If you take the 50 largest banks in the world, we wouldn't even think about [investing in] probably 45 of them.

7.    Being a bottom-up investor that looks at company fundamentals and not the broader economy:
Munger: Microeconomics is what we do, and macroeconomics is what we put up with.

8.    Investment consultants:
Buffett: No [investment] consultant in the world is going to tell you, 'Just buy an S&P index fund and sit for the next 50 years.' You don't get to be a consultant that way. And you certainly don't get an annual fee that way.

9. Wall Street snow jobs:
Buffett: There's been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities. There are a few people out there that are going to have an outstanding investment record, but very few of them. And the people you pay to help identify them don't know how to identify them; they do know how to sell you.

10: ‘Sophisticated’ investors:
Buffett: I've talked to huge pension funds, and I've taken them through the math [demonstrating the superiority of low-cost index funds over active fund management], and when I leave, they go out and hire a bunch of consultants and pay them a lot of money. It's just unbelievable.

Bonus: Inherited wealth:

Buffett: One surprise guest: I think my youngest great-grandchild -- [he] will be about seven months old -- is also here today. If he happens to break out crying a lot, don't let it bother you, it's just his mother explaining to him my views on inherited wealth.

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Warren Buffett, famed CEO of Berkshire Hathaway, took the stage alongside Vice Chairman Charlie Munger last weekend at the company's annual meeting to answer questions from shareholders and analysts.
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Thursday, 12 May 2016 11:50 AM
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