Warren Buffett’s Q&A with Peking University Students

北大光华学生代表根据现场内容整理如下信息,第一时间与大家分享与“股神”的精彩问答:
Q1: What is your latest idea of investing in China? And if you are going to do some investments in China, which industries will be your priorities and why?Q1: 您对在中国投资有兴趣吗?如果在中国投资的话,最看好哪个行业?

巴菲特: China is a huge market and there are more possibilities because of its size. My partner Charles Thomas Munge looks at China a lot. We focus on not price but valuation of companies. We do close research on the companies and try to buy the whole business when we invest. During the last 50 years, the population grew rapidly in China and it was full of talent and people resources. Some interruptions will not disturb its development. China and the US will become two superpower economies in the future. We do appreciate big investment opportunities in China as this country has more chances.中国是一个很大的市场,具有非常多的可能性。我和我的合作伙伴Charles Thomas Munge有很多关于中国的讨论和研究,我们注重公司的价值而非股票价格,希望购买下整个企业以进行运营。在过去的50年,中国人口飞速发展,人口红利巨大。一些波折并不会影响中国发展的脚步。中、美将来会是两大经济强国。如果在中国能找到合适的行业、合适的时间、合适的管理团队,我们会毫不犹豫的投资。

Q2:You are one of the richest men in the world, as well as one of the most generous. What is your view of wealth? Is it established at the very beginning at a young age, or is it developed through different phases of your life?您既是世界上最富有的人之一,也是最慷慨的人之一。您是如何看待财富的?这种观念是一开始就有的,还是逐渐建立起来的?

巴菲特:This is a good question, about money. Money can buy most things, but it cannot buy time and love. I have only one thing that can count as luxury—a private jet. Other things are the same as yours. Money has no utility beyond certain point and the usage is the same to everyone. Charity can change life of many people. My wife and I both agree that we should spend money to solve the important societal problems. For example, universities in the US have external funding, but the diseases curing in Africa may not have funding.Money can bring many interesting experiences. I enjoy this game of investing. However, more stuff does not mean happier. Money cannot buy love. When people try to control their kids through money, it may bring disasters. I believe taking care of family is very important.

这是个好问题,我们来谈谈金钱。金钱很有用,但它买不到两样东西:时间和爱。我有一样东西可以算作奢侈品——私人飞机,其他东西都和你们一样。在超过某个特定节点之后,金钱就失去它的效用了。慈善可以改变很多人的生活,我和我太太都认为我们应该把金钱用在解决社会问题上。比如美国的大学有很多资金,而非洲的疾病治疗资金却很短缺。

金钱可以带来很多有趣的体验,我享受投资。但是,拥有更多的东西不见得会更快乐。金钱无法买来爱,当人们试图通过金钱去控制自己的孩子时,可能会带来灾难性的结果。我认为照顾好家人是很重要的。

Q3:Bill Gates once said you are the most optimistic person he has ever known. Do you think you are optimistic, and why? Is it born with or learned later?比尔盖茨曾说你是他认识的最乐观的人。您认为自己是乐观的人吗?乐观是与生俱来还是后天培养的?

巴菲特:Optimism is a very important quality for a good investor. The result of life is getting better and stronger. Compared to Age of Jefferson (like back to 1776), people did not make a lot of progress. In less than 3 life times, significant changes and developments happened. Why? Human are not smarter, nor working harder, but we hung on with our potential. The economic system and government policies are delivering unbelievable results. Compared to old times when people died, and had fewer choices, everyone in the room live a better life. Our children, younger generations will live even better. Optimistic is realistic.乐观对于一个好投资者来说是至关重要的品质。现在与三个世纪前的杰斐逊时期相比,人口、交通、经济制度、政府、法治等各个方面都发生了巨大的变化和进步。人们并没有更聪明,或更努力,而是学会更好地利用自己的潜能。现在这个房间里的任何一个人都比过去最富有的人生活得好,享受着更好的医疗、更好的娱乐……变好的趋势还会延续下去,我们的孩子会生活得比我们更好。面对这种社会的进步,我怎能不乐观呢?乐观的就是现实的。

Q4:If you were president, how would you make the immigrant policy?如果您成为总统,会如何制定移民政策?

