Each year we look forward to Warren Buffet’s annual letter to shareholders. His latest letter was published this weekend and as usual, was packed with lots of wisdom. The key message of the letter was to focus on the big picture over the long term, rather than higher inflation and other factors in 2022 that dampened stock prices. In short, his message was - investors should not bet against America. Buffett wrote, “I have yet to see a time when it made sense to make a long-term bet against America. And I doubt very much that any reader of this letter will have a different experience in the future.” A reassuring reminder of the long-term power of investing in the USA in these uncertain times. He also discussed the importance of choosing your business partners well, below is a summary of the wisdom of his long-time business partner, Charlie Munger, that he shared in the annual letter:
• The world is full of foolish gamblers, and they will not do as well as the patient investor.
• If you don’t see the world the way it is, it’s like judging something through a distorted lens.
• All I want to know is where I’m going to die, so I’ll never go there. And a related thought: Early on, write your desired obituary – and then behave accordingly.
• If you don’t care whether you are rational or not, you won’t work on it. Then you will stay irrational and get lousy results.
• Patience can be learned. Having a long attention span and the ability to concentrate on one thing for a long time is a huge advantage.
• You can learn a lot from dead people. Read of the deceased you admire and detest.
• Don’t bail away in a sinking boat if you can swim to one that is seaworthy.
• A great company keeps working after you are not; a mediocre company won’t do that.
• Warren and I don’t focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time.
• Ben Graham said, “Day to day, the stock market is a voting machine; in the long term it’s a weighing machine.” If you keep making something more valuable, then some wise person is going to notice it and start buying.
• There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count on getting rich twice.
• You don’t, however, need to own a lot of things in order to get rich.
• You have to keep learning if you want to become a great investor. When the world changes, you must change.
• Warren and I hated railroad stocks for decades, but the world changed and finally the country had four huge railroads of vital importance to the American economy. We were slow to recognize the change but better late than never.
• Finally, I will add two short sentences by Charlie that have been his decision-clinchers for decades: “Warren, think more about it. You’re smart and I’m right.”
