July 24, 2006 | about stocks: BRK.A / BRK.B
Read part 2
Read part 3
Warren Buffett will likely be recorded in history as one of the most important capitalists of this era. His amazing investing skills led to the creation of the successful Berkshire Hathaway (BRKA)(BRKB) conglomerate and the recent massive $44 billion gift back to society that ensued from the wealth that Berkshire Hathaway stock generated. The recent three part Charlie Rose interview of Warren Buffett captures many of the important aspects of this man. I took down some interesting notes while viewing the show. Below you will find my notes on part one of Charlie Rose Show’s Warren Buffett: The Man.
- Warren Buffett on identifying good managers: “I have to look them in the eye, and I have to decide whether they love the money or love the business. It is okay if they love the money, some. They have to love the business. They have to have a passion for it.”
- Buffett says that he basically does two things at Berkshire Hathaway:
- Asset allocation - Buffett allocates the excess cash of his businesses in anything he wants to. He does not use advisers or committees.
- The second job is getting high grade managers to run his businesses.
- Buffett’s values and skills that have made him successful:
- High capacity to focus and read a lot.
- Buffett said, “Most people I know who are successful are focused.”
- Focus is concentrating on what is important.
- Buffett believes he was born wired the right way and born in the right place and right time.
- He was Born on August 30, 1930. His father worked for a bank selling securities until the bank went broke in 1931.
- Buffett enjoys being an entrepreneur.
- He recounts a study done many years ago that success in business correlated best with the age at which you first got into your own business.
- At around age six he would buy six packs of Coke from his grandfather’s store for a quarter and then sell them for a nickel each.
- He considers his father to be the best human being he’s known.
- Integrity and avoiding cheating people during business negotiation are important aspects of Buffett’s values
- Susie Thompson’s family knew Buffett’s family before they started dating.
- Susie was going to be Buffett’s younger sister’s roommate in college. Buffett made a sarcastic comment to her and she made a quip back. That’s how they first met.
- Susan Buffett said, “Doesn’t Warren always get what he wants?”
- Ben Graham had a major influence on him.
- Graham gave Buffett his investment framework. Gave him the foundation.
- Buffett didn’t realize Graham was teaching after he read his book, The Intelligent Investor, until he spotted Graham’s name in the Columbia catalog.
- The principles of investing are exactly the same today as when Graham taught him. The applications come up in different forms and you learn new applications.
- On what Graham taught him, Buffett said, “Don’t look at a stock as a thing that wiggles around or is quoted in the paper every day. Look at it as a piece of a business and figure out what the business is worth.”
- This strategy gave Buffett a huge edge.
- “The stock market is there to serve you rather than instruct you.”
- “Always have a margin of safety.”
- Warren Buffett walked Charlie Rose through a collection of his memories at his Omaha office:
- Patent for Gillette razor. After being in the business for 100 plus year they still have 70 percent of the business value of razors. It meets the Buffett test: Durable competitive advantage
- Buffett’s Royals uniform. Buffett is a big baseball fan and he use to play the game too.
- Buffett also talks about the first purchase of the Berkshire stock by his partnership in 1962.
- He displays the New York Stock Exchange stock for Berkshire in Omaha, Nebraska.
- Round lot requirements cause the exchange to work around some things? [I didn’t quite understand this reference. Maybe someone here understood what he was talking about.]
- Buffett does not split Berkshire Hathaway stock to avoid buyers encouraged by stock splits. He want investors to want to join in the business with the intention to hold it forever.
- On watching the stock market: He probably knows Berkshire’s stock value at the end of the day but is not interested in its movements.
- Buffett was on All My Children.
- Batted against famous player baseball player, Bob Gibson.
- Buffett quoted Ted Williams’ Science of Hitting: “Waiting for the right pitch is the most important thing for a batter.”
- “There are no called strikes so you can watch stocks come by and wait and wait until the right pitch and no one is going to call a strike,” said Buffett.
- Ty Cobb dated Buffett’s good friend, Carol Loomis, Editor-at-large for Fortune magazine.
- Buffett once caddied for Tiger Woods. They played for “serious” money, $5 and Tiger played on his knees.
- Gorat’s restaurant is one of his favorites.
- Buffett’s routine:
- Reads papers at home starting at 6:45 AM. Reads them mostly online now.
- He has no set schedule to speak of.
- Buffett doesn’t want to be head of IBM or General Motors since your time is taken up by thing you don’t really have a choice about.
- Buffett reads 5 papers a day, all sorts of annual reports, magazines, 10-K and 10-Q filings.
- 75-80 percent of Buffett’s time is spent reading, then on the phone and a little bit of time buying or selling investments.
- Buffet goes home at 5 or 6 PM then reads more or plays bridge online. (Pays $95 a year now for the online bridge service.) [I wonder which service charges this amount?]
- He would be willing to pay $5 million a year for online bridge. Thankfully, his vendor doesn’t know how to get that much out of him.
- When he is reading, first he is looking for is a business that he can understand. He thinks he knows what the economics of the business will look 5, 10 or 20 years from now then he thinks he understands it.
- He understands what a computer does, but he does not know who will be making lots of money on computers 10 years from now.
- Buffett doesn’t want to make speeches except for children and students. It can still change their lives, so he feels they are the ones best served by his speeches.
- “You want to have a passion for what you are doing. You don’t want to wait until 80 to have sex.”
- Best advice he was given was from his dad: He taught him to know that what is more important is on his inner score card versus outer scorecard.
- Buffett tells managers to use the newspaper test to determine if something is ethical.
- On friendship: Who would hide you. (Reference to the Nazi holocaust.) The number of those friend is that referendum on your life.
- Tom Murphy said Buffett is never looking to take advantage of anybody.
- “Whoever makes you smarter a little earlier in life makes you better,” according to Charlie Munger.
- Buffett had a unique relationship with Susie.
- Susie moved away since she wanted a private life. Physical proximity to Warren doesn’t mean he is always there for you. She had to have her own life. She loved life.
- She is responsible for Astrid and her relationship with Buffett. Susie asked her to take care of Warren when she moved to San Francisco. She went over and stayed and Susie considers this a great favor.
- Susie’s death devastated Warren.
- Warren didn’t want to talk about Susie (Susan) Buffett, his wife. The pain of her loss was still visible on Warren Buffett’s face.
I’ll post my notes on Part Two of the Charlie Rose interview with Warren Buffett shortly, so please stay tuned.
Berkshire Hathaway Annual Letter to Shareholders 2008 - Read the latest Berkshire Letter
Daily Forex Updates - Daily Forex data, commentary & tools to help make trading Forex easy
Share Investor Blog - Stockmarket & Business commentary
Share Investor New Zealand Business News- Get more business news
Shareinvestorforum.com - Discuss this topic further
Recommended Amazon Viewing