Berkshire Hathaway Transcript 2009 Annual Meeting with commentaries

OWH has the most detailed Berkshire Hathaway “transcript”/”play by play” for the 2009 annual meeting that I’ve found. Hope you enjoy the Q&As with Warren Buffett and Charlie Munger.

My BRK AGM question (Thanks Carol)

I am really happy the super insightful Carol Loomis picked and asked the question I sent her (thanks Carol),

“1:22 Carol Loomis of Fortune magazine asks for a shareholder who e-mailed the question what Berkshire is doing to restore its triple A rating, Buffett says it will not turn around anytime soon because credit agencies [...]“

Note: See following commentaries section (marked by @1:22) for my detailed response/concern in Warren’s answer to my question.

[HT: Special thanks to Marcelo, Alice and also Sahil for sharing their insight in this Snowball Facebook group discussion thread that helped me to formulate the question.]

My commentaries on selected items in the AGM “transcript”

@9:03: Hmmm, I thought the magazines were not just any “magazines” but old Playboy magazines (big smile) if I remember right from another article (WSJ?) describing the annual movie.

@10:17: Hmm, Warren is theoretically right that “one or more investment managers do not have to actions right away” but I think Warren is wrong in potentially delaying the announcement of the replacement investment manager(s). A month or so of extra volatility, waiting, and guessing for BRK investors/speculators, I am not sure if I can agree with Warren on this.

@10:59: Re a question about the federal stimulus bill “Buffett says when the consumer pulls back the way they have, government needs to step in. Buffett also says there will be consequences. “I think we should be doing it, but we shouldn’t think its a free ride.”” Translation: we should do it, but there will be some pain later.

@11:47: “Buffett is asked about Berkshire buying back its own shares. Buffett says most of repurchasing of shares recently has been foolish because the stocks were too expensive. ” [Interesting. I wonder what are some of these companies?]

@11:52: Good question, interesting answer. “… shareholder asks about opportunity costs of recent decisions made by Berkshire.” “Buffett says he does live the opporuntity to make those kinds of decisions. Buffett says he had not faced in quite some time the kind of opportunities it saw last year.”

@1:11: Re BYD, “Munger says engineering graduates are being hired at BYD who were at top of their classes. He says it is a remarkable compilation of talent. Munger says lithium batteries are needed in every utility company in America and using power of the sun will need batteries. Berkshire has invested in BYD and Munger says it is not a crazy venture. Munger says that car to be seen in the Qwest Center Omaha, the company makes almost every part in that car.”

@1:15: Re inflation, “Buffett says it is an unprecendeted period but inflation is almost inevitable. Munger says he has seen a lot of inflation in his lifetime, so a little inflation wil not ruin lives. Munger says the trick is to avoid the runway.“

@1:22: Thanks Carol for asking the question I sent. In Warren’s answer, I don’t understand how can the downgrades of BRK and all its subsidiaries have no “material effect on borrowing costs”?? Now, hearing “Buffett says Berkshire is still a Triple A in his mind” is nice as Warren is holding firm to his “inner score card“. Of course, to me, “in the minds of one credit rating agency that still has Berkshire at Triple A” is nothing to write home and brag about. Hmm, “Buffett says it is not material , Triple A“, really? Now, I am actually concern (”disturb” may be too strong) to read

“… Triple A, but losing it at Moody’s still irritates him. Munger says Moody’s will turn around, because Berkshire deserve it and people at Moody’s are smart. Following on that comment, Buffett says when he and Munger disagree, Munger often will say “eventually you will agree with me because I am right and you are smart.”“.

If I were the credit analyst at Moody’s rating BRK and if I still want to maintain any resemblance of credibility, I would have to be the LAST analyst to raise BRK. BRK owns ~20% of Moody’s, in my humble opinion, Warren and Charlie should have known better and not to say anything like the above in BRK AGM. I guess I might have been too strict here. But I really don’t want to read this as a WSJ headline,

“Moody’s forced to raise BRK to AAA after strong words from Warren Buffett“

Sorry Warren, your and Charlie’s words failed your famous “Salomon Headline Test“.

