“Tell me who your heroes are, and I’ll tell you how you’ll turn out to be” – Warren Buffett.
I am lucky to have found Warren Buffett early in my investing career. He has shaped who I am as an investor. I recently came across a transcript of Warren Buffett’s conversation with the students of Emory’s Goizueta Business School and McCombs School of Business at UT Austin in February 2008. The transcript is rich with insights, and the section below covers my key takeaways.
How to deserve success?
Behaving decently is a large part of it. Good things almost always come from good behavior. Don’t keep score in life. Tom Murphy does not keep score. He keeps doing 20 things for me, and I can only hope to return the favor.
Keeping score is terrible in marriage and terrible in business. Most humans have a great desire to reciprocate. If you do something for them, they will do 2X for you. How rare is it to work during lunch and be the first in the morning? You’ll get noticed if you do something extra. It’s good to have a willingness to pitch in even when you aren’t going to get credit for it.
Why can’t others emulate your success?
Value investing as a philosophy either takes you immediately or it never does. The reason comes down to temperament.
People want to make money fast, but it doesn’t happen that way. Graham’s philosophy doesn’t promise enough for many people. You don’t know when it will happen, but you wait for the fat pitches within your circle of competence. It’s not as exciting as guessing whether the stock price will go up the next day.
Most investors in internet companies didn’t know the market cap. They were buying because they thought the stock would move. It’s the classic tortoise versus hare, bound to work over time.
How to be happy?
I spend my time thinking about the future rather than the past. The future is exciting. As Bertrand Russell says, “Success is getting what you want; happiness is wanting what you get.” We’re all successful, intelligent, educated. To focus on what you don’t have is a terrible mistake. With the gifts all of us have, if you are unhappy, it’s your fault.
The most potent force in the world is unconditional love. To horde it is a terrible mistake in life. The more you try to give it away, the more you get it back. At an individual level, it’s essential to make sure that for the people that count to you, you count to them.
The difference between potential and output comes from human qualities. You can make a list of the qualities you admire and those you despise. You can learn to turn on those qualities you want and turn off those you wish to avoid. “The chains of habit are too light to be felt until they are too heavy to be broken.”
Qualities of good business managers
What we look for in managers is a passion for the business. I must look them in the eye and decide whether they love the business or the money. It’s fine if they love the money, but they must love the business more. Why do I come in at 7 am every morning? I can’t wait to get to work. It’s because I get to paint my own painting, and I like applause.
We’ve been lucky to have never lost a manager to competitors since 1965. Some retire, some were fired. We don’t lose them because we give them a lot of freedom to paint their own canvas.
Diversification vs Concentration
I have two views on diversification. If you are a professional and have confidence, then I would advocate lots of concentration. For all others, if it’s not your game, participate in total diversification. If you try to be a little bit smart, spending an hour a week investing (most part-time investors do this), you’re liable to be dumb.
If it’s your game, diversification doesn’t make sense. It’s crazy to put money into your 20th choice rather than your 1st choice. “Lebron James” analogy. If you have Lebron James on your team, don’t take him out of the game to make room for someone else.
Regrets
We’ve made many mistakes, but they don’t bother me. We’ve had no regrets. We are in the business of making many decisions, and there are bound to be mistakes. There are always things I could’ve done differently in my personal life. But so many good things have happened. It just doesn’t pay to dwell on the bad things. If you are lucky on health and lucky on your spouse, you are a long way home. Finding the right spouse is 90% of it.
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