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Friday, December 02, 2005

Wise guy

Having written two original posts last weekend, I'll take the easy way out and use borrowed content. I happened to read this interview with Warren Buffet earlier this week. Blunt, simple, witty and wise with his words and thoughts. Here's Warren Buffet (the emphasis is mine) on: Career advice

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. … 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.
Investing
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. Big money is made by obvious things. If using a discount rate of 8% vs. 10% is going to make or break an investment idea, it's probably not a good idea.
When Berkshire acquired a 90% stake in NFM in the 80's, Ms. B and I shook hands and signed a two-page agreement. There was no audit of the books, no due diligence, I trusted her integrity. When Wal-Mart sold me one of their operating units, their CFO came to my office, I gave him a price, he called Bentonville [Arkansas - Wal-Mart headquarters], and that day the deal was done. I know how Wal-Mart conducts business [very well], and when we took over the division, it was exactly how they described it. So integrity is a requirement. One of Berkshire's businesses is FlightSafety, the founder is dedicated to preventing deaths, he's not motivated by the next quarter's numbers.
His legacy
I think an example is the best thing you can leave behind. Obviously, you want to leave the right example. I mean, Wilt Chamberlain's tombstone may say, "At last, I sleep alone," and that's probably not the example you want to leave. If what I've done with Berkshire Hathaway - running a unique and independent company in true pursuit of shareholder value - persists and people learn from it to improve the way they invest and run their companies, that would be a fine legacy to leave.
His aversion for investing in technology companies
Technology is clearly a boost to business productivity and a driver of better consumer products and the like, so as an individual I have a high appreciation for the power of technology. I have avoided technology sectors as an investor because in general I don't have a solid grasp of what differentiates many technology companies. I don't know how to spot durable competitive advantage in technology. To get rich, you find businesses with durable competitive advantage and you don't overpay for them. 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. To me, all technology sectors look like 7-foot hurdles.
He has the honesty to say 'I dont know', in a topic (investing) where he could have gotten away saying any damn thing. Reminds the rest of us of how much we pretend. [Here's the link to the original article. Sorry for not providing this earlier. In reply to one of the comments, these are clearly Warren Buffet's comments. I have no pretense of offering such wisdom. Possibly, I have no wisdom!]

12 Comments:

At 7:25 PM, Blogger Akshat said...

Seems like an interesting interview. It will be great if you can provide a link to it.

aks

 
At 3:57 AM, Blogger Ananth said...

Hi,

Is the below mentioned material your view or Buffett's? While I have always believed in exactly that, a lot of people (incl. me) find it way too difficult or are misdirected. Lets take an example: Jobs in the VC field are too few and many students pursuing an MBA in top schools in the US who are very driven to land a job in a VC firm more often than not decide to take the IB/Consulting/Entrepreneur bridge towards a VC job. They sure gain very valuable experience enroute but a good number would have been talented and happy to get into a VC firm. Is this just being defensive or not being passionate enough???

Ananth

"...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."

 
At 4:52 AM, Blogger Ananth said...

Hi Anand,

I was just checking abt only that one particular comment for only one reason:
If it was your view - what do you think abt what I had to say?
If it was Buffet's - what do you think abt what I had to say!
:)
Ananth

 
At 2:19 AM, Blogger Kedar said...

Buffet is involved in business of public property insurance such as GEICO and I guess that business is run by discount rate of 8% vs 10%. Or should I quote their line as "15 mins could save u 15% on insurance".

Your comments regarding path are valuable, but it will be nice if u can explain in a post, why u choose the experience path and then landed here and how good it would have been if u got here directly.

 
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