2008 Warren Buffett - Must Read For Traders or Investors or Human

What does it take to become a successful investor? Brilliance or Smartness?

Neither, Success in investing doesn't correlate with I.Q. Once you have
Ordinary intelligence, what you need is the temperament to control the urges
That gets other people into trouble in investing.

When do you decide to invest in a firm?

The best thing that happens to us is when a great company gets into
Temporary trouble. We want to buy them when they're on the operating table.
(Mr. Buffett bought Coke when it had its biggest fiasco after launching New
Coke; he bought American Express when it went through a loss making phase in
The early 60's)

What do you look for in people when they come to sell their firms to you?

I don't look for the usual credentials such as an MBA, a pedigree (Harvard,
Wharton), or cash reserves or market cap of their firm. What I look for is
Just a passion in their eyes; I think that's the key. A person who is hungry
Will always do well. I prefer it when people even after selling stay on and
Work for the firm; they are people who can't wait to get off their bed to
Get to work. Passion is everything; there is no replacement for innate
Interest.


Mr. Buffett, you told us that Berkshire Hathaway has $ 45 Billion in cash.
Why aren't you investing?

Up until a few years back I had more ideas than money. Now I have more money
Than ideas.

When do you plan to retire?

I love my job; I love it so much that I tap dance to work. Mrs. B, the
Founder of Nebraska Furniture Mark worked until she was 104, she died within
6 months of her retirement, that's a lesson to all my managers, don't
Retire! I personally am going to work 6-7 years after I die, probably that's
What they mean when they say- "Thinking out of the Box"!!

Why do stock market crashes happen?

Because of human nature for greed and insecurity. The 1970s were
Unbelievable. The world wasn't going to end, but businesses were being given
Away. Human nature has not changed. People will always behave in a
Manic-depressive way over time. They will offer great values to you."

What are the things that are taught wrong in Business school and the
Corporate world?

I like such open ended questions, I think Business schools should refrain
From teaching their wards about profit making and profit making alone, it
Gives a sense of 1 dimensional outlook to the young students that loss is a
Curse. In reality, in the corporate world, failure and loss making are
Inevitable. The capital market without loss is like Christianity without
Hell. I think they should teach the student on how to buy a business, how to
Value a business? Not just on how to determine the price of a business.
Because price is what you pay, value is what you get.

Do you still hate Technology stocks?

With Coke I can come up with a very rational figure for the cash it will
Generate in the future. But with the top 10 Internet companies, how much
Cash will they produce over the next 25 years? If you say you don't know,
Then you don't know what it is worth and you are speculating, not investing.
All I know is that I don't know, and if I don't know, I don't invest."

How to think about Investing?

The first investment primer was written by Aesop in 600 B.C. He said, 'A
Bird in the hand is worth two in the bush.' Aesop forgot to say when you get
The two in the bush and what interest rates are; investing is simply
Figuring out your cash outlay (the bird in the hand) and comparing it to how
Many birds are in the bush and when you get them."

How do you feel after donating $ 40 Billion to the Bill and Melinda Gates
Foundation? You are a hero to us!
I feel nothing. I haven't sacrificed anything in life. I have had a good
Life. I donated after I turned 75. I think I admire those people who
Sacrifice their time, share their food and home, as the people to be
Emulated not me. Besides, what is money before a man's life?

What do you think are the pitfalls in donation?

I have never donated a dime to churches or other such organizations; I need
To believe in something before I end up doing that. I have been observing
The Bill & Melinda Gates foundation for years now and I am confident they
Will do a fantastic job of making use of the money. I am a big believer in
Outsourcing, others believed in me as an Investor and gave their hard earned
Money to invest. I believe in Bill Gates, he is a better donor than me.

Why do you work from Omaha and not Wall Street , New York ?

Wall Street is the only place where people alight from Rolls Royce to get
advised by people who use the Public transportation system. ( ha ha !!)

You seem to be so well read, tell us how it all started.

My father was a stock broker, so we had all these financial books in our
library. He introduced me to those classics and I got into them. I am lucky
that my father was not a fan of Playboy! Reading is the best habit you can
get. Well, you can learn from teachers too, and have mentors but there are
so many constraints attached- they will talk fast, talk slow, they might
talk like a pro or they might be terrible communicators. Books are a
different animal altogether, I love reading! The beauty about reading and
learning is that the more you learn the more you want to learn.

People who join Berkshire Hathaway seldom leave. How do you get along well
with all your executives?

