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Warren Buffett and Charlie Munger FAQ

nur0n 8y ago
> So, what we do is take money and move it around into other businesses. The newspaper business earned great returns but not on incremental capital. But the people in the industry only knew how to reinvest it [so they squandered a lot of capital]. But our structure allows us to take excess capital and invest it elsewhere, wherever it makes the most sense. It's an enormous advantage. Wow, they are playing the game at a higher order than I have even considered.
- valuearb 8y ago
  It’s always a circle of competency issue. Someone whose entire job is looking for good investments is going to find far more than someone running a business full time.
- ksec 8y ago
  But Berkshire Hathaway ( or the world in general ) is also at a point where they have too much capital and there are very little low hanging fruit ( comparatively speaking ). It is a lot easier to invest a few millions in a few very good small business, but once you need to invest hundreds of billions, all of a sudden you have very little choices.
JackPoach 8y ago
Wow, thanks for taking time to compile the list. It makes an interesting read. One thing - I wonder how many things that Warren or Charlie said 20 years ago they themselves no longer think are true.
cylinder 8y ago
> What are the economic characteristics that make Kraft a good business? WB: Most big food businesses are good businesses in that they earn good returns on tangible assets. If you own important branded assets in this country, and you have good assets, it is not easy to take on those products. Just imagine Coca-Cola. They sell 1.5 billion servings every day. It has been in everyone’s mind since 1886—associated with good value, happiness and refreshment. It is virtually impossible to take it on in a huge way. It may not be the same with Kraft. Kool-Aid, but I’m not sure I want to take on Kool-Aid. To implant RC Cola in people’s minds globally is very, very difficult. A brand is a promise. Coca-Cola delivers something to you. Virgin Cola — an unusual promise in a product—tried and couldn’t figure it out. Whatever it was, it didn’t work. Don Keough would know. Who would buy a can for two-cents-a-can less than Coca-Cola? We feel pretty good about branded products if they’re leaders in their field. There is nothing unusual about Kraft that’s different from Kellogg. Some good factors are price. If you don’t pay too much, you will do okay. But you won’t get superrich, as the attributes [of a strong brand] are well recognized. Source: BRK Annual Meeting 2008 Boodell Notes URL: Time: 2008 He was very wrong on this. Kraft just wrote-down $15 billion. Their brands have lost their "cachet." Nobody wants them nor needs them -- you're either buying a gourmet, healthy version (i.e. real cheese instead of the plastic block Velveeta) or a store's private label. https://www.irishtimes.com/business/retail-and-services/warren-buffett-was-too-american-to-see-through-kraft-1.3808217 https://www.irishtimes.com/business/retail-and-services/warr...
- ignoramous 8y ago
  In general, he's right you would think. Tough to displace a brand like Coke entrenched since 1886. Similarly, it might be tough to beat Apple/Disney at what they make for a while. Kraft might have faced other problems (poorly run or got disrupted or didn't acquire enough companies), but whatever it might be, it is an invaluable learning curve for them.
- paganel 8y ago
  And I'd imagine not many people associate "happiness and refreshment" with Coca-Cola anymore.
  - jjeaff 8y ago
    But maybe they do for Odwalla, Smart water, Dasani, Minute Maid, Vitamin Water, Zico Coconut Water, Nestea, Poweraid... The list goes on. They are wealthy and have unprecedented massive distribution. They can buy up any new upstarts before they even think about becoming a real competitor. And physical drink distribution is much, much more expensive to scale than something like an software competitor. It took Coca Cola 100 years to build their current network.
    - paganel 8y ago
      Originally Buffet was saying that he believes and invests in trusted brands, I was just saying that Coca-Cola the trusted brand is not regarded as highly as 15-20 years ago. And I’ve personally only heard about Nestea from your list of brands (I’m not an American) and as such I have a really bad opinion of the product behind said brand (I see it as sugary water masquerading as “tea”). Otherwise I agree, building a logistics holding company is hard, but Buffet said he invested in companies like Coca-Cola for their brand value not for their logistics know-how.
      - hisnameismanuel 8y ago
        Yes, you're right - one can dominate the cola industry, but if the cola industry itself goes away, one has serious problems. To your other point, Buffett doesn't always have the time to elaborate on each answer, so perhaps you missed it in this context. In general, a supreme distribution network is something that he values highly. It's known as having a 'moat' and is one of his most cited investing principles.
tim333 8y ago
Good stuff. It's going to take a while to look at all 463 of them.
lkhatter 8y ago
Another good site is mastersinvest.com
GuillaumeBrdet 8y ago
This is really cool, for someone trying to keep up with his advise that might be a great source to keep around.