巴菲特:Welcoming immigrants is a grand American tradition. The country couldn’t be here without the contributions from immigrants.In 1939, two Jewish immigrants, Albert Einstein and Leo Szillard, wrote a letter to President Roosevelt, alerting him to Germany’s undergoing research of “extremely powerful bombs of a new type” and recommending that the U.S. begin similar research. The letter saved US. Steve Jobs was son of immigrant. When people comes, the market comes.

President Trump is reaching to the clear present danger. However, U.S. would be a better country 50 years from now if it keeps the great tradition.

美国一直对移民抱有开放欢迎的态度,这也是美国能走到今天的重要原因。谷歌等美国企业的成功离不开移民的贡献。

1930年代,有两位犹太裔移民为了躲避德国纳粹来到美国,成为美国公民。他们就是阿尔伯特·爱因斯坦和利奥·西拉德。1939年,他们向时任美国总统的罗斯福写了一封信,提及德国正在研究核武器,建议美国尽早进行相应研究,这封信拯救了美国。如果往近了说,史蒂夫·乔布斯也是移民的儿子。要知道,人气愈旺,市场愈旺。

有些人担忧移民带来的潜在危险。特朗普总统的移民政策对当下这些潜在威胁做出了反应。然而,移民们是出于对美国的热爱而选择这个国家。如果美国保持对移民的开放态度,50年后的美国会更加美好。

Q5:You have picked many successful companies previously. And the market will see your purchase of the stock as signals of confidence, how does this influence on your positions?您过去发现了许多成功的公司。您的投资成为整个市场的风向标,这对您的投资带来怎样的影响?

巴菲特:I have signed some confidential treatments with the SEC, but not for my portfolio. We still need to disclose our portfolio holdings 45 days of the end of the quarter. However, I think there should be intelligence properties behind the idea of what stock to buy and these ideas should be protected.Management like the announcements though. But it will cost us a lot of money and it is negative to our investment. I have made attempt to not disclose what I am buying. We keep in mind to minimize the effects on market from our investment decisions.

我与证监会签署了一些保密合约,但公司的投资组合依然遵循证监会信息披露的标准。每一个季度我们都需要公开公司的投资组合。然而我认为,交易决定本身其实也是知识产权。这些公告会推高成本。我尽量不公开我们的交易,减少对市场的影响。

Q6: What is your view of the struggling newspaper industry?您怎么看待报纸行业的发展?

巴菲特:In the old time, the advertisements on newspaper were source of information and it spread everything. Nowadays, the industry is declining and the classified sections do not help anymore. They lose print circulation, and thus the advertisement revenue. The internet accelerates the change of newspaper and news need to be in time. New York Times’ and Wall Street Journal’s digital part allows them to keep some print circulation (joint cost synergy). Washington Post increased online activity a few years ago. Most newspapers have not found a feasible way of paid online subscription.在过去,报纸上的广告是重要的信息来源。而今天,这个行业在走下坡路,分类广告不再那么重要,报纸的发行量在下降,广告收入不断流失。网络的发展加速了报纸的改变。报纸的发行量下降。纽约时报、华尔街日报的在线部分使得他们可以继续发展纸质发行(成本共享),华盛顿邮报也在几年前开始了线上部分。其它大部分报纸还没找到可行的电子收费模式。

Q7:What is the most important improvement you make during the investments?哪些事情对您的投资产生了重要的影响?

巴菲特:I was focusing on technical analysis when I was young. The intelligent investor, the book written by Benjamin Graham, reset my whole investment thinking. It taught me how to think about stock market. From my perspective, there are two courses that should be taught in all business schools: how to think about stock market and how to value stocks. Margin of safety is always the principle of investment.The formula of investing never changes. First, how sure you are? Second, how soon it will to get you there? Third, what to do to achieve it?