I try to get quality people. I always say - Hire someone in your
organization who is better than you are. If you do that, you build a company
of giants. If you get people worse than yourself, you build a company of
dwarfs. And do not try to do everything yourself. Delegate the jobs and look
out of the window. The results will come. That's how you build institutions.
It happens only when you empower others, believe in others. Iam an investor,
Iam very secured at that, I have no clue how to make Coca-Cola or how to
dole out credit cards (Mr. Buffett owns 8% of Coca-Cola and 13 % of American
Express). I understand the wisdom of the aphorism that you cannot please all
the people all the time. Of Course, you will always find qualities that you
don't like in people around you, but if you observe carefully the love of
the work unites you both. There is no point in being obsessive about a bad
quality in a person, whom you otherwise respect.

I am a small time businessman from Dallas , Texas , what do I need to do to
hit big time?

Be patient, Achieving your financial goals and dreams will not happen
overnight. As much as we would all really love to accomplish our goals in a
few years, this is an ongoing process. Defining your financial goals is not
a one-time task; you need to keep adding new plans at different stages in
your life. We all admire the skills of Olympic ice skaters, pro golfers, and
concert pianists. But do we remember that they didn't acquire their skills
overnight? They had to practice hours on end for years to achieve their
dreams. The key to success is to continue learning throughout your life with
a voracious appetite.

I think it is marvelous that you have had a golden run with investing, how
did you do that?

My rule is to be fearful when others are greedy, and be greedy when others
are fearful. Besides, I call investing the greatest job in the world because
you never have to swing. You stand at the plate; the pitcher throws you
General Motors at 47! U.S. Steel at 39! And nobody calls a strike on you.
There's no penalty except opportunity lost. All day you wait for the pitch
you like; then when the fielders are asleep, you step up and hit it. Stay
dispassionate and be patient. You're dealing with a lot of silly people in
the marketplace; it's like a great big casino and everyone else is boozing.
If you can stick with drinking Coke, you should be OK. First the crowd is
boozy on optimism and buying every new issue in sight. The next moment it is
boozy on pessimism, buying gold bars and predicting another Great Depression
most people get interested in stocks when everyone else is. The time to get
interested is when no one else is. You can't buy what is popular and do well


Mr. Buffett you have seen so many crashes and recessions, your take on
facing recessions and stock market crashes?

If past history was all there was to the game, the richest people would be
librarians. Every scenario is different. But always remember, Tough times do
not last. Tough people do.

What is the 1 biggest advice you would impart to a young investor like me?

Think for a moment that you are given a car and told this is the only car
you would get for the rest of your life. Then you would make sure that you
car is taken care of well, it is oiled and detailed every now and then. You
would make sure that it never gets rusted, and you would garage it. Think of
yourself as that car. You just get 1 body, 1 mind and 1 soul. Take care of
it well. Invest in yourself that would be my advice.

You personally know many of the Financial executives who are engineers of
the current turmoil in the financial world, surprisingly even after record
losses, those executives receive astronomical salaries and bonuses and
arrogantly declare that they deserve it, why dint you advice them from
making such decisions and what's your view on their justification for their
pay?

I like sharing my ideas but don't like imposing my ideas on anybody. It
doesn't make sense and is a waste of time. If somebody has decided that they
know everything that is there to know, nobody can help them. The best way to
learn and succeed is to know that we know nothing. There is an entire
universe out there and still some of us think we can know everything. In the
world of investing a few people after making some money tend to imagine they
are invincible and great. This is the worst thing that could happen to any
investor, because it surely means that the investor will end up taking
unnecessary risks and end up losing everything – arrogance, ego and
overconfidence are very lethal. Personally I don't feel too comfortable with
too much extravagance, because I always think like an investor. My thought
process doesn't see a lot of value in a fancy car or a designer suit.
Thinking like an investor always is very important to bring in a sense of
discipline and focus. Before reading balance sheets and investing you need
to make sure your outlook and mindset is that of an investor. Never let ego,
arrogance and over-confidence control you - not just as an investor but also
as a human being. You will never have internal peace if you are unable to
look at everybody around you with love, compassion and understanding.
Irrespective of who the person is, he or she can teach you something you don
t know. I have learnt so much from people all around me and I wouldn't have
been able to learn all these wonderful things if I had not spoken to them
with a smile. To quote Sir Isaac Newton- If I have seen farther than others,
it is because I have stood on the shoulders of giants.


It was a 7 hour conversation and I could just capture some of the best
questions and answers. As 37,000+ dazed, amazed and grateful shareholders
trooped out of the stadium after the meeting, I found myself recalling one
of my favorite quotes-

"A man has to learn that he cannot command things, but that he can command
himself; that he cannot coerce the wills of others, but that he can mold and
master his own will: and things serve him who serves truth; people seek
guidance of him who is master of himself".