Part 1 - Wisdom/Advice (https://kobekoto.com/blog/snowball-warren-buffett-summary/)
Part 2 - Personality Traits (https://kobekoto.com/blog/snowball-warren-buffett-pt2-summary/)
Part 3 - Financial/Investing Insights (https://kobekoto.com/blog/snowball-warren-buffett-pt3-summary/)
Part 4 - Warren’s Social Circle
Time To Read: 5 minutes and 20 seconds
Charlie Munger is Warren Buffett’s business partner at Berkshire Hathaway
Handling Negativity & Finding Happiness
- When things went wrong, Munger would set out towards new goals rather than let himself dwell on the negative.
- “You should never, when facing some unbelievable tragedy, let one tragedy increase into 2 or 3 through your failure of will.”
- Munger’s mental habit of setting low expectations was well established. He equated this with the route to happiness, since he felt that high expectations led to fault-finding. Low expectations made it harder to be disappointed. Paradoxically, however, they could also mess up success.
On Paying Yourself And Getting Rich
- He realized that law would not make him rich. As a young lawyer, he was probably getting $20 an hour.
- He thought to himself, “Who’s my most valuable client?” And he decided it was himself. So he decided to sell himself an hour each day.
- He did it early in the morning, working on these construction projects and real estate deals.
- Everybody should do this, be the client, and then work for other people too, and sell yourself an hour a day”.
- I had a considerable passion to get rich not for Ferraris but I wanted independence. I desperately wanted it. I thought it was undignified to have to send invoices to other people.
- He was known to his children as a “book with legs”, constantly studying science and the achievements of great men.
Having Children Early On
- “Charlie had a lot of children early on. That hindered him a lot in getting independent. Starting early with no encumbrances is a big advantage.”
Buffett vs. Munger’s Investing Philosophies
- Buffett and Munger’s differing investing philosophies:
- Buffett would forgo the chance of profits any day to avoid too much risk, and viewed preserving his capital as an almost holy imperative.
- Munger had the attitude that if you weren’t already rich, you could afford to take some risk - if the odds were right - to get rich.
Munger & Inversion
- Munger’s favorite thing on inversion:
- “Turn a situation or problem upside down. Look at it backward. What’s in it for the other guy? What happens if all our plans go wrong?
- Where don’t we want to go, and how do you get there?
- Instead of looking for success, make a list of how to fail instead - thru sloth, envy, resentment, self-pity, entitlement, all the mental habits of self-defeat. Avoid these qualities and you will succeed.
- Tell me where I’m going to die, that is, so I don’t go there.
Rose Blumkin was the massively hilarious owner of Nebraska’s Furniture Mart who kept calling her children “a bunch of fuckin bums” that Warren Buffett ended up acquiring
- “It’s better to have them hate you than to feel sorry for you.”
- “I only use the kitchen and bedroom. I can’t wait until it gets daylight, so I can get back to the business.”
- (advice for Creighton University graduates)
- “First, honesty. Second, hard work. Next, if you don’t get the job you want right away, tell them you’ll take anything. If you’re good, they’ll keep you.”
- To Warren Buffett about her sons who were about to inherit her business:
- See all these guys next to me? If I sell it to you, you can fire them. These people are a bunch of bums, and they are all related to me and I can’t fire them. But you can fire them. They’re bums, bums, bums
Benjamin Graham was Warren Buffett’s mentor
- Ben Graham describes himself as loner who never had an intimate friend after high school:
- “I was cut out to be everybody’s friend but no one’s bosom pal or crony”.
- He was too clever and after a while would get tired of talking to people.
- He considered his real friends - his favorite authors and books.
- Buffett on Ben: “Ben didn’t really care how much money he had.
- He passed his 1st 25 years when the country experienced 4 financial panics and 3 depressions.
- He wanted to have enough, and he went thru the Great Depression in ‘29 to ‘33 that was very rough.
- But if he had as much money as he felt he needed, anything else was totally immaterial to him.”
- Ben said to me “Remember one thing Warren: Money isn’t making that much difference in how you and I live. We’re both going down to the cafeteria for lunch and working every day and having a good time. So don’t worry too much about money, because it won’t make much difference in how you live.”
- He had a skill of analyzing numbers
- He developed the first thorough, systematic way of analyzing the value of a stock.
- He preferred to study a company's financial statements - and rarely attended even public meetings with a company’s management.
- The art of security analysis lay in the details
- playing detective - probing for what assets were really worth,
- excavating hidden assets and liabilities
- considering what the company could earn - or not earn
3 Principles Warren learned from Graham
- Graham’s class: Warren took away 3 principles
- A stock is the right to own a little piece of a business
- Use a margin of safety. Investing is built on estimates and uncertainty.
- Mr. Market is your servant, not your master. Mr. Market is a moody character that offers to buy and sell stocks every day, at prices that don’t make sense.
- The moods of the market should not influence your view of price.
- However from time to time he does offer the chance to buy low and sell high.
Peter Kiewit Sons is the most profitable construction company in the world, also owned the Omaha World-Herald
- Kiewit was another Buffett prototype, a hard taskmaster and penny-pincher in the office who instilled his values through pithy little sayings like:
- “A reputation is like fine china, expensive to acquire, and easily broken”
- In making ethical decisions, therefore - “If you’re not sure if something is right or wrong, consider whether you’d want it reported in the morning paper.
Running A Business & Being A Producer
- Kiewit was overwhelmingly a producer, not a consumer. “He believed that profits went to build the capacity of the organization, not to provide opulence to the owner.”
- “In essence, one who spends less than he earns is accumulating ‘claim checks’ for future use.
- At some later date he may reserve the procedure and consume more than he earns by cashing some of the accumulated claim checks. Or he may pass them on to others - either during his lifetime by gifts, or upon his death by bequest.”