Investing is buying a piece of business. You could buy business with one million dollars in Omaha. What will you invest? Maybe a fast-food restaurant since people need to have food every day. Go through the ideas in your mind, look at things, and grab information. That is why investing is amazing: you only need to make decisions rather than do it by yourself. Since the market prices change every day, opportunities are always there. Mr. Market is there to serve you. You should utilize it when he goes crazy rather than let him take pressure on you.

本杰明·格拉罕(Benjamin Graham)的《聪明的投资者》(The intelligent investor)对我的影响很大。我刚开始投资的时候一直侧重技术分析,而这本书彻底改变了我的投资思路,教会我如何理解股票市场。在我看来,商学院教投资只需要两门课:一是如何思考股票。二是如何对股票进行估值。投资策略的准则就在于安全边际(margin of safety)。

投资的秘诀从未改变。你可以问问自己,首先,你对这笔投资有多肯定?其次,你需要多久达到预想的目标?第三,具体要怎样做?

投资就是买一盘生意。一百万美金可以让你在奥马哈投资三个项目,你会投资什么?你可能会投资快餐店,因为奥马哈的人们每天都需要吃饭。如此种种,你会有一个思路。这也是投资的乐趣所在——你只需要做出决定,而不需要自己亲手去做生意。同时,由于市场价格每天都在改变,也就意味着每一天投资都有不同的机会。你要利用市场先生(Mr.Market)的疯狂或愚蠢,而不是被他所影响。

Q8:What is the best investment, favorite investment and learned-most investment in your life?您最喜欢的投资是什么?

巴菲特:The best investment is in yourself. On my wall in the office, there is a certificate degree of Dale Carnegie Course, which I signed up for giving public talking. This is the best investment ever in my life.Also we should invest in right friends. Associating with important friends will shape your life. Right friends or a spouse can make a huge difference in your life, such as my partner Charlie Munger.

When I was a student, I went to an insurance company, GEICO,  in Washington DC downtown on a Saturday afternoon. And I pounded on the door and the custodian let me in. He introduced me to the only person at the office at that time and he gave me a 4 hour brief about the insurance business, which changed my life.

When I want to know about coal industry, I would ask people in coal companies, which competitor’s stock you will buy and which you will short and why? That is very useful for marketing research since people love to talk about their competitors.

有两笔投资是我认为最值得的。

首先是对自己的投资。任何可以提高你能力的投资都是值得的。年轻时我不擅公众演讲,于是我报了一个Dale Carnegie课程,提高自己的演讲能力。这让我受用一生。

另外就是对朋友的投资。一个人交往的朋友会塑造他的人生,如我的合伙人芒格。1951年我21岁,想投资保险公司。可那时我对保险行业一无所知。我在哥伦比亚大学的老师、本杰明·格拉罕当时在政府员工保险公司(GEICO)任职董事,所以我坐火车去华盛顿找他。可惜我忘记了那是周六,他不上班。公司的一个管理员为我开了门,把我介绍给Lorimer Davidson。他当时是公司的副总裁。他知道我是格拉罕的学生,于是与我聊了四个小时,为我讲解了整个保险行业,这改变了我的一生,他成为我一辈子的良师益友。

曾经我想投资煤矿行业,我会问煤矿公司的朋友,你会买你们公司哪个竞争对手的股票?如果你要沽空某竞争对手的股票,你会沽空谁?为什么?当问一圈后,你对这个行业就基本了解了。这个方法在做市场研究的时候非常有用,因为人们往往更愿意谈论竞争对手。

