Monday, April 17, 2006

Advice from Mr. Buffett

I would like to first start off by saying that my trip to meet Warren Buffett was amazing. He is a down to earth, hilarious guy that seems like any other person (except that he has $40B under his belt). He is very intelligent and seems like he has the ability to memorize exact quantities and dates. He's just a really interesting guy that loves to tell jokes.

Great Advice:

"Change is not an investor's friend".
Look at businesses that are simple. Determine what the businesses will be in 10-20 years. He does not particulairly like technology companies because they change way to fast and are unpredictable in that time horizon.

"Swing hard and swing at the right price". Wait for the perfect price to buy. Determine the value of the company and only swing at that "perfect pitch". You may have a few pitches that you could swing at but the perfect pitch will be the best to hit out of the park.

Hold companies that you have confidence in. If someone offers you 2x what a company is worth, don't take it. You should have so much confidence in the company you are investing in that the future will be better than what someone will offer you now.

Tips for buying a business (stock). Buying a stock is like buying a business. You should have the mentality that you are purchasing the entire business, even though you may only be purchasing a few shares.
  • Find out if the manager loves the business or loves the money. If he/she loves the money then this should be a warning to you. If they love the business, chances are they are there for their enjoyment - not to get a pay raise.
  • The business should also have the right leader (CEO). He/she should be appropriate for that business and paid in an appropriate way.
  • Good leaders should also have the ability "to inspire others". These are the leaders that make great businesses.
Key things a person should gain in business:
  • Communication (oral and written) skills. Warren commented about a Dale Carnegie course that he had taken which had one of the greatest impacts on his life.
  • Accounting knowledge. "It is the language of business". If you do not understand accounting then you are at a huge disadvantage in the business world. It is essential to your success.
  • Getting people to work for you. Many different characteristics go into this one but getting people motivated and to work for you is absolutely essential to being a leader and being successful.

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