@2:27: Interesting question and answer re comp. “A shareholder asks about

Psychologist Mihaly Csikszentmihalyi – Great minds our of time

The psychologist Mihaly Csikszentmihalyi (pronounced “CHICK-send-me-high) has influenced my thinking the most through his book/audio book Creativity: Flow and the Psychology of Discovery and Invention and Flow. Highly recommended.

Here is Mihaly on Positive Psychology,

Strangely I enjoy the above brief interview more than this 2008 TED talk,

I think Mihaly is much more insightful than what he showed in the TED talk.

Here is Mihaly being interviewed on European TV (contain non-English (German?) dialog which I skipped. Even I don’t understand the non-English part, I enjoy these videos the most. Highly recommend.

Experience Design – Bill Buxton @ MIX09 Keynote

Bill Buxton is one of the people I respect very much and he was the first person I picked, for fun, in my personal list of “Great Minds of Our time“.

Here are some blogger’s notes.

Check out the interesting Nerd Stalker’s interview part 1 and part 2 as well.

Outliers: Book Title Chinese Translation

Book title translation (in this case, Malcolm Gladwell’s “Outliers: The Story of Success”) is one of the toughest translation task I have ventured into recently (actually, last night). Book title translation is really difficult because the few words in a book title, in a sense, are the most important words in a book. Why? Because a good book title will entice people to pick up the book, check out the book, and may even end up buying the book. So the translator has to really understand what the book is about to come up with a good and fitting title translation.

I am not saying my skill in translating book title is any good. Far from it, I think my suggestion can probably be improved with more time and careful thinking. But the important thing is there are lessons to be learned everywhere. And I am trying to learn them wherever I am.

In this case, I have read the book “Outliers: The Story of Success”, and decided it will be nice to try to engage in a dialogue with Mr. Lam (林行止先生) and see if my insights can move the discussion forward.

Here is my blog entry 與林行止先生談談 “Outliers: The Story of Success” 書名的翻譯. If you read Chinese, I hope you will enjoy it as much as I did in writing it.

Best Snowball presentation

Here is, in my humble opinion, the best Snowball (the biography about Warren Buffett) presentation that Alice has given so far. Enjoy. (Presentation starts at 6:00 or 7:00 mark. BTW, I’ve listened to this talk three times now to let the ideas slowly sink it. I will probably listen to it a few more times.)

The Snowball: Warren Buffett and the Business of Life – What a great read

I’ve finally finished reading/reviewing and picking “best of” pages from the 960 pages“The Snowball: Warren Buffett and the Business of Life” (check out my longish review/”best of” here). Alice Schroeder (link to Alice’s Facebook fan page) has become the de facto expert on all things Warren. The kind of access Warren has granted Alice is just unbelievably detailed and very personal. And it takes the openness of Warren to promise, “Whenever my version is different from somebody else’s … use the less flattering version.“

Don’t let the thickness of “The Snowball” intimidates you. If I can read it, I am sure you can too. (smile) Read and learn from the insights of Warren Buffett and may be you can make or save some money in your own investments.

“The snowball just happens if you’re in the right kind of snow, [...] I don’t just mean money either. It’s in terms of understanding the world and what kind of friends you accumulate. [...] You’d better be picking up snow as you go along, because you’re not going to be getting back up to the top of the hill again. That’s the way life works.”

Buy a copy of the book from your locally run bookstore, or Amazon, or Chapters.

P.S. If you can’t afford to buy a copy right now, I say borrow a copy from your local library but you will likely have to wait. In Calgary, there are currently 102 people waiting for a copy. At the end of the day, just read and learn. The advantage of having your own copy is that you can make your own personal notes.

Outliers: The Story of Success 《非凡之輩: 勤有功，時與我》

March 27 Update: 與林行止先生談談Outliers書名的翻譯
– 我的第二個「試譯」《非凡之輩: 勤有功，時與我》

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Malcolm Gladwell’s new book Outliers: The Story of Success 《表表者的故事: 勤有功,時與我》 is a book that I highly recommend. It just happened that my friend Lap has forwarded a group of us 林行止’s article “漁火偷渡客 江上數峰青” (which was also referenced by my blog friend Ming).

