Highlights
We’re partial to putting out large amounts of money where we won’t have to make another decision. If you buy something because it’s undervalued, then you have to think about selling it when it approaches your calculation of its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.
However, Berkshire Hathaway, by and large, does not invest in these people who are surfing on complicated technology. After all, we’re cranky and idiosyncratic, as you may have noticed. And Warren and I don’t feel like we have any great advantage in the high tech sector. In fact, we feel like we’re at a big disadvantage in trying to understand the nature of technical developments in software, computer chips, or what have you. So we tend to avoid that stuff, based on our personal inadequacies. Again, that is a very, very powerful idea. Every person is going to have a circle of competence. And it’s going to be very hard to enlarge that circle. If I had to make my living as a musician … I can’t even think of a level low enough to describe where I would be sorted out to if music were the measuring standard of the civilization. So you have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose.
Now, investment managers would say, “We have to be that way. That’s how we’re measured.” And they may be right in terms of the way the business is now constructed. But from the viewpoint of a rational consumer, the whole system’s bonkers and draws a lot of talented people into socially useless activity. And the Berkshire system is not bonkers. It’s so damned elementary that even bright people are going to have limited, really valuable insights in a very competitive world when they’re fighting against other very bright, hardworking people. And it makes sense to load up on the very few good insights you have instead of pretending to know everything about everything at all times.
To the extent you become a person who thinks correctly, you can add great value. To the extent you’ve learned it so well that you have enough confidence to intervene where it takes a little courage, you can add great value. And to the extent that you can prevent or stop some asininity that would otherwise destroy your firm, your client, or something that you care about, you can add great value.
However, all man’s desired geometric progressions, if a high rate of growth is chosen, at last come to grief on a finite earth.
The third weakness that I find in economics is what I call physics envy. And, of course, that term has been borrowed from “penis envy,” as described by one of the world’s great idiots, Sigmund Freud.
This tactic is not an attractive part of human nature, and I want to tell you that I pretty completely avoided it in my life. I don’t think it’s necessary to spend your life selling what you would never buy. Even though it’s legal, I don’t think it’s a good idea. But you shouldn’t accept all my notions, because you’ll risk becoming unemployable.
The last idea that I want to give to you, as you go out into a profession that frequently puts a lot of procedure and some mumbo-jumbo into what it does, is that complex bureaucratic procedure does not represent the highest form civilization can reach. One higher form is a seamless, non-bureaucratic web of deserved trust. Not much fancy procedure, just totally reliable people correctly trusting one another. That’s the way an operating room works at the Mayo Clinic. If lawyers would introduce a lot of lawyer-like process, more patients would die.
