Note: This eBook format is authorized by the compiler Nick Webb (nick[at]sweetspot.com) at buffettfaq.com
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The Other Buffett Books
There are many great books about Warren Buffett.
I read The Intelligent Investor (I.I.)and Buffett: The Making of an American Capitalist when I started learning about stocks. I.I. is THE book on value investing and investing in general. The latter book, a biography, gave me an overall idea about his life upto 1995.
Later, I read Essays of Warren Buffett: Lessons for Corporate America. This book re-organizes Buffett’s annual letters based on topics, unlike the original letters were written, of course, in chronological order. I found this book much easier to read than individual letters.
However, once you know much about Buffett, you probably have lots of questions to ask him for opinions and advice. Like many problems in life, you are not alone. Every year, lots of lucky people get the chance to ask him and his partner Charlie Munger many simple or, more often, sophisticated questions, at the annual meeting or school visits.
The problem is, how do we know what he replied? No recordings are allowed in such events; journalists reports are scarce and never detailed.
Fortunately, some people took notes; and thanks to Nick Webb, who spent probably tremendous efforts on gathering and editing. We have Buffett’s Q&A in one page at Nick’s Website:
It has Buffett’s answers to 463 questions covering 17 categories from “Investing approaches” to “Personal”. It is a huge document with 175, 164 words. Dickens’ A Tale of Two Cities only has 135, 420 words.
To make reading easier, I spent some time and converted the webpage to eBook format. I fixed some errors from converting as well as some typo from original document. If you find more, feel free to let me know.
Download Buffett FAQ by Nick Webb eBook: ePub | Mobi | PDF
What I Learned
I enjoyed reading this FAQ even more than the Essays of Warren Buffett.
First, it’s more vivid and full of impromptu humor.
Unlike the formal well-thought writings in the annual letters, these FAQs are real face-to-face conversations. I am amazed by how Buffett organizes his thoughts, ideas and background info in no time to answer challenging questions, by how he make fun of himself, Charlie, the audience and the financial industry etc. in a witty yet polite manner. These Q&A sessions are full of laughter.
For example, when answering how could investors influence the executive compensation system (Buffett is a big advocate of more strict system). He described the current system as:
We have the honor system — shareholders have the honor, and the executives have the system.
Second, it covers much wider topics.
There are topics that cannot be covered in Buffett’s letters but only in conversations. Some cannot because it’s not so appropriate in formal writing, such as criticizing other people. Some are what Buffett doesn’t bother or would not think of to talk unless someone asks, such as questions on specific industry or business. Some would not fit in the business setting of Berkshire annual letters, such as opinions on worldly issues, career and life advices.
You have certain things you want to achieve, but if you don’t have the love and respect of people, you are always a failure.
Third, it comes with a personal touch.
In conversations, with his story-telling skill, Buffett shares many personal stories that would not be covered in his business letters nor by biography authors, such as his Saturday visit to GEICO in 1951 without appointment. He met Lorimer Davidson, Assistant to the President, who was later to become CEO. Davidson spent 4 hours showing this stranger young student around GEICO and told him about all the GEICO business (Q#222).
Most people in this room and most college students I talk to will have plenty of money, but some will have few friends.
Fourth, lots of interactions between him and Charlie.
Buffett and Munger are life time partners. They complement each other, which means they have differences. Buffett is a democrat, while Munger is a republican. Buffett believes the best days of America are yet to come, while Munger thinks America is near its peak glory. This Q&A includes lots of interactions between this pair of greatest minds, funny or insightful.
[CM: I think there’s some mythology in this idea that I’ve been this great enlightener of Warren. He hasn’t needed much enlightenment. But we know more now than five years ago.]
Charlie and I have been partners in some way since 1959. We worked together in a grocery store and both came to the conclusion that we don’t like hard work.
We have never had an argument. You just have to learn how to calibrate his answers. If you ask Charlie something and he says “no,” then we put all of our money in it. If he says “that’s the stupidest thing I’ve ever heard,” then we make a more moderate investment. If you calibrate his answers and then you’ll get a lot of wisdom.
Hope you enjoy this book as much as I do. Happy reading and investing!
Go back to links to download Buffett FAQ the eBook.
successful investing.The headings do however suggest the truth in the title, ie the book
is for managers as well as for investors.A new CEO could do worse that make this
his/her first read after appointment \u2013 particularly if, as Buffett says is generally the case,
they are good at their commercial discipline/endeavour, but do not really understand the
allocation of capital, which is of paramount importance to shareholders.
Chock-a-block with pithy wisdom
Buffett has a great way with words, borne no doubt from a lifetime of study and
commercial engagement/intercourse at the highest levels.Cunningham picks all this out
for us in his excellent introduction with such insights as: \u201chaving first rate people on the
team is more important than designing hierarchies and clarifying who reports to whom
about what and at what times\u201d (remember: Buffett runs a vary large corporate empire of
controlled companies);\u201cstay away from businesses without favourable anddurable
economic and competitive characteristics\u201d (Buffett has learned this the hard way); \u201c a
stock that has dropped very sharply compared to the market \u2026 becomes \u2018riskier\u2019 at the
lower price than it was at the higher price\u201d (another nail in the coffin of modern finance
when explaining the shortfalls ofbeta); and in reference to the hallowed principle of
diversification (see below) we are reminded that \u201cKeynes, who was not only a brilliant
economist but also an astute investor, believed that an investor should put fairly large
sums into two or three business he knows something about and whose management is
trustworthy.On that view, risk rises when investments and investment thinking are
spread too thin\u201d, which observation is linked to the \u201ccircle of competence\u201d concept,
which holds that investors should be aware of the scope of their competence and stay
within it \u2013 the primary reason why BH did not lose money in the tech wave, for as Buffett
acknowledged, he did not understand it, and with a fermenting industry like technology
his attitude is much the same as with space exploration \u201cwe applaud the endeavour but
prefer to skip the ride\u201d; and finally \u201cas happens in Wall Street all too often, what the wise
do in the beginning, fools do in the end\u201d.
In revisiting these observations from the world\u2019s greatest investor, I am reminded of the
constant use of Buffett quotes by fund managers and financial planning groups as
justification for their approach and products.The reality is that Buffett believes, as is
pointed out in one of his letters, that most investors would do well to avoid actively
managed funds (admittedly in the US context), and to simply put their money into the
index \u2013 unless they can just focus on what they know, avoid undue diversification into
unknown areas, and apply all the principles it has taken him a lifetime to learn from the
worlds masters (eg, Graham and Dodd)!
Again, Buffett is often used as justification for never trying to time the market \u2013 just hang
in there and hope for the best, as no-one can call it.But even here, his writings have, it
seems to me, been quoted out of context.His actual approach to market timing is far
more sophisticated and pro-active.Indeed, as is pointed out in Hagstrom\u2019s book (The
Essential Buffett), Buffett closed his first investment partnership in 1969 and paid out
funds, for the reason that he found the market to be highly speculative and worthwhilevalue increasingly scarce (p 26).Buffett refers to the super-contagious diseases of fearand greed and says that he never tries to \u201canticipate the arrival and departure of either