Investment story from younger days: In 1962, Al Marshall [his partner at Wheeler, Munger] asked him to help bid on oil royalties, “and under peculiar rules of stupid civilization, the only bidders were cheap and shady bastards who were insiders to the space who low bid everything, and so we bid a little high to win, and are getting thousands of dollars a year off of a single $1,000. The trouble with that story is it only happened once. The trick in life is when you get to one, two or three great deals, which is your fair allotment, you gotta do something about it.”
“Blue Chip Stamps and Wesco were some of the most screamingly successful investments in the history of mankind, and only five or six transactions carried all the freight - just doing a few things over a long period of time - those nothing companies worked out fairly well out of a few good decisions. You make your money by the waiting, not til next depression, but a fair amount of patience is required followed by pretty aggressive discipline when the time comes. Imagine putting all the foreclosure boom money to work in 1 day on the bottom tick of the market (Wells Fargo stock bought at $8). Sure it was luck, but it wasn’t luck that we had the money ready to deploy and were willing to do so when others were fearful.”
Mental models used to make investing easier: “There’s no way to make investing easy. Anyone who finds it easy, you’re living in an illusion. This is an intelligent group of people [at the meeting]. We collect them. It is hard for all of us. The constant quest for wisdom and a temperamental reaction to opportunity will never be obsolete.”
How to reduce errors in life: “Warren and I and [DJCO director J.P.] Guerin do two things. One, we spend a lot of time thinking. Our schedules are not crowded, and we look like academics more than businessmen. It is a soft life waiting for a few opportunities, and we seize them and are ok with waiting for a while and nothing happens. Warren is sitting on an empire, and all he has on his schedule is a haircut this week. He has plenty of time to think. Luckily so many of you groupies [attendees] are so obscure, you’ll have plenty of time to think. Second, multitasking is not the highest quality thought man is capable of doing unless you’re chief nurse of hospital. If not, be satisfied with life in shallows. I didn’t have #2 plan; I wasn’t going to dance lead in Bolshoi Ballet or stand on the mound in Yankee Stadium. The constant search for wisdom or opportunity is important.
On synthesis of disciplines: “Saying one is in favor of synthesis is like saying one is in favor of reality. It is easy to say we want to be good at it, but the rewards system pays for extreme specialization. You’re usually way better off being a deep expert than someone an inch deep in a lot of disciplines. It [Synthesis] is helpful to some but not the best career advice for most people. The trouble is you make terrible mistakes everywhere else without it, so synthesis should be a second attack on the world after specialization. It is defensive, and it helps one to not be blind sided by the rest of world.”
On being rational: “I worked at being rational young and kept doing it. Do it til you’re as old as me, it is a good idea and it is a lot of fun if you’re good at it. I can hardly think of anything more fun. And I have a lot of cousins [like-minded folks] in the room. You don’t have to be emperor of Japan. You can be a very constructive citizen by being rational. Just avoid where the standard result is awful. Anger, jealousy, resentment, self-pity, etc. They’re a one-way ticket to hell, and many people wallow in them, and it’s a disaster for them and everyone around them. Self-pity won’t improve anything if you’re dying of cancer. Keep your chin up, and forget about it.”
Value investing: “Fundamental value investing will always be relevant . To succeed, always buy for less than what it is worth, and be smarter than market. It will never go out of style. High frequency traders have all the contribution to economy of a bunch of rats to a granary, sucking out while contributing nothing to civilization.”
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