(Question)
WARREN BUFFETT: I’m not sure I got all of it, but Charlie will help me.
I certainly think
investment principles do not stop at borders. So if I were investing in China or any place else —
India, UK, Germany — I would apply exactly the same sort of principles that I learned
from “The Intelligent Investor.” I would think of stocks as a small piece of a
business. I would think of investment fluctuations being there to benefit me, rather than to hurt me.
And I would try to focus my attention on businesses where I thought
I understood the competitive advantage they had and where they would — what they would
— look like in five or ten years. So I don’t think I would change the principles at all. I’m not sure
I got all of the question. Maybe Charlie can elaborate on the rest.
CHARLIE MUNGER: Well, the Chinese have a history of being very entrepreneurial and
gambling very heavily when they have the opportunity, and it has created great volatility
in the Chinese stock markets.
And when things get
bouncy and prosperous, like our Internet craze here in the United States, China looks a lot
like Silicon Valley.
I think China would be way better to be more value investor minded and less
absorbed in waves of speculation. So I think the more China copies
the way Berkshire operates, I think the better it will be for China.
(Applause)
WARREN BUFFETT: Yeah. There’s a certain irony, in that we will — we would — do the best, over decades,
if we operated in a market where people operated very foolishly.
and
the more people
respond to short term events and exaggerated things or — anything that causes people to get
wildly enthusiastic or wildly depressed, actually, is what allows people to
make lots of money in securities. And, on the other hand, it’s not the greatest thing for a society. And
Charlie and I have benefited enormously by the fact that over a 50-year period, there have been
a few periods, probably the most extraordinary being 1973 and ’74, where you could buy stocks
unbelievably cheap, cheaper than happened in 2008 and 2009.
And
And, you know, it doesn’t make sense
to have that much volatility in the market, but humans behave the way humans behave,
and they’re going to continue to behave that way in the next 50 years.
I mean, if you’re a young investor, and
you can sort of stand back and value stocks as businesses and invest when things are very cheap,
no matter what anybody is saying on television or what you’re reading, and perhaps, if you wish, sell
when people get terribly enthused, it is really not a very tough intellectual game.
It’s an easy game, if you can control your emotions.
And as Charlie says,
you think, we’ve talked about a little bit that the Chinese market may be
more — there may be more speculative influences in it, even than in the United States, because it’s a
relatively new development and it may lend itself to greater extremes, and that should
produce great opportunities. Charlie?
CHARLIE MUNGER: Yeah. But there’s great opportunities for excess and
nasty contractions after unnatural booms and so on.
I think China is wise
to dampen the speculative booms and to — and I think the Chinese — I don’t think that value
investing will ever go out of style. Who in the hell doesn’t want value when you buy something?
How can there be anything else that makes any sense except value investing?
WARREN BUFFETT: It never gets that popular though. (Laughs)
CHARLIE MUNGER: People are looking for an easier way.
CHARLIE MUNGER: And that’s a mistake. It looks easier,
but, in fact, it’s harder. And there’s a lot of misery to be obtained by misusing stocks.
WARREN BUFFETT: Yeah. Nobody buys a farm to make a lot of money next week or next month, or they buy,
you know, an apartment house. They buy it based on what they think the long-term future is. And
if they get a — if they make a reasoned calculation of that and the purchase
price looks attractive, they buy it and then they don’t get a quote on it every day or
every week or every month or even every year,
and that’s probably a better way to look at stocks.