Attend the Berkshire Annual meeting and you’ll quickly realize it’s a bit like drinking from a fire hose. There is an astounding amount of content covered during this event and every word spoken carries an immense amount of meaning and content. Summarizing six hours worth of wisdom is no easy task but here’s my best attempt.
1.) Focus on the big picture and stay the course – Warren acknowledged the “noise” in the markets, whether it be interest rates, trade, or politics. He overlayed that with countless observations and statements proving that there’s always been noise. He has lived under 14 of 44 presidents (7 republican, 7 democratic), he’s lived thru wars and terrorist attacks, he’s witnessed all levels of interest rates – and yet, throughout it all, GDP per capita has increased 6 times and the stock market has gone from Dow 100 to Dow 24,000. We’ll never get rid of the noise – but we can put in some earplugs and continue to invest in businesses
2.) Productive vs Non-productive assets – when asked about Bitcoin, Warren and Charlie focused squarely on the distinction between productive and non-productive assets. With a productive asset (like a stock or a farm), you benefit from ongoing cash flow and appreciation in the price of the asset. With non-productive assets (like bitcoin or gold), all you are counting on is that the next person will pay you more (based upon their belief that someone else will pay them more). You are speculating on price – not owning an asset that has the ability to produce something on your behalf. Always know what you own and why you own it
3.) Trade – As they simply stated, everyone wins when there is free trade. US and China are the dominant economies in the world and Warren & Charlie don’t anticipate either will do anything foolish when it comes to trade. Warren did remind us that some citizens (ie: US factory workers) may be personally harmed by trade negotiations and that America must not leave them behind
4.) Perfection is unattainable – Even Warren and Charlie make mistakes. They openly admitted to having missed the opportunity in Google and Amazon. They acknowledged the damage that has been done at Wells Fargo. They expressed challenges in putting cash to work for new deals. They reminded the audience to always keep learning (from mistakes and successes)
5.) If you are in a position to try, you should– Health care costs have risen to 18% of GDP (from 5% of GDP in 1960). No one would disagree that the system is in need of major improvement. Berkshire has joined forces with JP Morgan and Amazon to explore solutions and refinements to the health care system. Warren and Charlie both acknowledged it wouldn’t be easy – but as Warren said “We are in a better positioned than most to try – and so we should do just that”
181 years of combined wisdom (between Warren and Charlie) was a privilege to experience. I have at least 50 more takeaways that will make me a better student, investor, learner, and human being. Thanks again for having us. Until next year!
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