Q9:您最近与比尔盖茨先生有一场对人工智能的讨论。您是如何看待人工智能对投资领域以及股票市场的影响的?
巴菲特:人工智能毫无疑问是会到来的,并将在很大程度上引发一些行业的变革。然而对于投资领域,我不认为人工智能将会对投资决策会有变革式的影响。首先,我几年前就开始与一些AI领域的专家深入探讨,AI在某些领域的发展状况还处于瓶颈期,目前尚不足以支持替代人脑思维的功能。当然,最重要的是,投资并不仅仅是围绕计算。我们了解一家公司及其行业的运营和价值是需要复杂思维和判断的。对于短期投资而言,人工智能可以帮助高效完成很多交易;但对于长期投资,我不认为人工智能会有很大影响。回顾1987年,股票市场在一天之内下跌22%,主要是受程序化主导发生的。我还是坚持认为电脑技术以及人工智能不会对投资界有很大的影响。
Q10:您如何看待关于企业管理与领导的问题?
巴菲特:当我们进行企业运营时,不要去模仿别人的做法,要考虑我们自己需要做什么。一个成功的领导者能够把正确的人安排在正确的位置上,并且适时进行管理和跟踪。当然,还要说到做到,只有这样员工才会信任你。
Q11:信息传播速度的加快,使得市场有效性提升,被错误定价的证券数量减少。这对您的投资有什么影响?
巴菲特:今天相比于50年前,市场竞争激烈了很多,但是人们也拥有更快更简单的途径来获取信息。1957年,我还在学校的时候,主要通过读公司的年报来获取信息。那个时候的年报只包含公司非常基本的财务信息。我有一本50年前的信用评级公司穆迪(Moody)的年报(编者注:巴菲特拿出一般很厚的书)读到第1433页,是国家西方人寿保险公司(NWLI)的公年报。据报告所述,1950年,NWLI每股收益21.66美元,一年之后是每股29.09美元。此前12个月,这只个股的交易价在3到13美元。公司股票交易额非常小,不过那个时候我也只是一个很小的投资者。以前买股票是很麻烦的事情。几年前,有人告诉我应该留意韩国。我得到一本花旗的册子,上面每页介绍了一只韩国个股,韩国所有的公开上市公司都列入其中。把这本册子从头读到尾,了解它提供的面值、每股收益等。一般来说股票价格不会告诉你任何事。我可以找出同行业等大概15-20家公司,一个下午就找到大约20家公司。

Q12:您认为,一家公司董事会所面临的三个最大的挑战是什么?
巴菲特:我认为他们可能面临的一个挑战是收购。通常情况下,在一次收购中,CEO会听取单方面的演示,解释这次收购为什么以及如何发生。我见证了一百多个收购演示,多数收购是不可能发生的。我的建议是,董事会应该听取两组投资银行家的演示,一组解释为什么交易应该继续,另一组指出为什么交易不应该继续。这可以确保获取的推理是合理的。如果收购不该继续,投资银行家和律师就应该离开并停止交易。这种终止情况不会经常发生,但应该要发生更多。许多CEO对于收购知之甚少,但很好地了解收购对他们很重要。
Q13:您最困难的一次投资经历是什么?
巴菲特:当初我开始投资公司购买股票时,我喜欢购买非常低估值的股票,但是这些公司都不是好公司。我花了20年才走出 “捡烟蒂”式投资。估值便宜的公司就像一艘漏水的船。查理告诉我去寻找和投资伟大的企业。US Arrow Air Inc.(航空货运公司)在1987年出售价格达到3000万美金,而公司却破产过两次。在投资的世界中,不需要担心投资的过错。我把我的所有持仓在反弹时卖掉了,然后市场后来上升了200多点。
Q14:这个问题是关于银行业监管的,银行希望监管放松,然而如何去平衡监管与行业的增长?
巴菲特:有一篇文章详细的回答了您的问题,在Tim  Geithner发表关于风险的担忧。1.银行是否遵从他们应符合的行为。2.联邦存款保险公司(FDIC)是一家政府公司,为储户提供存款保险。当银行破产后,仍然是纳税人为这些费用买单。我们现在可能比过去更容易受到金融冲击。在2008年9月,大于35亿美金的市值蒸发。现在我们必须懂得如何处理市场恐慌。国会现在拥有更大的权利。唯一的办法就是委任一位有公信力的人。例如,美联储主席。35亿美金的货币市场基金可以让整个市场瘫痪。当人们害怕时,每个人都涌向出口。然而当人们的信心恢复时,却需要一个一个的恢复。从某种意义上来说,我们需要监管当最坏情况的发生,我们需要联邦存款保险公司来支持和稳定银行系统。我们的市场没有美联储是无法运转的。

