During the 2017 Berkshire Hathaway Annual Meeting, Warren Buffett discussed getting new ideas and shedding old ones. Here’s an excerpt from the meeting:
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CHARLIE MUNGER: Everywhere you look in Berkshire, somebody is being sensible. And that is a great pleasure. And if you combine that with being very opportunistic so that when something comes along like a panic, why, it’s a nice — it’s like playing with two hands instead of one on a game that requires two hands.
It helps to have a fair-sized repertoire.
And, Warren, we’ve learned so damn much. There are all kinds of things we’ve done over the last 10 years we would not have done 20 years ago.
WARREN BUFFETT: Yeah. That’s true, although if you take — it’s interesting. I’ve mentioned this before. But one of the best books on investment was written, I think, in 1958. I think I read it around 1960, by Phil Fisher, called Common Stocks and Uncommon Profits. And he told — CHARLIE MUNGER: All the countries went — companies went to hell eventually.
WARREN BUFFETT: But it talked about the importance, I mean, or the usefulness of, what do you call, the “scuttlebutt method.” And, you know, that was something I didn’t learn from [Benjamin] Graham.
But every now and then, it’s turned out to be very useful. Now, it doesn’t solve everything. And, I mean, there’s a whole lot of more —
CHARLIE MUNGER: I saw you do it with American Express in the Salad Oil scandal.
WARREN BUFFETT: Yeah, yeah.
CHARLIE MUNGER: You’re still doing at Apple, you know, decades later.
WARREN BUFFETT: Yeah. It — in certain cases, you actually can learn a lot just by asking a lot of questions. And I give Phil Fisher credit. That book goes back a lot of years. But as Charlie said, some of the companies he picked as winners forever did sort of peter out on him.
But the basic idea, that you can learn a lot of things just by asking in some cases — I mean, I used to — I mean, if I got interested in the coal industry — just say to pick one out of the air — you know, when I was much younger, more energetic, if I went and talked to the heads of 10 coal companies and I asked each one of them — way later into the conversation, after they got feeling very — they felt like talking.
And I would just, you know, I’d just say, “If you had to go away for 10 years on a desert island and you had to put all of your family’s money into one of your competitors, which one would it be and why?”
And then, you know, and then I’d ask them if they had to sell short one of their competitors for 10 years, all their family money, why?
And they — everybody loves talking about their competitors. And if you do that with 10 different companies, you’ll probably have a better fix on the economics of the coal industry than any one of those individuals has.
I mean, the — it — there’s ways of getting at things. And sometimes they’re useful. Sometimes, they’re not. But sometimes, they can be very useful.
And, you know, the idea of just learning more all the time about — I’m more specialized in that by far than Charlie. I mean, he wants to learn about everything.
And I just want to learn about something that’ll help Berkshire.
But — (laughs) — it’s a very, you know, it’s a very useful attitude toward — have toward — the world.
And, of course, I don’t know who said it. But somebody said the problem is not in getting the new ideas but shedding the old ones. And there’s a lot of truth to that.
CHARLIE MUNGER: We would never have bought ISCAR if it had come along 10 years earlier. We would never have bought Precision Castparts if it had come along 10 years earlier. We are learning. And, my God, we’re still learning.
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Article by The Acquirer’s Multiple.
