Warren Buffett and Charlie Munger: More than Investing

What would happen if you were to give two elderly gentlemen soda, candy, and a microphone in front of 40,000 people?  In the case of Berkshire Hathaway’s 50th annual shareholder meeting, the result was hardly what you would expect.

At age 84 and 91, respectively, the legendary duo of Warren Buffett and Charlie Munger are regarded as two of the wisest and most successful investors of our time.  For five hours they fielded questions from analysts, journalists, and the audience on everything from crunching profit numbers to life lessons learned.  Here are a few takeaways from their dialogue that can be applied not only to investing, but also to life in general.    

Control Your Emotions

"It's an easy game if you control your emotions," Buffett said. Many corporations and managers are evaluated on quarterly expectations and results. But investors and managers inhibit their ability to evaluate what makes a business successful when they make decisions based on short-term metrics. Our emotions are part of what makes us human. But, when we lead with our emotions and make rash decisions, we can end up creating greater opportunities for loss. Remember those investors who panicked after the 2008 crash and sold at rock bottom? Buffet and Munger make money by buying into businesses being sold at low prices—Buffett even acknowledged that he prefers to see the stock price go down in those companies. Why? So he can then buy a bigger share of a good company at an even greater value. This type of disciplined investing, which has made Berkshire so successful, is only possible if you don’t let your emotions get in the way.  

Keep It Simple

"If people weren’t so often wrong, we wouldn’t be so rich," Munger said.
Buffett and Munger have an extraordinary ability to distill the complicated world of investing into a simple value proposition. They don't make decisions based on macroeconomic data or the latest trends in investing. That’s not to say they don’t keep their minds open to new ideas. At age 84 and 91, respectively, they welcome new ideas, while attempting to avoid unnecessary risk for their shareholders. They stick with what they know:  finding quality, undervalued companies that will provide long-term returns.  As Buffet said, "I would rather be a hundred times too cautious than be one time too incautious, and it will stay that way for as long as I'm around."

Consider Each Investment as a Business

An investment, according to the Berkshire team, should be purchased for its potential growth over the long haul. Buffett said investors (especially young investors) need to learn how to value investments as businesses, and not just focus on short-term profits gained from buying and selling securities. He used the example of buying a farm or an apartment complex: You wouldn’t buy either of these businesses because you expect a huge profit next year. Neither investment will make you get rich overnight. You buy because of the potential return the farm or apartment complex can yield over time.  

Life Lessons

The duo’s lessons did not stop at investing.  Munger was asked by a young boy how to become well-liked by his peers and make friends.  In classic fashion, he replied that he wasn’t well-liked when he was young.  “The only way I could get people to like me was to get very rich and very generous.”  Munger also offered some marital advice, saying “In marriage, you shouldn’t look for someone with good looks or character.  You look for someone with low expectations.”  And finally, Buffett shared a large-scale view on human development.  He asked that meeting attendees, who came from all parts of the world speaking many different languages, take a look at the landscape below as they fly out of Omaha, Nebraska and imagine how everything looked in 1776.  The cities, roads, cars, etc. that we see today, according to Buffett, are all profit from human creativity to improve the world.     

Summary