It was Berkshire Hathaway’s annual shareholders meeting last weekend in Omaha, Nebraska. For investors around the globe, it was an opportunity to hear what Warren Buffett, 92, and Charlie Munger, 99, had to say about the conglomerate they’ve run since 1965, and a host of others. topics, ranging from Elon Musk to artificial intelligence to how to live a good life.
During their careers, the two self-made billionaires have had an impact that has undoubtedly been unprecedented on generations of investors. If you haven’t already, I recommend all curious minds to read the biography The Snowball: Warren Buffett and the Business of Lifewritten by Alice Schroeder, and Damn Right! : Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger, by Janet Lowe. The documentary Becoming Warren Buffettfrom HBO, is also excellent, and it is streaming for free on YouTube.
Here are some annotated passages from the annual meeting this year.
On the role of emotions:
We constantly make bad investment decisions. […] But I can’t remember that we ever made a decision based on emotion in Berkshire history. […] You don’t want to be an unemotional person in all walks of life, but you definitely want to be in investing, or in business.
warren buffett
Throughout his career, Warren Buffett has spoken of the importance for the investor not to be driven by his emotions. But, concretely, what does that mean? The two strongest emotions felt by an investor are fear and greed. I put fear first, because it’s the most powerful emotion, and it’s extremely corrosive in the long run.
Being afraid in investing is like trying to drive a car by constantly applying the handbrake: the one who does it is at a disadvantage compared to the one who has learned not to do it.
For example, in a stock market crash, when we see the value of our asset plummeting, fear can take over and drive us to sell, often at the worst possible time. As we have seen in 2020 and again in 2022, declines will occur. It is a certainty, just like death and taxes. There’s no point in poisoning your life with it.
About Elon Musk:
Elon Musk likes to take on impossible challenges. He succeeded in life by undertaking extremely difficult things. We are different…Warren and I seek to take on the easiest challenges we can determine.
Charlie Munger
Munger repeats here an idea that is dear to him, that investing correctly does not have to be complicated, and above all does not require a crystal ball. The largest companies in Berkshire Hathaway’s stock portfolio are Coca-Cola, insurance company Geico, Bank of America and Apple, among others. Companies that have reached a certain maturity, which do not require massive investments and whose customers come back year after year. Buffett and Munger are perfectly comfortable raking in profits and letting Elon Musk work sleepless nights to revolutionize several complicated and expensive industries.
About iPhone:
PHOTO ANDREW KELLY, REUTERS ARCHIVES
The iPhone is the most popular product in history.
People spend $1,500 on an iPhone and $35,000 on a second car, and if they had to choose between the two, they’d give up their second car [et garderaient leur iPhone].
Charlie Munger
This takes up the theme of simplicity. The iPhone is the most popular product in history, and people will continue to buy it because it’s extremely powerful, and because it’s difficult and complicated to leave Apple’s ecosystem. Warren Buffett is happy to own a part of the business that sells people a product they deem essential in their lives. Investing in a vehicle company, on the other hand, is more difficult, because the level of consumer attachment is lower, the international competition is stronger and “no one knows who will be at the top in 5 or 10 years,” Buffett said. . So even though they are both tech companies, Apple is a better fit for Buffett than Tesla, for example.
About artificial intelligence:
What worries me is that once it’s been invented, you can’t uninvent it… It can change everything in the world, but what won’t change is the way people think and behave.
warren buffett
Like many people, Warren Buffett is impressed with advances in artificial intelligence, but he can’t help but wonder how it will be used for evil. He makes a link with the atomic weapon, invented during the Second World War. “It was important to invent it, and we couldn’t do otherwise, but is it positive for the next 200 years? »
About the character:
I don’t know anyone who was nice and died friendless. But I know a lot of people who had money and died without friends.
warren buffett
Studies have shown that simply thinking about money makes us less altruistic. There seems to be something about this topic that activates our animal side, our desire to score as many points as possible and keep it all to ourselves. Warren Buffett found a way to circumvent this predisposition a few years ago by pledging to donate 99% of his fortune to charity upon his death. As of last year, Buffett, whose net assets are US$113 billion, had already given $48 billion to charities in his lifetime.
Also, no one will remember our savings rate or the percentage of our stock market return after we die. But many will remember our words and our character.
About index funds:
Index funds are an excellent investment tool because management fees are low.
warren buffett
You’re getting to know me, I couldn’t ignore the fact that once again Warren Buffett offered his favorite piece of advice to people with money to invest: buy index funds and move on.
By buying index-based exchange-traded funds (ETFs), it is possible to obtain market returns, and subtract the lowest management fees in the industry (often 0.25% or less per year, versus almost 2% for actively managed mutual funds).
Over a period of several decades, and by adopting the right investment behaviors (not selling during falls, making regular purchases, etc.), an investor can have much better results if he keeps his management fees at bare minimum. Warren Buffett has already announced that 90% of the millions he will leave as a legacy to his wife will be invested in a Vanguard index fund that tracks the S&P 500 index, and that the rest will be placed in US Treasury bonds. Such an investment portfolio has a management fee of 0.04% per year. Hard to beat.
Your tips for saving
PHOTO OLIVIER PONTBRIAND, LA PRESSE ARCHIVES
The electric scooter can be an economical means of transport.
Last week, I asked you for your tips for saving money in the transportation sector. Here are some of the responses received.
Lucille writes: “Hybrid SUV, electric scooter, bike and walk. Perfect for our city of 7500 inhabitants. »
Christian writes: “Even if I can afford an SUV, a Volvo or a BMW, I prefer a gas-efficient compact. I save, at the very least, $4,000 to $5,000 a year. »
René writes: “I live in a city with poor public transport, and I gave up car ownership 25 years ago. I walk, I use public transport, the train and occasionally rent a car if necessary. The key word is planning. When I go to a place or a direction, I think before leaving of everything that I must or can do on the way. I always have a bag, so I can bring something back. I didn’t die! My TFSA is all the better for it. »
The question of the week
What are your biggest lessons in investing?