Berkshire Hathaway 2019 Annual Shareholders Meeting – Buffet and Munger Defend Investing in Amazon, Discuss Delayed Gratification, and Bash Bitcoin

Key Takeaways

  • “All investing is value investing” 
    • You’re putting up money now to get more money later on while making a calculation as to:
      • The probabilities of getting that money
      • When you’ll get it
      • And what interest rates will be seen in between
  • Charlie really regrets not recognizing the potential of Google earlier
  • “If you’re not happy with $50k or $100k, you’re not going to be happy with $50 or $100 million” – Warren
  • Warren and Charlie see investing in bitcoin as a gamble based on speculation – not an investment


Defending Amazon as a Value Investment

  • For background, Berkshire Hathaway has been buying shares of Amazon
  • Warren
    • Warren brings up a quote from Charlie – “All investing is value investing” 
      • You’re putting up money now to get more money later on while making a calculation as to the probabilities of getting that money, when you’ll get it, and what interest rates will be seen in between
    • Amazon, as a company, is definitely following value investing principles
    • On Amazon  – “They don’t necessarily agree with each other or agree with me, but they’re very smart, they are totally committed to Berkshire, and they’re very good human beings on top of it” 
    • There’s a famous saying – “A bird in the hand is worth two in the bush”
      • “When we bought Amazon, we were trying to figure out whether there were 3, 4, or 5 [birds] in the bush, how long it would take to get to the bush, how certain we were that we’d actually get to the bush, and who else would be coming to try to come take the bush away”
      • “Your success in investing is determined by how well you’re able to figure out how likely the bush is to exist, how far away it is, what the worst case scenario is (for instance, only 1 bird being there instead of 2), and the possibilities of 4, 5, 10 or even 20 birds being there”
  • Charlie
    • “If something as extreme as this internet development happens and you don’t catch it, other people are going to blow by you”
    • “I don’t mind not having caught Amazon earlier….but I feel like a horse’s ass for not identifying Google better and I think Warren feels the same way”
      • “Yep” – Warren
      • “We could see in our own operations how well Google advertising was working and we just sat there sucking our thumbs”

How does Warren value Berkshire’s insurance unit?

  • Note from Podcast Notes – this isn’t all that relevant but in short…
  • “It’s a very valuable asset…we would not sell it” – Warren
  • Berkshire’s insurance unit has $124 billion under management

How can kids develop the skill of preferring delayed gratification?

  • Charlie
    • “They come out of the womb being able to understand delayed gratification or they come out of the womb where they have to have everything right away, and I’ve never been able to change them at all”
      • “We identify it, we don’t try to change”
    • (Charlie has had 8 children)
  • Warren
    • “I don’t necessarily think for all families and all circumstances that saving money is the best thing to do in life”
      • There are things to be said for preferring enjoyment > trying to save every dime
    • “I’ve always believed in spending 2 or 3 cents out of every dollar and saving the rest” (sarcasm)
    • “If you’re not happy with $50k or $100k, you’re not going to be happy with $50 or $100 million”
      • A certain amount of money, up to security, certainly helps
      • “I don’t think people become happier when they get super rich….but they are happier when they no longer have to worry about money”
    • In summary – “Don’t go overboard on delayed gratification”

Succession Planning

  • As Warren and Charlie are getting up there in age, perhaps it would be worth it for people like Greg Abel, Ajit Jain, Ted Weschler, and Todd Combs to join Warren and Charlie on stage for future Annual Meetings and allow people to ask them questions?
  • Warren
    • “We’ve certainly thought about it”
    • “You could not have 2 better operating managers than Greg and Ajit”
    • These people aren’t on stage now, but people can certainly direct questions their way

On Bitcoin

  • Charlie was invited during the gathering to go to a “happy hour put on by the Bitcoin people”
    • “I tried to figure out what the Bitcoin people do in their happy hour and I finally figured it out…they celebrate the life and work of Judas Iscariot
      • According to Christian history, the apostle Judas Iscariot betrayed Jesus Christ for 30 pieces of silver. He revealed the identity of Jesus by kissing him on the cheek in front of soldiers who arrested him. (Credit)
      • Munger’s comment is indicative of the way many established financial institutions view cryptocurrencies: as an existential threat to traditional banks (Credit)
  • Warren
    • Warren recalls stopping in Las Vegas on his honeymoon
      • “I saw all these well-dressed people who had come from thousands of miles away…and they came to do something every damn one of them knew was mathematically dumb [gamble]”
      • “Imagine people playing Roulette….Bitcoin has rejuvenated that feeling in me”
        • So clearly, Warren sees investing in bitcoin as a gamble based on speculation — and not an investment.

These notes were edited by RoRoPa Editing Services

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Notes By MMiller

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