a great investor. But when I first got started when I was 22,
I really didn’t know what I was doing. I’m fresh out of college from University
of Illinois. And I thought being a stockbroker was a financial
management or analyst type job. But after I actually started doing it, I realized it was
a sales job. And so, I went to one of the
most experienced people in our office at the time. We had about 100 and I think we had
105 brokers in our office. And Leo Samet, he was around 80 years old, and he had started with A. G.
Edwards 60 years prior. And he’s very successful. So, I went into his office, and I was like, hey,
Leo, I’m new, you’re successful. Can you share a few tips with
me on how to have a long career in this industry and be successful like you are?
And Leo is funny. I remember this like it was yesterday.
And this was I guess what, 30 years ago? Yeah, 30 years ago, this
happened. But it’s still so fresh in my mind. He looked at me.
I mean, it was probably just for like, maybe 10 seconds, but it seemed like it was for at
least a minute, like just sizing me up. And I guess in his mind, he was thinking,
should I really share the secret of success with this kid? And so,
he didn’t say a word. All he did was he put his hand on a piece of paper,
and he slid it over to me across his desk. And he goes, just put
all your clients in this. And what he slid me was a Value Line report on a
company called Berkshire Hathaway. And so, this is back in 1991. Berkshire Hathaway was less than
$10,000 a share. I think it was about $8,000 or something like that.
And he was like, just put all your clients in this. And I looked at
him, and I was like, my clients are not buying an $8,000 per share of stock.
Don’t you have anything that’s like $10 or $1, like a penny stock?
And that’s what I was thinking in my head because I didn’t know how to
value a company. I didn’t know what the value of Warren Buffett who
ran the company. I didn’t know how to value the free cash flow being generated by the company.
I didn’t know how to predict that interest rates might drop from 10% base or
down to zero over the next 30 years, which would increase the value of the company.
And so, I was just unaware. And so, I never bought the stock. And over the next 30 years, Berkshire
Hathaway went from $8,000 up to over, I think today it’s like $410,000 or so,
and they’ve never had a stock split. And so,
that’s where I learned that don’t pay attention to the price. The price is not what matters.
It’s the value that matters. And I equate that to Bitcoin today because
a lot of people are looking at Bitcoin at $61,000 a coin.
And they’re like, oh, I don’t want to buy it’s too high. I can’t buy a whole Bitcoin.
I’d rather buy like Dogecoin at 23 cents. And that just doesn’t
make sense to me. Because there’s a value to Bitcoin, there’s really no
.. “The Rebel Allocator” is the opposite of most business novels. Here, the rich capitalist isn’t an evil genius using genetic engineering to hijack the brains of newborn babies. Instead, he is a hero: an investing mastermind who regards allocating capital as a noble calling that improves other people’s lives.
Blunt and bristly, with zero tolerance for stupidity, Mr. Xavier spouts proverbs and zingers. A mash-up of Mr. Munger and Mr. Buffett, he often invokes their ideas.
.. Taking a shine to Nick, Mr. Xavier asks him to write his biography. Like many young people today, Nick wonders if becoming a billionaire is inherently immoral when poverty is still widespread.
Mr. Xavier teaches Nick what separates great businesses from good and bad ones. He uses three drinking straws, labeled “cost,” “price” and “value,” to demonstrate: When a business can charge a higher price than its goods or services cost, the difference is profit. When the value its customers feel they get is greater than price, that difference is brand or pricing power—the ability to raise prices without losing customers.
As Mr. Xavier moves the straws around, Nick learns that investing decisions can make the world a better place: “Good capital allocation means doing more with less to create happier customers,” says Mr. Xavier. “Profit should be celebrated as a signal that an entrepreneur provided value while consuming the least amount of resources to do so.”
.. “I have known no wise people who didn’t read all the time—none, zero,” Mr. Munger once said. “You’d be amazed at how much Warren reads—and at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
.. The money managers among them are “like a bunch of cod fishermen after all the cod’s been overfished,” Mr. Munger tells me. “They don’t catch a lot of cod, but they keep on fishing in the same waters. That’s what’s happened to all these value investors. Maybe they should move to where the fish are.”
By that, he presumably means not the bargain companies that have become almost an endangered species, but rather the great companies at fair prices that Mr. Buffett has been favoring for the past couple decades under Mr. Munger’s influence.
Warren Buffett said it would be “ridiculous” for the conglomerate not to do business with gun makers, noting that he doesn’t want to impose his political views on Berkshire’s investment decisions or business operations.
.. “I think what the kids are doing is very admirable, but I don’t think Berkshire should say we’re not going to do business with people who own guns,” Mr. Buffet said on CNBC. “I think that would be ridiculous.”
.. The companies could pare health-care expenses 3% to 4% through negotiating power alone, but the initiative intends to go further. Amazon CEO Jeff Bezos and JPM CEO Jamie Dimon are perfect partners, he said, because “we can make things happen. Our companies are big, yet we can still make things happen. We don’t have the bureaucratic problems or the constituency problems” that other large companies have.
He argued that the American Health Care Act, which passed the House this past week, amounted to “a huge tax cut for guys like me.” He also said rising health care costs, rather than high taxes, were the biggest drag on American businesses.
“Medical costs are the tapeworm of American economic competitiveness,” he said.
.. Yet Mr. Buffett and Mr. Munger stood by Wells Fargo and other Berkshire investments, including United Airlines and Coca-Cola. When a protester from Germany delivered a long speech decrying Coke, sugar and capitalism itself, Mr. Buffett said he would continue to drink his favorite beverage, Cherry Coke.
.. “Change is painful for a lot of people,” he said. “I think it’s absolutely essential to America that we become more productive, because that’s the only way we increase consumption per capita.”
.. Still, he allowed that he expected Berkshire’s next chief to already be rich after a career of business success. And in answering a question about how much that person would be paid, he took a swipe at compensation consultants who often urge corporate boards to pay their managers extravagant salaries. “If the board hires a compensation consultant, I’m coming back!” he joked.