I am enclosing the following edited discussions and turning it into a blog entry.

Note: Do check out my previous blog entries on Gladwell: the now famous TED spaghetti sauce 18 minutes video presentation and pooling of risk. More videos here and here.

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Happy to engage in this discussion. I just hope others are not totally bored by us. :)

Gladwell talks about his book “Outliers – the Stories of Success” on this page.

林行止 gives it a temporary Chinese title《表表者之勤有功》. I agree with his decision of not doing a literal and direct translation of “the Stories of Success” because it doesn’t tell us much. And the reason of him using “勤有功” is because Gladwell, the author, talks about the 10,000 hour rule (see here).

You can only starting to become an expert if you have spent about 10,000 hours on something (piano, chess, drawing, painting, etc). And spending 10,000 hours on something can be said of 勤有功.

The problem and flaw of 林行止 in using only 勤有功 is that he ignored to mention the other important factors like cultural and timing, etc. Again, in the book, Gladwell talks about the math ability of Asian kids (whether you agree with his supports or not is a different topic) the Chinese cultural is one that historically rise up real early to take care of their rice fields and that Chinese words of numbers are shorter to pronounce, etc.
http://www.gladwell.com/outliers/outliers_excerpt3.html

And in the example of Bill Gates in 1968, when Gates was only 13, he (and along with Microsoft co-founder) was the only kid that has unlimited access to time-share computer resources for him to learn about computer and computer programming. And this is the reason that I added “時與我” to “勤有功”. If we have “勤有功” alone, it gives the false impression that you are really smart or you put in your 10,000 hours, than you can be Bill Gates. Wrong! Timing makes a big difference. Our individual culture makes a big difference. Who our parents are, who their friends are, what kind of businesses they are in, what kind of societies they and we live in matters, etc.

Galdwell also talks about and analyze the tragic case of Korean airline crashing a few years ago (based on the cockpit voice recording). It was painfully sad to hear that story. The Korean culture of totally respecting and obeying their seniors or the authorities were parts of the reasons that lead to the tragic consequences of the plane crashing. Part of the steps to make it safe to fly again in Korea again was to change the Korean culture and the way they speak in the cockpit environment.

The Calgary library has the 61 copies of the book and 17 copies of the CD book (read by the author) or you can pick it up from Amazon (the site has a video).

Here is an excerpt from Gladwell’s Q&A,

11. What do you want people to take away from Outliers?

I think this is the way in which Outliers is a lot like Blink and Tipping Point. They are all attempts to make us think about the world a little differently. The hope with Tipping Point was it would help the reader understand that real change was possible. With Blink, I wanted to get people to take the enormous power of their intuition seriously. My wish with Outliers is that it makes us understand how much of a group project success is. When outliers become outliers it is not just because of their own efforts. It’s because of the contributions of lots of different people and lots of different circumstances— and that means that we, as a society, have more control about who succeeds—and how many of us succeed—than we think. That’s an amazingly hopeful and uplifting idea.

P.S. For those that love audio book, the 7 CDs unabridged Outliers is read by Gladwell himself.

P.P.S. Interesting, someone has given Gladwell’s book this translation 《表表者之勤有功、勢要就》 and also collected the birthdays of some of the Hong Kong super rich.”睇《福布斯》特區富豪榜同維基百科，李嘉誠1928年出世、李兆基1928、鄭裕彤1925、霍英東1923、陳廷驊1923、何鴻燊1921，拉闊小小仲可以包括1918年出世嘅包玉剛。”

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Jan 14, 2009 Update: An interesting piece from CBC “The Charming Malcolm Gladwell“.

10 people in The Snowball

After I finished reading The Snowball, here is my personal list of 10 people in Warren Buffett’s life that helped me understand him more,

1. Susie Buffett (Warren’s first wife) (video, as remembered in the Charlie Rose interview) (wikipedia)
2. Ben Graham (teacher)
   
3. Charlie Munger (partner)
4. Kay Graham
5. Carol J. Loomis
6. Bill and Melinda Gates
7. Alice Buffett (Warren’s Aunt)
8. Leila Buffett (Warren’s mother)
9. Astrid Buffett (Warren’s second wife)
10. Alice Schroeder (biographer)

The Snowball: 960 pages Finished, End of the Beginning

I’ve finally finished the 960 pages The Snowball: Warren Buffett and the Business of Life. Yes, 838 pages of text, pages of notes (I’ve read not all but many of these notes), and I will be using the index pages for researches to write a few more blog entries.

