Youth Is No Guarantee Of Innovation: Highlights Of The Berkshire Hathaway Annual Meeting 2021
Here I post a few thoughts that I found fruitful and insightful upon watching the Berkshire Hathaway Annual Meeting 2021.
Market Morality
The market is about making money. Although, moral sentiments are inevitable.
Warren Buffet: I don’t like making the moral judgments on stocks, in terms of actually running the businesses, but there’s something about every business that you know that you wouldn’t like.
Self-Rescuer
Count on yourself. Abstain from depending on strangers.
Warren Buffet: [The] one thing about Berkshire is, we don’t want to depend on anybody. We’re not a bank. We can’t go to the federal reserve if we need money. And we’ve got to be sure that under any circumstances […] we can’t solve nuclear war, and maybe we can’t, but Blanche DuBois, if you remember, in, A Streetcar Named Desire, said, “I depend on the kindness of strangers.” You can’t depend on the kindness of your friends, if things really stop.
Water Circles
In economics, there are consequences to everything.
Warren Buffet: [In] economics, there’s one thing always to remember, you can never do one thing, you always have to say, “And then what?”
Infinity Absurd
Unlike some politicians, remember St. Petersburg Paradox. (You can read more about it here or here.)
Warren Buffet: [If] a country can borrow at negative interest rates, you get into something, that’s kind of akin to the St. Petersburg Paradox. And those of you who want to go to Search you can find some interesting things on it, but it becomes infinite. And it’s a crazy consequence of a bunch of abstract mathematics where you get there. But, you lose gravity entirely, and if you tell me that I’m going to have to lend money to the government at minus 2% a year, and I’m talking nominal figures, not… You’re just telling me how I’ll go broke over time, if I do that.
Egg Shells
Beware of SPACs.
Warren Buffet: It’s a killer. […] You can, sell almost anything. And it’s an exaggerated version of what we’ve seen in, in kind of… Well, gambling done type market.
Money Shells
Beware of cryptocurrencies.
Warren Buffet: We had a governor one time in Nebraska, a long time ago. He would get a tough question, what do you think about property taxes or what should we do about schools? He’d look right at the person, and he’d say, “I’m all right on that one,” and he’d just walk off. Well, I’m all right on that one.
Charlie Munger: Well, those who know me well are just waving the red flag at the bull. Of course, I hate the Bitcoin success and I don’t welcome a currency that’s so useful, and the kidnappers in our stores and so forth, nor do I like just shuffling out a few extra billions and billions and billions of dollars to somebody who just invented a new financial product out of thin air. I think I should say, modestly, that I think the whole damn development is disgusting and contrary to the interests of civilization, and I’ll let leave the criticism to others.
World Casino
When gamblers are everywhere, it takes all the effort to resist their spirit.
Warren Buffet: Well, the stock market, we’ve had a lot of people in the casino in the last year. You have millions and billions of people who’ve set up accounts where they day trade, where they’re selling… Put some calls, where they, I would say that you had the greatest increase in the number of gamblers essentially. […] [The] gambling impulse is very strong in people worldwide, and occasionally it gets an enormous shove and conditions lead this place where more people are entering the casino than are leaving every day, and that creates its own reality for a while.
Here is also a quote from John Maynard Keynes:
Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital of element of a country becomes a by-product of the activities of a casino, the job is likely to be ill done.
Lost People
Society of gamblers is a failed society.
Charlie Munger: I call it fee driven buying. In other words, it’s not buying because it’s a good investment. They’re buying it because the advisor gets a fee, and of course the more that you get, the sillier your civilization is getting, and to some extent, it’s a moral failing too, because the easy money made by things like SPACs and returned derivatives and so on, and so on. You push that to excess, it causes horrible problems with the civilization and reflects no credit on the people who are doing it, and no credit on the regulators and voters that allow it. So I think we have a lot to be ashamed of current conditions. […] I don’t mind the poor fish that gamble. I don’t like the professionals that take the suckers.
Free Cheese
There is no free cheese. Fee-free investment apps are no exclusion.
Warren Buffet: [It] really makes its money when people are doing stupid things. […] It’s become a very significant part of the casino aspect, of the casino group that has joined into the stock market in the last year, year and a half. And I do want to say, I’m concerned about how they handle the source of income when they say that they don’t charge the customer anything. It’ll just be interesting to watch how they describe it.
Charlie Munger: Well, that is really waving red flag of the bull. I think it’s just God awful that something like that would draw investment from civilized men and decent citizens. It’s deeply wrong. We don’t want to make our money selling things that are bad for people. […] They’re taxing hope.
Eternal Cinderella
You can never know for sure when the party is over.
Warren Buffet: [Nobody] tells you when the clock is going to strike 12:00, and it all turns to pumpkins and mice.
Market Mind
To be anticapitalist is a mistake.
