Gene Abegg. Smart, but didn’t think he was smart. Ideal combination

Wells Fargo/ Capital Cities / ABC. 2 people teams

Management – if they need my help, we’re probably both in trouble

Fraud managements

Munger is asked a question about the possibility of Berkshire listing its subsidiaries

Low taste for complex spaghetti structures

Acquisitions have a high % of trouble in them

We view change as more of a threat than an opportunity

Retailing industry. Threat and opportunities of e-commerce

This question was posed in Dec 1999. 26 years have passed since then. We can read this Q&A and reflect how the internet has decimated some retailers (book stores and music CDs ), left some unaffected to a large degree (automotive retailers, high end jewellery), propelled many (stock broking, insurance, advertising) and meaningfully changed many businesses along the way (grocery retailing, newspapers)

Threats to businesses from the internet

Economics of technology companies is too hard to predict 10 years from now

We can't have a discussion around Buffett's investment philosophy and not discuss Coca Cola

Coca-Cola : wonderful business at a reasonable price

Cap Cities and Tom Murphy

See's Candy : Pricing Power

Best businesses take very little money to operate

One, I focus on inherently strong businesses that should be able to handle external macroeconomic challenges. a la Buffett : focus on the swimmer, not the current.

And two because there are so many moving parts in the external environment that it’s impossible to make a decision with a good probability of being right. Thinking about macros also contaminates thinking about the businesses where with the right effort and practice, I can make better decisions.

In that spirit, please find below what Buffett and Munger had to say about macroeconomics with respect to their investing thinking.

We never try to predict the stock market. We do try to price businesses.

Price and value. Focus all the time. No attention to beta

So much about predicting the future price of oil. Practically, all the oilmen got it wrong

What do you think about the market today ?

We don’t want to be thinking about the wrong things when we’re buying businesses

Too much math, too little horse sense

Starting early in life

How to detect frauds in insurance companies?

Greed, fear and folly - predictable. Sequence is not

Macro predictions

No opinion on markets. It might interfere with the good opinions that we have

You can’t get rich with a weather vane

Future and projections. Record of people making projections

We aren’t trying to predict markets. We care about what the business does

Large net worth; a moat around Berkshire

Reputational moat around BRK

Insurance – why BRK writes less of it?

Purchasing businesses in their entirety

Intrinsic value Vs Book value

How to value a business ?

Discount rates used in DCF

Valuation of a business

Lifetime batting average. Past record is the best single guide

You don’t want to hire somebody to change them

We just want to identify the exceptional ones

Proclivity for announcing how valuable their stock is: be cautious

Newspaper business. Elevator going up or down? (These were comments made by Buffett and Munger in 1995. Interesting to think what has happened to newspapers in the last 30 years since then)...

Newspapers don’t have the lock they used to have

How to adjust for risks ?

Definition of stock market risk

Their perspective on Real estate investments

Washington Post. At some time in 1973, the business sold for a song

Good business. What makes it good?

Common attributes of a good business- Chuck Acre

Good engineering and good accounting. A must

Accounting for goodwill

Conservative accounting

How accounting firms turned into a moral sewer one little step at a time

Forget the big picture. Concentrate on what happens to the company (comment made by Peter Lynch in May 1990)

Totally futile to predict the economy (Peter Lynch May 1990)

Macroeconomic outlook. Fox vs hedgehog

No attention to macro-economics. Focus only on the business

Waiting in the stock market

Surprises in the stock market (comment made in Oct 1987 when the Japanese market was roaring)

Keep it simple. Jump over 2 foot bars

We view ourselves as business analysts

Control of your time is very important. Nancy Reagan approach

Conservative about balance sheets & people. French army manual

A time to fight and a time to run

Risk arbitrage

Authority bias. Authority पर मत जाओ, अपनी अक्ल लगाओ

What makes your right ?

Contrarian thinking can also be foolish

Deep human nature. People don’t respond to suggestions

Think both forward and backward. Trick that works in life

Shape your life on the Grant McFayden model

Huge mistake if you don’t absorb elementary worldly wisdom

Focus on things that are both important and knowable

How to come up with good decisions ?

This is what The Bible teaches Luke 6:31 “Do to others as you would have them do to you”.

Secrets of a long life.

This one is from Phil Carret who died at the age of 101. He knew what he was saying !

Wait. You don’t have to make decisions ahead of time.

Learn from the mistakes of others

I break into a smile every time I remember his remark "Some things just take time. You can't have a baby in a month by making nine women pregnant "

I will begin today's post with another light hearted remark about his strong views on inheritance.

Something that makes my family members cry

Lifetime supply of food stamps

Money - a byproduct of doing something that I like

Most important idea- Know your limitations

The easier option

The last one is short and simple but very very profound. Do read it again and remember.

The topic of today's post "Principles of Life" is close to my heart.

Many years ago, when I started reading OIDs I started feeling a shift in the gears of my mind. It felt as if something was getting sculpted within me.

I had read a quote long back and I tweaked it a bit to describe value investing to myself :

"It's less important what you gain from it but more important what you become by it"

Buffett and Munger set simple rules for themselves in business and life but practised them seriously. There was little gap between their thought, speech and action.

Throughout OIDs, they have shared such simple rules and I labelled them "Principles of Life".

Since there are quite a few of them, I am going to share 4 consecutive posts on this topic before I move to the next one.

-

Effects of effects

Graduates who can think better and behave better

Mental models and confidence

Modesty : Understanding your own limitations

Foresight and Hindsight