Now, I will and am ready to finish my “review/best of” selections (which I ended at chapter 18 when I last updated it). Stay tune.

P.S. I am excited not just because I finished the book but how I am looking forward to how I can apply what I learn from the book (which is why I said it is the “End of the Beginning”).

Rebel Without Applause – The Snowball

Find more episodes here. See my book review/”best of” picks here.

Milton Friedman under attack (again)

Globe and Mail has this report about Friedman under attack. See my previous blog entry about this ill-reasoned attack against Friedman.

PBS interviews Alice Schroeder on her new Warren Buffett bio (The Snowball)

Some good info in this PBS interview of Alice. Also check out this CNN interview of Alice. Here is a C-SPAN video of Alice speaking in Omaha bookstore at the book launch.

HT: Alice Schroeder on Facebook.

Warren Buffett UNC Talk 1996

While I tried to (and failed to) find the full video for recent 2008 Oct Warren Buffett chat with college students, I found this 1996 Warren Buffett UNC Talk which you may enjoy. Here is Part 1 and you can find other parts there.

Videos from The Snowball Warren Buffett bio author Alice Schroeder

To me, it is priceless to see this collection of YouTube videos from TheSnowballBook. The following is part 1 (out of 3 parts already posted here so far with more to come).

See also my review/best of “The Snowball: Warren Buffett and the Business of Life”. Become a fan of Alice Schroeder on Facebook and leave Alice a comment or question.

Warren Buffett: “Buy American. I Am.” – In waiting for the comfort of good news, investors are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

In time of a seemingly hopeless global crisis, the hope is more will be informed enough to hear the right advices from the likes of Warren Buffett in his New York Times op-ed piece “Buy American. I Am.” Here is an excerpt (emphasis added),

In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

[...] Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

I wish you can and will make a right and wise decision based on your own personal circumstances.

HT: CNBC Warren Buffett Watch

Did Warren Buffett buy into Encana, Nexen, etc?

Dec 25, 2008 Update: Hmmm, I stand corrected. Buffett certainly didn’t buy Encana or Nexen in sufficient quantity to be required to file a SEC report. But he did increase his holdings in ConocoPhilips.

Oct 17, 2008 Update: Now we know Warren has been buying some solid American companies recently for his personal portfolio as expected. With the level of fear in the market, this may be somewhat helpful for the market but may not last long. Will see.

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Taking a page from the learned but totally ignorant & irresponsible Wall/Bay street analyst, allow me to make some wild and unfounded guesses. I am going to openly wander if Warren Buffet has taken advantage of the recent Global Financial Crisis in buying into deeply discounted Canadian companies like Encana, Nexen, etc last week?

Many people know that Warren Buffet and Bill Gates visited Fort McMurry some weeks ago to learn more about oil sand operations. At the time, I think Warren specifically said something like he wasn’t going to invest but may be in a few years. Well, Warren has been reading Oil & Gas Journal for years, since the 1950s or earlier, so I wouldn’t be surprised if he knows a thing or two about Oil & Gas. Now, with the share prices of these companies (Encana, Nexen, etc) dropping like a stone recently, he might not have to wait a few years to find a good price. He might have found it already. Who knows ?!!

Of course, whether he did or did not buy those shares, we might find out in a few weeks if the purchase are considered material, and assuming he has to file a report with SEC. (Note: The purchases might have been too small to be considered material to be reported.)

Anyway, it is fun to take a wild guess once in a blue moon. And I think I am going to guess more. Only time will tell if I am right or wrong. :)

“If you have to forecast, forecast often.”
- Edgar R. Fiedler in “Across the Board: The Three Rs of Economic Forecasting — Irrational, Irrelevant and Irreverent”

Note to self: Living in Calgary, Alberta, I think I should start reading Oil & Gas Journal for fun. After all, I used to read Aviation Week for fun and I remember I quite enjoy it.