Q15:如果您在2017年毕业,您会如何从零开始建立职业生涯?
巴菲特:当我感到有信心时,我选择了两位基金经理来到伯克希尔·哈撒韦,他们现在每人管理100亿美金。这两位基金经理有一些特质是非常稀有的。他们没有过去的成绩记录。当我毕业后,我总是会选择一个职业,是当我不需要工作时也会去做的职业。我不希望我梦游般的上班,而我也不会太在意我的起薪。我会选择那些谢我喜爱的,让我有激情的工作。如果不是这样的话,我只会不断地看着时钟等待下班。对于MBA学生,我建议大家毕业前着重培养商业思维,以及掌握如何评估公司价值。

 

On February 17, 2017, I took 20 Peking University students to Omaha to spend a day at Berkshire Hathaway. The trip included 3 company visits, a 2.5 hour Q&A with Warren Buffett, and then a steak lunch with him. I’m writing up the whole experience and will post it shortly. This was his first meeting with Peking University and his second with a student group from China.

Here is the Q&A from the lunch session with Mr. Buffett (note: it is translated from Chinese)

Q1:What was your most difficult investment experience?

A: When I first started buying businesses, I started buying very cheap and not-so-good businesses. You can’t fix bad businesses. And it’s no fun. Berkshire Hathaway had 12,000 employees but only 3,000 when I bought it. And half of them spoke Portuguese. I took me 20 years to get out of it and the idea of “cigar butt” investing. Bad businesses are like a “leaking boat”. It is better to get into a new boat than to patch it.

Charlie told me to get great businesses. US Arrow Air Inc. (cargo airline) in 1987 was sold for more than $30 million, the company went bankrupt twice. In the world of investing, you shouldn’t worry too much about the mistakes.

Q2: You recently had a conversation with Bill Gates on AI. What is your opinion about AI’s influence on the investment industry and the stock market?

A: There is no question that AI is coming. AI is going to change some industries dramatically, but not investment. In 2013, I listened to some experts and I decided that it is still tough for AI to do some things. Investment is not only about calculation. In short-term trading, AI and computers can do the trades. But in long-term investing, AI is not changing the game much. It does not help you find investments.

Back in 1987, the stock market dropped 22% in one day. That was a computer breakdown. I will stay with my comments that the computer and AI will not change the investment sector too much.

Q3: Bill Gates once said you are the most optimistic person he has ever known. Do you think you are optimistic, and why? Is it born with or learned later?

A: Optimism is a very important quality for a good investor. The result of life getting better and stronger. Compared to the age of Jefferson (back to 1776), people did not make a lot of progress. Not much had changed in thousands of years.

But in less than 3 life times, significant changes and developments have happened. Why? Human are not smarter, nor are they working harder. The economic system and government policies have let people start to deliver unbelievable results. Compared to olden times when people died and had fewer choices, everyone in this room lives a better life. Our children, younger generations will live even better. Optimism is realistic. It is from analysis.

Q4:If you were president, how would you make the immigration policy?

A:Welcoming immigrants is a grand American tradition. The country couldn’t be here without the contributions from immigrants.

In 1939, two Jewish immigrants, Albert Einstein and Leo Szillard, wrote a letter to President Roosevelt, alerting him to Germany’s undergoing research on “extremely powerful bombs of a new type” and recommending that the U.S. begin similar research. The letter saved the US.

Steve Jobs was son of immigrant. When people come, the market comes.

President Trump is reacting to a danger (perceived?). However, the U.S. will be a better country 50 years from now if it keeps its great tradition.

Q5: Banking regulations: Banks want to deregulate, but how do you balance regulations of the industry with growth?

A: There is a great article addressing the questions you asked. It was written by Tim Geithner and published in October 16th.

Federal Deposit Insurance Corporation (FDIC) is a government corporation providing deposit insurance to depositors in US banks. When banks go broke, it is the taxpayers paying the expense. But this has never really happened. This is a good example of good regulation.

There is no question about banks needing to be regulated. When people are afraid, they run to the door. However, confidence come back one at a time.

