Float

• Float is a liability that has not cost anything.

• It cannot disappear in a hurry.

• It finances the asset side much like equity.

Bad investment decisions

• Warren Buffett – We make bad investment decisions plenty of times. But I can’t recall any time in the history of Berkshire that we made an emotional decision.

• We made an emotional decision, perhaps, when a manager has been with us for a long period and they aren’t what they were earlier.

Artificial intelligence

• Charlie Munger – Skeptical of the hype in AI.

• Warren Buffett – There won’t be anything in AI that replaces the gene. AI can do all kinds of things. When something can do all kinds of things, I get a little worried. Because I know we can’t un-invent it. With AI, it can change everything in the world except how men think and behave.

Value investors

• Charlie Munger – I think value investors will have a harder time, now that there are so many of them competing. My advice to value investors “get used to making less”.

• Warren Buffett – “What gives you opportunities is other people doing dumb things”.

• The world is overwhelmingly short-term focussed.

Estate planning

• The biggest thing you want is that your kids get along. You don't want to mess it up with an estate. Warren does not sign a will until his kids have read, understood and given comments on his will.

• If you want to figure out how to live your life. Write your obituary and then reverse engineer your life. 

Succession

In future they have designed something to separate the insurance and the other areas of the business. But this will not be announced until it makes sense to do so.

Happiness

“The road to human happiness is to expect less.” - Charlie Munger

Berkshire Hathaway takeover

• Can Berkshire be taken over after Warren and Charlie? In future, there will be a limited group that can do a trillion dollar takeover.

• Neither Charlie or Warren are worried about this.

Reinsurance business

Margins are healthy. They have an unbalanced portfolio. If there is a big exposure to Florida. Ajit Jain is happy with the portfolio.

Short term profits vs long-term competitive advantage

Control your destiny. Berkshire has the freedom to own wonderful businesses forever. They learn as they go along on how a good business can maintain its competitive advantage over time.

Portfolio position sizing

Apple is not 35% of Berkshire’s portfolio. Berkshire owns a lot of other operating businesses too. Apple is a great business, better than other Berkshire businesses.

Diworsification

• “We are not so smart, but we know where the edge of our smartness is.” – Charlie Munger

• Charlie - you can ignore expert advice on diversification.

Relationship with China

There should be more trade with China. Each side (US and China) should respond with reciprocal kindness. – Charlie Munger

Electric vehicles vs Geico insurance

Geico is working with the manufacturers to come up with an insurance solution. You need information not only on the car, but also on the driver.

Index funds

Index funds aim to get business in cheaply and then get you into their other higher cost funds.

Share buybacks

• The Berkshire capital allocation framework has been laid out for 30 years.

• When the opportunity presents itself, Berkshire will look at share buybacks.

Berkshire succession

• Warren does not have a second choice to Greg Abel. Warren is 100% comfortable.

• Berkshire on auto-pilot can still do really well. Implying that Greg Abel has time to find his feet.

The secret of business

“The secret of business is to buy a good business” – Warren Buffett

Outlook on banks

• The situation is the same as always. Fear is contagious.

• The FDIC was enormously sensible to have set up.

• There should not be a worry about money in banks, since the FDIC has paid out 100 cents on the dollar.

Charlie Munger on investment banking

• I’m so old fashioned that I preferred it when banks did not do investment banking.

• I don’t think bankers wanting to get rich leads to good things.

Big banks vs regional banks

• A well run bank is a perfectly sensible investment.

• In 1969, Berkshire had 19 million in banks and had 17 million in insurance. The 1970 Bank Holding Act forced them to sell.

• Banking was more attractive than insurance to Berkshire before the law changed.

Munger quote

“I am deeply distrustful of situations where everybody wants to get rich but envies everyone else.” – Charlie Munger

De-dollarization

• Warren sees no option for any other currency to be the reserve currency of the world.

• Charlie: At some point printing money to buy votes will become unproductive.

Money printing

• Warren - it’s madness to keep printing money.

• The best investment is always in yourself.

Mistakes

• Write your obituary and try to figure out how to live up to it – Warren Buffett.

• You don’t want to make mistakes that take you out of the game.

• Spend a bit less than you earn.

Buffett advice

• Praise by name, criticize by category.

• I’ve never known anybody who was kind that died without friends. I've seen people with money die without friends.

Toxic people

• Get them out of your life. Do it fast. – Charlie Munger

• But do it tactfully. – Warren Buffett

Streaming wars

• The streaming business is interesting to watch.

• There’s a lot of companies doing it. You need fewer companies or higher prices.

• You cannot lock people up when they sign up for streaming.

• Anyone who knows that pricing will do in the future is fooling themselves.

Oil producers

• Half the oil production in the USA produces for years and years.

• In the Permian Basin, production is high on the first day but drops to almost nothing in 18 months.

• Shale oil wells die very quickly. 

Does Elon Musk overestimate himself?

• Charlie – Yes, I think he overestimates himself, but he is incredibly talented.

• Warren – Elon is a brilliant, brilliant guy. He dreams about things. There have been important things done by Elon. It requires a dedication to solving the impossible, every now and again they do it.

Berkshire cash distributions

• We would prefer to buy businesses.

• It isn’t killing us to hold $130 billions of T-bills at 5%.

• We will see what the world holds.  

What’s it like being in a big law firm?

“It’s like a pie eating contest where if you win, you get to eat more pie.” – Charlie Munger

What is the hardest part of your business and funniest story?

• Warren Buffett - We don’t have a hard business. We love our business.

• Charlie Munger – I think Warren and I are so ridiculous that we don’t need funny stories.

Incentives

• There’s nothing like working for yourself. But if you don’t own a big company then working for Berkshire is the closest you can get. You get a lot in the way of freedom.

• There are reasons to sell to Berkshire, and If we were on the other side, we would take the deal. But it isn’t for everybody.

NetJets joke

Warren Buffett – we couldn’t get Charlie to subscribe to NetJets [private jets] until we added a coach seat.

The auto industry

Warren Buffett - I think I know where Apple will be in 10 years, I am not sure where the auto industry will be in 10 years.

American business

Having 25% of the world’s GDP with a small percentage of the population, shows that there’s something to the system.

Accounting

• Warren Buffett - EBITDA was about as bad as I thought you could get.

• Why not have EBE - earnings before everything?

On family

Charlie Munger – I live my life my way. The grandchildren can follow it as an example or do it their way. I don’t like it when they do it their way.

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