> So, what we do is take money and move it around into other businesses. The newspaper business earned great returns but not on incremental capital. But the people in the industry only knew how to reinvest it [so they squandered a lot of capital]. But our structure allows us to take excess capital and invest it elsewhere, wherever it makes the most sense. It's an enormous advantage. Wow, they are playing the game at a higher order than I have even considered.

valuearb 8y ago
It’s always a circle of competency issue. Someone whose entire job is looking for good investments is going to find far more than someone running a business full time.
ksec 8y ago
But Berkshire Hathaway ( or the world in general ) is also at a point where they have too much capital and there are very little low hanging fruit ( comparatively speaking ). It is a lot easier to invest a few millions in a few very good small business, but once you need to invest hundreds of billions, all of a sudden you have very little choices.

JackPoach 8y ago

Wow, thanks for taking time to compile the list. It makes an interesting read. One thing - I wonder how many things that Warren or Charlie said 20 years ago they themselves no longer think are true.

cylinder 8y ago

> What are the economic characteristics that make Kraft a good business? WB: Most big food businesses are good businesses in that they earn good returns on tangible assets. If you own important branded assets in this country, and you have good assets, it is not easy to take on those products. Just imagine Coca-Cola. They sell 1.5 billion servings every day. It has been in everyone’s mind since 1886—associated with good value, happiness and refreshment. It is virtually impossible to take it on in a huge way. It may not be the same with Kraft. Kool-Aid, but I’m not sure I want to take on Kool-Aid. To implant RC Cola in people’s minds globally is very, very difficult. A brand is a promise. Coca-Cola delivers something to you. Virgin Cola — an unusual promise in a product—tried and couldn’t figure it out. Whatever it was, it didn’t work. Don Keough would know. Who would buy a can for two-cents-a-can less than Coca-Cola? We feel pretty good about branded products if they’re leaders in their field. There is nothing unusual about Kraft that’s different from Kellogg. Some good factors are price. If you don’t pay too much, you will do okay. But you won’t get superrich, as the attributes [of a strong brand] are well recognized. Source: BRK Annual Meeting 2008 Boodell Notes URL: Time: 2008 He was very wrong on this. Kraft just wrote-down $15 billion. Their brands have lost their "cachet." Nobody wants them nor needs them -- you're either buying a gourmet, healthy version (i.e. real cheese instead of the plastic block Velveeta) or a store's private label. https://www.irishtimes.com/business/retail-and-services/warren-buffett-was-too-american-to-see-through-kraft-1.3808217 https://www.irishtimes.com/business/retail-and-services/warr...

ignoramous 8y ago
In general, he's right you would think. Tough to displace a brand like Coke entrenched since 1886. Similarly, it might be tough to beat Apple/Disney at what they make for a while. Kraft might have faced other problems (poorly run or got disrupted or didn't acquire enough companies), but whatever it might be, it is an invaluable learning curve for them.
paganel 8y ago
And I'd imagine not many people associate "happiness and refreshment" with Coca-Cola anymore.
- jjeaff 8y ago
  But maybe they do for Odwalla, Smart water, Dasani, Minute Maid, Vitamin Water, Zico Coconut Water, Nestea, Poweraid... The list goes on. They are wealthy and have unprecedented massive distribution. They can buy up any new upstarts before they even think about becoming a real competitor. And physical drink distribution is much, much more expensive to scale than something like an software competitor. It took Coca Cola 100 years to build their current network.
  - paganel 8y ago
    Originally Buffet was saying that he believes and invests in trusted brands, I was just saying that Coca-Cola the trusted brand is not regarded as highly as 15-20 years ago. And I’ve personally only heard about Nestea from your list of brands (I’m not an American) and as such I have a really bad opinion of the product behind said brand (I see it as sugary water masquerading as “tea”). Otherwise I agree, building a logistics holding company is hard, but Buffet said he invested in companies like Coca-Cola for their brand value not for their logistics know-how.
    - hisnameismanuel 8y ago
      Yes, you're right - one can dominate the cola industry, but if the cola industry itself goes away, one has serious problems. To your other point, Buffett doesn't always have the time to elaborate on each answer, so perhaps you missed it in this context. In general, a supreme distribution network is something that he values highly. It's known as having a 'moat' and is one of his most cited investing principles.

tim333 8y ago

Good stuff. It's going to take a while to look at all 463 of them.

lkhatter 8y ago

Another good site is mastersinvest.com

GuillaumeBrdet 8y ago

This is really cool, for someone trying to keep up with his advise that might be a great source to keep around.