{"id":599,"date":"2017-05-13T05:50:17","date_gmt":"2017-05-13T05:50:17","guid":{"rendered":"http:\/\/charliemungersays.com\/?p=599"},"modified":"2017-10-24T22:56:43","modified_gmt":"2017-10-24T22:56:43","slug":"92-berkshire-annual-meeting-2017-part-2-wisdom-guide-7-12","status":"publish","type":"post","link":"https:\/\/charliemungersays.com\/index.php\/2017\/05\/13\/92-berkshire-annual-meeting-2017-part-2-wisdom-guide-7-12\/","title":{"rendered":"92. Berkshire Annual Meeting 2017 – Part 2 – Wisdom Guide 7 – 12"},"content":{"rendered":"

\"\"<\/a>Excellent Book: Charlie Munger For All Seasons<\/a><\/a><\/strong><\/p>\n

Ref: Adam Blum\u2019s 2017 Berkshire Hathaway Annual Meeting Notes – May 6, 2017<\/strong><\/p>\n

Guide 7. A life properly lived is just learn, learn, learn all the time.<\/strong><\/p>\n

Guide 8. The first rule of fishing is to fish where the fish are, and the second is don\u2019t forget the first.<\/strong><\/p>\n

Q5 \u201cAt the time we do every deal, I think it\u2019s smart!\u201d AIG transferred to Berkshire Hathaway 80% of the excess of $25B up to $20B limit; Berkshire Hathaway got $10.2B for that. \u201cAjit has made a lot more for you than I have.\u201d Ajit and team have come to conclusion that they will pay out less money and at a slower rate than the $10.2B received. Ajit does 99% of the thinking and know they may be wrong but they\u2019re conservative. They were wrong on one transaction in the past like this but have done ok overall. Warren was interested in the $10.2B, but it\u2019s hard with $90B+ in cash earning peanuts.<\/p>\n

\u201cEarning peanuts\u201d is not an attractive use for the capital. They need to have a use for it, and they will. Charlie thinks this transaction is intrinsically dangerous but there are no two better people in the world to assess it than Ajit and Warren \u2013 \u201cget me in a lot more of these businesses, and I\u2019ll accept that worry.\u201d<\/p>\n

Berkshire Hathaway is the only business in the world who\u2019d have taken on that business in a way that AIG would\u2019ve accepted.<\/p>\n

Q6 What did the most good was his learning experience with See\u2019s Candy, seeing the power of the brand and the unending flow of ever increasing money with no work. He wouldn\u2019t have bought Coke if he hadn\u2019t bought See\u2019s. \u201cA life properly lived is just learn, learn, learn all the time.\u201d Every time they appoint new person who hasn\u2019t had capital allocation experience, it\u2019s a roll of the dice \u2013 \u201cif we had stopped learning, you [shareholders] wouldn\u2019t be here – you\u2019d be alive, probably, but you wouldn\u2019t be here \u2013 there\u2019s nothing like the pain of getting into a lousy business to find a good one – the first rule of fishing is to fish where the fish are, and the second is don\u2019t forget the first.\u201d<\/p>\n

They bought a department store in Baltimore in 1976 with risk of competitors coming into this new market and both failing. They learned over time which things to avoid. \u201cExperience is like eating cockleburs \u2013 it really gets your attention.\u201d<\/p>\n

Guide 9. Walmart, Amazon & Google: What Do They Have In Common? Cinches Or Near Cinches Not Invested In.<\/strong><\/p>\n

Q7 When they bought IBM 6 years ago, they thought it\u2019d do better than it has; Apple is much more of a consumer products business in terms of analyzing the moats around it; wrong on first but will find out on second \u2013 \u201cnot apples and apples but not quite oranges.\u201d<\/p>\n

They avoided tech companies, because they didn\u2019t want to play where others were better. Their mistake was seeing Google and being impressed but never investing in it. They were close to it and seeing the impact of it with the pay per click stuff but never pulled trigger. Munger added that Walmart was a total cinch, but they didn\u2019t figure it out and blew that one too. It\u2019s harder to predict winners and price competition in tech. It\u2019s remarkable where one person has built extraordinary economic machine in two different industries simultaneously like Jeff Bezos \u2013 if a CEO in his industry had a silver bullet and could get rid of one of his competitors as Intel\u2019s Andy Grove used to hypothesize, competitors on both sides would be pointing at Jeff in the cloud and in retailing; Jeff has been involved in the business execution, not just bankrolling it, so it\u2019s even more impressive.<\/p>\n

Munger: \u201cWe are sort of like the Mellons – old fashioned folks who\u2019ve done right, and Jeff Bezos is a different species.\u201d<\/p>\n

Guide 10. Why buy all four airlines instead of one? Because it is hard to distinguish who will do best.<\/strong><\/p>\n

