Patience and discipline. And doing something you love.
If you're doing something you love, you're more likely to put your all into it, and that generally equates to making money.
But investors don't necessarily have the patience to wait for the great company with the great underlying economics at the right price. When Warren bought Dairy Queen, I joked, "He probably wanted to buy it when he was eight years old, but it wasn't the right price." So he waited 50 years or so.
Predictable products equal predictable earnings. So you know, for instance, that if the stock market dropped tomorrow people would still be drinking Coca-Cola, people would still be shaving, people would still be chewing gum. Warren says, "I don't think the Internet is going to change how people chew gum." He looks for businesses that he can predict where they'll be in 10 or 15 years. Warren says he never gets good ideas talking to people, He says, "My idea of a group decision is to look in the mirror." He has a history of standing alone that dates back to the early days of his investments. Most of the stocks of the companies he's bought, he bought when no one wanted them.
Warren believes that if he doesn't understand a business, it's not worth looking at it, even if the business is popular at the time. If he can't find an investment that's selling at an attractive price, he'll wait and wait and wait. In the late 1960s he wrote to his investing partners that he couldn't find any investments that he understood at attractive prices. He waited until 1973 when the stock market collapsed and some of the best companies were selling at bargain prices. Pick the wrong company at the right price and you lose. Pick the right company at the wrong price and you lose. You have to pick the right company at the right price and to do that you have to wait and wait--patiently.
Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it - even though others may hesitate or differ". (You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.)
We only buy companies where the seller cares about where the business goes.
What is your career advice?
A: If you want to make a lot of money go to Wall Street. More importantly though, do what you would do for free, having passion for what you do is the most important thing. I love what I do; I'm not even that busy. I got a total of five phone calls all day yesterday and one of them was a wrong number. Ms. B from NFM had passion, that's why she was successful. A few months ago I was talking to another MBA student, a very talented man, about 30 years old from a great school with a great resume. I asked him what he wanted to do for his career, and he replied that he wanted to go into a particular field, but thought he should work for McKinsey for a few years first to add to his resume. To me that's like saving sex for your old age. It makes no sense.
When making investments, pretend in life you have a punch-card with only 20 boxes, and every time you make an investment you punch a slot. It will discipline you to only make investments you have extreme confidence in. Back in 1951 Moody's published thick handbooks by industry of every stock in circulation. I went through all of them, thousands of pages, motivated by the hope that a great idea was just on the next page. I found companies like National American Insurance and Western Insurance Securities Company that nobody was paying attention to that were trading for far less than their intrinsic values.
How do you identify extraordinary business ability? A: Again, passion.
Q: You've spoken about the importance of getting on the right train early in your career, how do you identify the right train?
A: Don't pay attention to beginning salaries. My first job with Benjamin Graham I accepted before I even knew what the salary was. Do what you're passionate about.
The major themes Mr. Buffett spoke about--do what you're interested in, have passion, always act with integrity, don't follow the crowd, respect your community, the best ideas are the obvious ones卆ll crystallized in the car ride.
Q: I worked in the paper and packaging business this past summer and really enjoyed my experience. None of my classmates are interested in the paper business and the company I worked for has not had MBA interns in years. Clearly the paper business has its challenges, but do you see this as an opportunity or a roadblock?
A: Well, you've got it right that the paper business is challenged. High capital intensity, low margins, cyclical. It is a brutal business; no one cares who made the box their Dell computer came shipped in. In general, commodity businesses, even you're the low-cost producer, are difficult. There are generally two recommendations I offer to college and business school graduates. The most important thing about where you work is that you admire/love it. So it sounds like you liked your experience, and that's great. But we come to my second recommendation, which is to get on the right train; that is, moving in the right direction. There's no course in business school called "Getting on the Right Train", but it's really important. You can be an average passenger but if you get on the right train it will carry you a long way. You want to learn from experience, but you want to learn from other people's experience when you can. Managing your career is like investing - the degree of difficulty does not count. So you can save yourself money and pain by getting on the right train.
When you consider an acquisition, what are the first things you look for in a management team?
A: Well, what do you look for in a girl? Seriously, you look for the logical things - passion, an interest in running the business, honesty. Such as, do they love the business, or do they love the money? This is the first filter. I mean real passion.
Technology is based on change; and change is really the enemy of the investor. Change is more rapid and unpredictable in technology relative to the broader economy.
The meaning of life is to do everything you can to make sure the people you care about love you back.
-------FAST IS SLOW------
He emphasized it many times during the conversation. When we drive to work from home, we are usually reminded by family members to "drive safely"; nobody wants us to drive fast and get accidents, while in investment, people are eager and encouraged to get rich quick! But that is just a recipe to get rich slower, or worse yet, get wiped out faster.
what would Mr. Buffett do if he had lots of cash, but could not find many opportunities (as is true for Mr. Buffett right now)? What would Mr. Buffett do if he had very few cash, but just found a great investment opportunity, would he use margin, or otherwise get some loan? For the first question, Mr. Buffett said to do nothing, which was the most difficult thing to do. For the second question, Mr. Buffett said not to use margin, no loan. As Mr. Buffett said, he knew he would be rich, very rich, when he was young. So what is the point to get 2% faster this year or next year? There is no need to be hurry. You only need to be rich once. A long string of fabulous numbers times 0 is always 0, so you do not want to be rich again.
Q: Did you need any courage to buy NetEase when it was facing delisting?
A: "I do not need any courage, actually I do not have any courage in investment. When you are buying something with more than $2.5 cash per share for 80 cents, you really do not need any courage.