Warren Buffett and Charlie Munger FAQ

Warren Buffett and Charlie Munger FAQ(buffettfaq.com)

152 points by anton_tarasenko 7 years ago | 20 comments

nur0n 7 years ago |

> So, what we do is take money and move it around into other businesses. The newspaper business earned great returns but not on incremental capital. But the people in the industry only knew how to reinvest it [so they squandered a lot of capital]. But our structure allows us to take excess capital and invest it elsewhere, wherever it makes the most sense. It's an enormous advantage.

Wow, they are playing the game at a higher order than I have even considered.

ksec 7 years ago | |

But Berkshire Hathaway ( or the world in general ) is also at a point where they have too much capital and there are very little low hanging fruit ( comparatively speaking ).

It is a lot easier to invest a few millions in a few very good small business, but once you need to invest hundreds of billions, all of a sudden you have very little choices.

valuearb 7 years ago | |

It’s always a circle of competency issue. Someone whose entire job is looking for good investments is going to find far more than someone running a business full time.

JackPoach 7 years ago |

Wow, thanks for taking time to compile the list. It makes an interesting read. One thing - I wonder how many things that Warren or Charlie said 20 years ago they themselves no longer think are true.

cylinder 7 years ago |

> What are the economic characteristics that make Kraft a good business? WB: Most big food businesses are good businesses in that they earn good returns on tangible assets. If you own important branded assets in this country, and you have good assets, it is not easy to take on those products. Just imagine Coca-Cola. They sell 1.5 billion servings every day. It has been in everyone’s mind since 1886—associated with good value, happiness and refreshment. It is virtually impossible to take it on in a huge way. It may not be the same with Kraft. Kool-Aid, but I’m not sure I want to take on Kool-Aid. To implant RC Cola in people’s minds globally is very, very difficult. A brand is a promise. Coca-Cola delivers something to you. Virgin Cola — an unusual promise in a product—tried and couldn’t figure it out. Whatever it was, it didn’t work. Don Keough would know. Who would buy a can for two-cents-a-can less than Coca-Cola? We feel pretty good about branded products if they’re leaders in their field. There is nothing unusual about Kraft that’s different from Kellogg. Some good factors are price. If you don’t pay too much, you will do okay. But you won’t get superrich, as the attributes [of a strong brand] are well recognized.

Source: BRK Annual Meeting 2008 Boodell Notes URL: Time: 2008

He was very wrong on this. Kraft just wrote-down $15 billion. Their brands have lost their "cachet." Nobody wants them nor needs them -- you're either buying a gourmet, healthy version (i.e. real cheese instead of the plastic block Velveeta) or a store's private label.

https://www.irishtimes.com/business/retail-and-services/warr...

hopler 7 years ago | |

0. You are cherry picking one stock from a portfolio. That's not how investing works.

1. Buffett said that Kraft may not be the same, in the quote you cited.

2. Kraft today is not the same company as Kraft in 2008. The company split, and strong brands went to en.wikipedia.org/wiki/Mondelez_International which has done quite well.

jjeaff 7 years ago | |

Kraft is mostly valuable because of it's extremely wide distribution. They can buy up any boutique brand they like. Which is something they already do.

You will find that Kraft actually owns many of the "high end" brands out there and that they also provide product for many generic store brands.

sumedh 7 years ago | |

> He was very wrong on this.

How many billions do you have :)

On a serious note, lot of people over the years keep saying Buffett is wrong yet in the end when banks need money they go to Buffett.

ignoramous 7 years ago | |

In general, he's right you would think. Tough to displace a brand like Coke entrenched since 1886. Similarly, it might be tough to beat Apple/Disney at what they make for a while. Kraft might have faced other problems (poorly run or got disrupted or didn't acquire enough companies), but whatever it might be, it is an invaluable learning curve for them.

paganel 7 years ago | |

And I'd imagine not many people associate "happiness and refreshment" with Coca-Cola anymore.

jjeaff 7 years ago | | |

But maybe they do for Odwalla, Smart water, Dasani, Minute Maid, Vitamin Water, Zico Coconut Water, Nestea, Poweraid... The list goes on.

They are wealthy and have unprecedented massive distribution. They can buy up any new upstarts before they even think about becoming a real competitor. And physical drink distribution is much, much more expensive to scale than something like an software competitor. It took Coca Cola 100 years to build their current network.

GuillaumeBrdet 7 years ago |

This is really cool, for someone trying to keep up with his advise that might be a great source to keep around.

tim333 7 years ago |

Good stuff. It's going to take a while to look at all 463 of them.

lkhatter 7 years ago |

Another good site is mastersinvest.com