To some extent, we need to regulate for the worst-case scenario. We must bring in the FDIC to stabilize banking system. Our economy will not work without the Fed.

Q6: Question on leadership

A: When doing business, you should not say “everybody else is doing something so we should follow”. Consider what you really need and want to do. On being a successful leader, the basic job is to put the right person at the right place and monitor the whole business. Also, always do what you promise so that your employees will trust you.

Q7: (from Peking University) What is your latest idea for investing in China? And if you are going to do investments in China, which industries will be your priorities and why?

A: China is a huge market and there are more possibilities for us there than in any other country besides the US because of its size. My partner Charles Munger looks at China a lot. We focus on not price but valuation of companies. We do close research on the companies and try to buy the whole business when we invest.

China is just as smart and works just as hard as the US. But they didn’t have the system. Now they have the secret sauce and they have compound interest working. There will be some interruptions but this will not disturb its long-term development. China and the US will become the two superpower economies in the future. We appreciate the big investment opportunities in China.

My investment in Petrochina came from reading the annual report. The government owned 90% and we bought 15% of the 10% available. The investment in BYD came from Li Lu.

Q8:You have picked many successful companies previously. And the market will see your purchase of a stock as signals of confidence. How does this influence on your positions?

A:I have signed some confidential treatments with the SEC, but not for my portfolio. We need to disclose our portfolio holdings 45 days after the end of the quarter. However, I think there is intellectual property in the ideas of what stocks we buy and these ideas should be protected.

Management likes these announcements but they cost us a lot of money and it is negative for our investment. We have to publish our intellectual property. I have made attempts to minimize disclosure in what I am buying. We keep in mind to minimize the effects on the market from our investment decisions.

Q9:Question about passive managed funds.

A: It has been 9 years since I made a 1 million bet with Protégé Partners, LLC. It is the largest bet on the website Longbets.org.

Over a ten-year period, I predicted that the S&P 500 will outperform a portfolio of hedge funds, when performance is measured on a basis net of fees, costs, and expenses.

2008 was the first year and the market went down a lot. The fund of hedge funds performed better than the index.

9 years later, the fund of hedge funds, invested in 7200 hedge funds, has had a cumulative return of 22%. The index has yielded 86%. We are in a commanding 64% lead with one year to go.

Jedge fund get rich on fees. Wall Street sells you what you will buy. Hyper activity is bad, “fees never sleep”

Q10: The speed of information is faster and faster. There are fewer mispriced securities. How has this changed your investments?

A: It is true that the market today is a lot more competitive than 50 years ago. It is also true that information can be accessed faster and easier. When I was at school in 1957, I gained information from the annual report of companies. At that time, the annual reports and the Moody’s and S&P manuals provided the key information on companies (Buffet brought a binder out). On page 1433, the book showed the financial report for the insurance company NWLI. In 1950, the company earned 21.66 dollars per share and this grew to 29.09 dollars per share one year after. But the share was selling 3.13 dollars per share. The company had a terribly small float, but I was as small investor at that time. It wasn’t difficult to buy stocks at that time.

Years later, somebody told me that I should pay attention to the Korean market. I read a report from Citi where one stock was introduced on each page. You can get a lot of information from this. I found 15-20 stocks trading at about 2x earnings and bought them as a group. It took about three hours of work on a Sunday.

You don’t need an information edge. You need a willingness to act.

Q11: What is your view of the newspaper industry?

A:In the old times, the advertisements in newspaper were a source of information and it spread everything. Nowadays, the industry is declining and the classified sections do not help anymore. They are losing print circulation, and thus their advertising revenue. The internet is accelerating the change in newspapers.

The New York Times and Wall Street Journal have viable digital businesses which allows them to keep some print circulation (joint cost synergy). The Washington Post has also increased online activity a few years ago. But most newspapers have not found a feasible way of being paid online.

Q12:What is the most important improvement you have made in investing?

A:I was focusing on technical analysis when I was young. The intelligent investor, the book written by Benjamin Graham, reset my whole investment thinking. It taught me how to think about the stock market.

