This is the 18th article of my reading experience on “The Transcript of the Berkshire Shareholders’ Meeting”. The background of writing this series is:
“If there is a “cheat book” for investment, in addition to Buffett’s letters to shareholders over the years, in fact, there is another material that is probably ignored by 99% of people. It is:
Buffett and Munger, Q&A to questioners at Berkshire shareholder meeting.
The reason is clear at a glance: Those questioners are just like you and me, so they don’t come here to be false. They ask some very specific questions, such as what do you think of XX company, whether to sell when the stock price is overvalued, and so on.
Although you and I don’t have the opportunity to ask them questions directly, these questions that we “dream about knowing the correct answer”, the views of the stock gods, are in this document.
So, through some means, I obtained the Q&A records of the past twenty years, and the electronic version is in the backstage of my XX (villike’s financial freedom notes) to reply to the records, and will push them to you.
After reading it hungrily, I organized the content of millions of words in a structured way from a practical point of view, and condensed it into the articles you are about to read. “
In the previous article, we mentioned that the most important thing about investing is not to make fatal mistakes.
As for what things should be resolutely avoided, Buffett gave an example at the 2016 shareholders meeting:
“Investment does not require a high IQ, but to invest well, you must be able to control your emotions. Many smart people do stupid things. What is insignificant to oneself is willing to risk what is insignificant to oneself.”
In fact, to be honest, most of the leveraged people are smart people. Under normal circumstances, people who are not confident in their intelligence are unlikely to take this risk.
Whereas usually it is:
Smart people are often rich because they are smart, and then, rich smart people increase their leverage.
After doing this several times, in the end, there is often a “smart guy without money” left.
Again, although an astronomical number is multiplied by 0, the result is still 0. This is common sense, but it is difficult for ordinary people to have common sense and always ignore common sense.
Buffett not only warned us in this way, he really regarded “not doing stupid things” as a very important criterion. When choosing his heir, he once said this criterion:
“What we need is someone who never does stupid things — basically nothing stupid, and occasionally something pretty good, and that can be done.”
“Basically don’t do stupid things, and occasionally do some pretty good things”, this should also be the investment standard we give ourselves.
If this standard can be met, I think we can all do quite well in investment.
The excerpt above is from the 2007 shareholders meeting. In the same year, Buffett emphasized his expectations for the character of candidates from another perspective:
“When I was looking for an investment manager to replace me, we were very concerned about finding someone who not only understood all the risks that had occurred, but also could foresee things that hadn’t been experienced. There are a lot of people who are smart, but they just Not thinking about trouble they haven’t seen before.”
Note that this paragraph looks ordinary, but in fact there is a very subtle part in the middle:
Think about troubles you haven’t seen before.
Let me give you an example. Before the crash in 2015, many people did not consider:
What will happen to the stock market if there is no allocation of funds? What will happen to my account?
For another example, from 2021 to 2022, the CSI 300 will continue to decline sharply for one year after falling for one year. What impact will this have on my account?
More important than the “influence” mentioned in the above two paragraphs is:
Can your system handle these extreme situations well?
No one can guess what will happen tomorrow and how the market will go, but whether your system can adapt to rare events-at least survive extreme events, is a key to making good investments.
Moreover, this kind of thing is usually not felt. Once this kind of thing happens, you can see the difference in the skills of investors. This is what Buffett emphasizes “thinking about troubles that have never been seen before.”
In addition to the topic of “avoiding trouble”, in 2009, a dialogue between a shareholder and Munger shocked me:
Shareholders: Many of the things that you and Charlie do and preach are the opposite of what people are used to. For example, you don’t change the management of acquired companies, you don’t encourage retirement, you don’t compensate directors a lot and you don’t give them stock options, you don’t seem to hire many MBAs, you don’t invest in tech, you don’t provide earnings guidance , you don’t live near New York. I wonder, what is the root cause of all these things? There seems to be a core philosophy here that I’m missing?
Munger: It’s pragmatism. We do things the way we do because it suits us, partly because it’s in our character, and partly because we’ve found through experience that it works better that way, and we’re Keep repeating what works.
Let me first remind everyone that this passage shocked me a lot, so please read it again carefully.
Let me talk about some background information first. In Berkshire’s shareholder meeting, more than 80% of the Q&A sessions were answered by Buffett.
As for Munger, he rarely gave systematic answers to questions, except for the occasional “I have nothing to add.”
Therefore, Buffett once mischievously said, “Even if I put a cardboard of Charlie’s head next to me, no one will be able to find out that it is a fake.” He seemed to have done it once, which is really cute, haha.
The shareholder’s question is a good summary:
In the past, I just thought that Buffett and Munger were different, but I didn’t make such a comprehensive summary, nor did I consciously think about the following questions:
“There seems to be a core philosophy here that I’m missing?”
The first time I saw this question, I got an electric shock in the brain.
At that moment, I realized that there might be something that I had overlooked. What is the core thing, the thing behind it?
Munger’s reply seems unremarkable, but in my opinion, this paragraph is simply the definition of “independent personality”:
When they think and do things, they don’t bow to the world’s way. They think a lot, they have independent judgment, and if they think their way is right, there is nothing to stop them from doing it.
In other words, they are repeating actions that they believe are correct and effective.
This matter is easy to say, but you must have your own independent judgment and the courage to “fight the whole world”. How many people can do it?
Buffett and Munger, these two are really not in a hurry when it comes to “sticking to the truth”, making people feel comfortable and natural.
Let’s take a look at the 2008 shareholders’ meeting. When the whole world was restless because of the financial crisis, what did they say about their company:
“Berkshire used to be a small business, and Charlie and I never tried to do something masterful — turn her into something four times as big, but in the business world, people do that sometimes.
We feel like if we keep doing what we understand and keep doing it and have fun doing it, then at some point she’s going to be big, there’s nothing magical about it, it takes time. “
Berkshire can do this big, and the bottom line is that “Charlie and I haven’t tried to do something masterful, (like) make her something quadruple the size”.
So what do they do?
They invest in companies they can understand, insist on doing so, and enjoy the process.
Under the nourishment of time, Berkshire has grown into a world-class great enterprise. This is the power of sticking to the bottom line and insisting on doing the right thing.
Buffett has said a lot about “doing the right thing repeatedly”. Let’s first look at this passage from 2016:
“We like to study companies in depth. Regardless of whether we buy or not, I just think it is interesting to study all types of companies. We study microeconomics (companies) and accept macroeconomics.”
I have always believed that a person who can make a good investment must be a person who is curious about the business world.
Why are some companies very profitable, why are some companies everlasting, and why are some companies able to bring good returns to shareholders?
For these questions, I believe many people’s reactions will be:
What does it matter to me?
People who hold this kind of attitude are actually not good at investing themselves, but I am afraid that it is precisely this group of people who will turn around and ask another question:
Do you have any stock recommendations recently?
In terms of learning investment, let’s see how Buffett does it. He talked about this topic in 2019.
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