Q8 Their investment has no connection with the railroad business or any other business. Long term, one couldn\u2019t pick a tougher industry ever since Orville went up. \u201cIf anyone had ever been thinking about investors, they would\u2019ve had Wilbur shoot him down.\u201d Hundreds of airlines have gone bankrupt. Buffett said the dumbest things he\u2019d ever done was buy USAir, but he made money off it, then the company went bankrupt twice. A number of factors make for terrible economics. The question is if it\u2019s suicidally competitive. The industry has been operating at 80% or better of capacity (seat-miles), and they can see visibility into deliveries. It will be at higher capacity than it was historically, but will they do suicidal things with pricing? It remains to be seen. Today the airlines are earning higher returns on invested capital than FedEx or UPS, but that doesn\u2019t mean it will last when someone cuts prices or fuel prices go up. The conditions have improved, as there\u2019s more labor stability having been through bankruptcy, and now the airlines have an industry pattern of bargaining.<\/p>\n

Munger: \u201cThe Investment world has gotten tougher. Maybe now we have small statistical advantages when before was like shooting fish in a barrel. It\u2019s ok to have things get a little harder when you\u2019re filthy rich.\u201d<\/p>\n

Even if airlines are worth a little less than today, the investments will do well in five years just from stock repurchases. Railroads were a terrible business for decades, and then it got good.<\/p>\n

They bought all four airlines, because it is hard to distinguish who will do best. Revenue-passenger miles should be higher in 5-10 years, but the question is what the companies\u2019 operating ratios are, and will they have fewer shares outstanding from buybacks?<\/p>\n

Guide 11. There\u2019s something in longevity about feeling happy in your life.<\/strong><\/p>\n

Q9 \u201cThat\u2019s marvelous.\u201d \u201cI\u2019ve been eating things I like to eat all my life. I drink about five Cokes a day. It has about 1.2oz of sugar in a can. I happen to believe that I like to get my sugar this way, and it\u2019s enjoyable.\u201d<\/p>\n

\u201cIf you told me that I\u2019d live one year longer by only eating broccoli and asparagus as my aunt suggested, I\u2019d rather eat what I enjoy.\u201d<\/p>\n

\u201cCoca-Cola has been a very positive factor in America and the world for a long time.\u201d<\/p>\n

Munger: \u201cI solved my Coke problem by drinking Diet Coke, and I swill the stuff like other people swill I don\u2019t know what. I have breakfast with Warren, and he has nothing but Cokes and nuts.\u201d Buffett: \u201cIt\u2019s pretty damn good. There\u2019s something in longevity about feeling happy in your life.\u201d<\/p>\n

Guide 12. A lot of other people are trying to be brilliant, and we are just trying to be rational. Trying to be brilliant is very dangerous, particularly when gambling.<\/strong><\/p>\n

Q10. Intrinsic value can only be calculated in retrospect \u2013 It\u2019s the cash to be produced between now and judgment day discounted at a reasonable rate. The last 10 years, their stock has compounded about 10% – it is impossible to achieve this return continuing in this interest rate environment \u2013 in Japan their interest rates sustained for 25 years, so one can\u2019t just assume rates will change. The chances of a terrible result are as low as one can find and same for sensational result. Buffett\u2019s best guess for the stock in future is a 10% return, assuming some higher interest rates.<\/p>\n

Munger: \u201cIn the future, with our present size, in terms of rates of return, will be less glorious than the past. We keep saying it, now we\u2019re proving it. But it is still a collection of businesses on average that has a better investment return than S&P 500.\u201d<\/p>\n

They have more shareholder orientation than the S&P. Their culture is one where decisions are made as a private owner would make them. This is a luxury that other companies don\u2019t have that have other pressures. Buffett asks CEOs of other companies \u201cwhat would you be doing differently if you owned it all yourself?\u201d The answer at Berkshire Hathaway is they would be doing exactly what they are doing.<\/p>\n

Munger: \u201cA lot of other people are trying to be brilliant, and we are just trying to be rational. Trying to be brilliant is very dangerous, particularly when gambling.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Excellent Book: Charlie Munger For All Seasons Ref: Adam Blum\u2019s 2017 Berkshire Hathaway Annual Meeting Notes – May 6, 2017<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[3,4],"tags":[],"class_list":["post-599","post","type-post","status-publish","format-standard","hentry","category-investment","category-wisdom"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/599","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/comments?post=599"}],"version-history":[{"count":2,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/599\/revisions"}],"predecessor-version":[{"id":843,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/posts\/599\/revisions\/843"}],"wp:attachment":[{"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/media?parent=599"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/categories?post=599"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/charliemungersays.com\/index.php\/wp-json\/wp\/v2\/tags?post=599"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}