P.S. See this note by Andy Willis re Encana. Interesting read. Here is an excerpt (emphasis added),

The destruction of wealth in the Canadian oil patch has been nothing short of astounding, and predators have to be tempted by the perceived bargains, even if financing takeover presents no small challenge. Here is a quick snapshot of the major players in Calgary, along with the change in their market capitalization from the highs seen in the summer, and the percentage decline from that peak: [K: ?? In US dollars ??]
Suncor: $26-billion vs. $71-billion, down 63%
EnCana: $33 vs. $71, down 54%
Canadian Natural: $29 vs. $61, down 52%
Talisman: $11 vs. $27, down 59%
Nexen: $9 vs. $23, down 61%

Warren Buffett The Snowball: 224 pages down, 614 to go

Oct 17, 2008: Now we know Warren has been buying some solid American companies recently for his personal portfolio as expected. With the level of fear in the market, this may be somewhat helpful for the market but may not last long. Will see.

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In some strange cosmic coincidence, Warren Buffett’s biography The Snowball (see my Snowball review and best of pages selection) came out during the current global financial crisis. And I am lucky and fortunate to be able to find time to read and learn from the wisdom of Warren while we are engulfed by this seemingly unstoppable crisis. The lost of confidence seems to surround us like a Black Hole where no light of hope can escape.

Anyway, while I am transfixed by the seemingly unstoppable collapse of various stock prices, I hold firm the believe that for SOME (not all, but some) companies in good financial grounding, their shares simply means a fractional ownership of a viable business. The fact that they are getting cheaper is good for long-term investors who want to buy more of the business. Like a hamburger lovers waiting for hamburgers going on sale, or waiting to buy KFC chickens on a Toonie Tuesday for a discount.

Now, of course, these are my personal musing and I can be wrong (and I do get things wrong often). Which is, incidentally, why I am so disappointed of the statement made by Prime Minister Harper when he gave stock advices on national TV without knowing the specific circumstances of the individuals receiving his suggestions/advices. Mr. Harper, this country’s security laws exist for a good reason and you ignoring of the “Know Your Client rule” was a glaring sign of your ignorance. The brief off-handed comment made on national TV on an issue that should take much longer to give proper advice on, and even if you give advices, it should have been on an individual basis at best.

Anyway, it is 224 pages of Snowball down for me, and 614 pages to go on the main text. Mind you, I do flip to the reference notes sections fairly often. I am getting to some really good bits in terms of investing insights and stories in the book now. Of course, the back stories when Warren was young were so important to understand him and his actions as an adult. I will be posting more to my review and best of pages when I can find some time to read and post. Rest assure that I am still reading it, and won’t stop posting to my review and best of pages until I’ve finished the book.

Ben, Congrats for getting your MBA

Ben, Congrats for getting your MBA today.

And I wish you all the best.

Here is a Warren Buffett chat with MBA students which I blogged about previously. I hope you will enjoy this classic.

Ben, I know you are looking for a job and I think the section where Warren talks about job will be great to watch too. (starts around 22:00) Have fun and Congrats.

Warren Buffett – When a Wise Man Speaks in a Crisis

When a wise man like Warren Buffett speaks in a crisis, you listen, you listen very carefully. And he speaks in such an easy to understand and appreciate manner. Here is Charlie Rose’s exclusive conversation with Warren Buffett yesterday (Oct 1st, 2008).

P.S. Warren is very healthy at the moment and I wish Warren will live to 200 years old but I am realistic and I realize I should treasure his advises and insights when he gives them.

If I had 3 billion dollars …

If I had 3 billion dollars, I still won’t be able to pull Warren’s $3 billion deal here (listen to Warren’s insight and advices) with General Electric. At the end of the day, it is not just the $3 billions, it is the man behind the deal. On this note, any sovereign wealth funds can have the money to invest, but it is safe to say not all of them are “smart” money. (smile)

Here is the Ladies’ “If I had a million dollars“. Enjoy.

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Oct 1st, 2008 21:31 Update: Warren Buffett will be on Charlie Rose tonight. I will be watching. I will try to post a link to the video in a few days when Charlie post it.