From my perspective, there are two courses that should be taught in all business schools: how to think about the stock market and how to value companies. Margin of safety is always the main principle of investment.

The formula of investing never changes. First, how sure you are? Second, how soon it will to get you there? Third, what to do to achieve it?

Investing is buying a piece of a business. What will you invest in? Maybe a fast-food restaurant since people need to have food every day. You go through the ideas in your mind, look at things, and grab information. That is why investing is amazing: you only need to make decisions rather than do it (build the business) yourself. Since the market prices change every day, opportunities are always there. Mr. Market is there to serve you. You should utilize it when he goes crazy rather than let him put pressure on you.

Q13: If you graduated in 2016, what would be your initial step to build your career?

You need an audited record. Even if its tiny. Have 5 years of what you have done and how it was done. I selected two people to come into Berkshire, each now managing $10 billion. These two managers have qualities that are rare. They had track records.

Don’t postpone things in life for money or career. After graduation, I would do what I would do if I didn’t need to have a job. Pretend you are rich. I don’t want to sleep walk to work. I would not worry about starting salary. I would do things that I really like in life. If not, I would end up looking at the clock after 3:00 and 3:10.

Q14: What are the top three challenges faced by boards of directors?

A:I think their primary job is to pick the right CEO and then to make sure he or she doesn’t over-reach.

Also they face challenges in acquisitions. Usually, an acquisition is a one-sided presentation with CEOs presenting why and how the companies is going to benefit. I have witnessed over a hundred acquisition presentations and the majority were impossible to stop. I would suggest the system where one investment banker points out why the deal should be go through and another one points out why the deal should not go through. Only the winner gets paid. This would ensure the reasoning for acquisition would be evenhanded. Killing deals in unpleasant and you don’t get invited back. Most CEOs know little about acquisitions but it is important for them to know it well.

Q15: (from Peking University):You are one of the richest men in the world, as well as one of the most generous. What is your view of wealth? Is it established at the very beginning at a young age, or is it developed through different phases of your life?

A:This is a good question. Money can buy most things, but it cannot buy time and love. I have only one thing that I count as a luxury—a private jet. Other things are the same as yours. Money has no utility beyond a certain point and the usage is the same to everyone. If you buy ten houses, you have gone intot he hotel business. Are you happier with ten cars than one good one?

Money can change the life of many people. I hoard money because it can grow faster with me. But otherwise there is no reason to hard it. My wife and I both agree that we should spend money to solve the important societal problems. Especially if there is no ability to raise money. For example, universities in the US have external funding, but curing diseases in Africa may not have funding.

Money can buy many interesting experiences. I enjoy this game of investing. However, more stuff does not make me happier. Money cannot buy love. When people try to control their kids through money, it can also bring disasters. I believe taking care of family is very important.

Money is like manure. If you pile it up, it stinks. If you spread it around things grow.

Q16:What is your best investment, favorite investment and learned-most investment in your life?

A:The best investment is in yourself. On my wall of the office, there is a certificate degree of Dale Carnegie Course, which I signed up for for giving public talking. This was one of the best investments in my life.

Also we should invest in the right friends. Associating with great friends will shape your life. The right friends or a spouse can make a huge difference in your life, such as my partner Charlie Munger.

GEICO was my best investment. When I was a student, I went to an insurance company, GEICO, in Washington DC on a Saturday afternoon. And I pounded on the door and the custodian let me in. He introduced me to the only person at the office at that time and he gave me a 4 hour brief about the insurance business, which changed my life. I did not know much about insurance before this.

When I want to know about coal industry, I will ask people in coal companies, which competitor’s stock would you buy and which would you short and why? That is very useful for research since people love to talk about their competitors.

Other comments:

  • Focus on what the numbers will be in 5 years, not today.
  • I would have failed as a person without my wife.
  • GEICO was the first stock he recommended. The first one makes a big difference.
  • His lifetime formula is to let other people do the work while he just sits and thinks.
  • Investing is about knowing a business well enough that you can predict how many birds will be in the bus, and when they will appear.