A few weeks back, I had the joy of meeting Warren Buffett in Omaha, Nebraka, as part of a group of students at Cornell that Warren Buffett hosted for a morning of Q&A and lunch. We were among 8 schools that were visiting on the day, and there were some very interesting takeaways from the meeting. I will list summaries below, and my comments in parentheses.
Decision-making
Refrain from action until there’s a good reason and do so in an uninhibited way when you see the opportunity clearly (Soros and Paulson would agree). Price action affects emotion, so do not worry about that too much. Also, often people seek social proof; avoid it as much as possible.
Separate emotion from decision-making (obvious in some ways, but this is often attributed to money managers who use complex mathematical models to avoid emotion. Given that Buffett often makes decisions on buying a company within days, and at time hours, it tells that there’s a way to do so within our heads. I think it requires a special kind of intellect to be able to do so, and lesser investors like us will need to begin with models as a guides to ensure that we’re less affected by emotions).
Sign of a good company
When you forget price of the product. We remember experiences–good or bad, but forget prices over time.
When it has a product that you would walk across the street for.
When it has men hooked. According to Buffett, American men avoid making decisions, and if they find something that works, they simply stick to it.
What career to pursue
Do what you love (this one is obvious, but what is interesting is that Buffett replied with this answer when someone asked him what industries hold good prospects for young men and women today).
Go to work for someone you admire.
On his stand on tax policy
Historically, government spending has been 20-21% of GDP and income from taxes has been 18-19% of GDP, leading of 2% GDP deficit, which is easily sustainable. But, now, we spending going up to 25% of GDP (automatic stabilizers being a significant contributor), and getting only 15% of GDP in taxes. Spending needs to be cut down, yes, but income also has to rise back to 18-19% from 15%, and conversation on that seems to go nowhere.
Also, the often reported statistic that almost half the people don’t pay the income taxes is misleading. Income taxes account for $900bn of government’s income, and payroll taxes, which are rarely talked about, account for $800bn of government’s income. And, payroll taxes are paid by almost everyone, as are state, local and retail taxes.
Prasad Capital 