Warren Buffet: I think capitalism is what raises GDP for everybody. And so, and I have also a feeling that Benjamin Franklin was right when he said that it’s hard for an empty sack to stand upright, and to some extent, the prosperity of leading American institutions helps them behave better. Now, there are exceptions in promotional financing, so I’m, but by and large Franklin was right. And so I’m a little wary of just constantly getting mad at people because they have a little more money.
Evolution Model
As long as the cat catches mice, it does not matter whether the cat is black or white.
Warren Buffet: I think that the Chinese government will allow businesses to flourish. It was one of the most remarkable things that ever happened in the history of the world when a bunch of committed Communists just looked at the prosperity of places like Singapore and said, “The hell with this. We’re not going to stay here in poverty. We’re going to copy what works.” They changed communism. They just accepted Adam Smith and added it to their Communism. Now we have Communism with Chinese characteristics, which is China with a free market with a bunch of millionaires and so forth. They made that shift. They deserve a lot of credit. Warren and I are not quite as good at that, at changing our minds, in many cases. That was a remarkable change coming from such a place. Of course, it’s worked like gangbusters. They’ve had enormous growth in the average income of the average Chinese. They’ve lifted 800 million people out of poverty fast. There was never anything like it in the history of the world, so my hat is off to the Chinese. I think they will continue to allow people to make money. They’ve learned it works.
New Lessons
Definitions matter. Especially the ones about force-majeur.
Warren Buffet: So it’s the pandemics, the wording will be much more careful and in future policies on trying to define it very precisely.
Key Position
The fish rots from the head.
Warren Buffet: The number one risk factor is that this business gets the wrong management, and you get a guy or a woman in charge of it that they’re personable, the directors like them, they don’t know what they’re doing, but they know how to put on an appearance.
True Assets
Employees make all the difference.
Warren Buffet: [Ted Weschler and Tod Combs are] both absolutely terrific, and that’s one reason I don’t want people quizzing them on stocks. They are assets of Berkshire. There’s no reason for them to be out educating other people on how to compete with us. It always seemed so silly that people expect it. They don’t expect Merck or Pfizer or something to tell them exactly what their scientists are working on and where they stand or where the failures have been so they can eliminate those. If you’ve got talent that knows how to evaluate businesses, and those two fellows have gone far beyond that. They’re terrific assets. They love Berkshire and they work extraordinary hours, but we don’t really want them going around with people asking them questions about why you like this industry better than that industry or anything of the sort.
Job Interview
One does not necessarily have to be an expert in the field to get the job.
Warren Buffet: Ajeet [Jain] came to the office in Saturday. I was opening the mail and I said, “How much do you know about insurance?” And he said, “Nothing.” And I said, “Well, nobody’s perfect. Let’s talk about it some,” and by the end of the morning, I knew I had somebody that was going do build a great insurance business.
Clear Deadlock
Stick to a well-balanced and reasonable strategy — especially if everything is uncertain.
Warren Buffet: The best thing to do is recognize you don’t know and proceed in a way where you get a decent result, no matter what happens.
Fresh Ideas
Modern Money Theory should raise concerns.
Charlie Munger: Well, I think the modern monetary theorists are more confident they ought to be, too. I don’t think we, any of us know what’s going to happen with this stuff. I do think there’s a good chance that this extreme conduct is more feasible than everybody thought. But I do know if you keep just doing it without any limit, it will end in disaster.
Blurring View
It pays off to critically assess one’s view.
Warren Buffet: [One] of my favorite remarks in the history of human remarks was by Sir Cedric Hardwicke, who is a great British actor. And he said, “I have been a great actor for so long that I no longer know what I truly think on any subject.” And I think that happens to a lot of people and it happens to virtually every politician.
Online Show
We are all spectators of an exciting show with humans and COVID-19 starring. Stay tuned.
Warren Buffet: We enjoy, in a crazy way, actually seeing what happens. I mean, this has made us halfway through the movie much more interested in watching even more. This is an unusual movie.
False Comfort
There are no such things as stability and predictability.
Warren Buffet: [We have] seen some strange things happen in the world in the last year and 15 months, and we’ve always recognized the fact that stranger things are going to happen in the future.
Charlie Munger: [Winston Churchill said about Clement Attlee] “He was a very modest man and had a great deal to be modest about,” and that’s exactly what’s happened with the professional economists. They were so confident about everything, and it turns out the world is more complicated than they thought.
Charlie Munger: If you’re not a little confused by what’s going on, you don’t understand it. We’re in uncharted territory.
Disclaimer: This is my personal blog. This is neither a legal opinion nor a piece of legal advice. The opinions I express in this blog are mine, and do not reflect opinions of any third party, including employers. My blog is not an investment advice. I do not intend to malign or discriminate anyone. I reserve the right to rethink and amend the blog at any time, for any or no reason, without notice.
