Tuesday, 9 May 2017

Words of Wisdom from Warren Buffet

When I first began working in the financial reporting department of a publicly traded company in Minneapolis, U.S.A. many decades ago, my first assignment was to read the Plain English Handbook. It is a document published by the Securities Exchange Commission (SEC) on how to write annual reports and other financial information in plain (spoken) English.  

I still have many fond memories of reading it over and over again.  Warren Buffet, the second wealthiest person in the world, well-known investor and Oracle of Omaha is credited with helping SEC create this footprint for companies to write in simple and understandable English.

Things such as dangling modifiers, action verbs, run-on sentences are considered taboos by Buffet as he was amazed on how complicated, wordy, and utterly incomprehensible annual reports and disclosures were being written.  As a result, when I was first talked with writing the draft Management Discussion and  Analysis (MD&A) section of the annual report, I had to double and triple check my grammar. I have to always emphasize the use of personal pronoun such as “We” instead of using “The Company.”  Instead of constantly using commas to join three sentences into one, I had to try and create sentences with no commas, semi-colons, and etc where possible (lawyers, please take note!). 

Thirty years later, Warren Buffet, at the young age of 85, is still outsmarting everyone in the investment world.  What I admire his most however, is his act of generosity and his simple way of life. He had pledged to give more than 99% of his wealth to philanthropic foundations. He has donated billions of dollars to the Melinda and Bill Gates Foundation.
Below are some of his famous quotes that I like to share with you not only because it makes sense from a financial perspective, but it also teaches me to be a better person and to contribute to mankind.
·        Look for a job that you would take even if you did not need the money – His advice to the younger generation looking for advice on career.

·        Be fearful when everyone is greedy, and be greedy when everyone is fearful – Buffet’s investment philosophy

·        I will not bet against America - Spoken during the height of the U.S. credit market crisis in 2008.  

·        Rule number 1: never lose money, rule number 2: never forget rule number 1 – enough said!

·        It takes 20 years to build a reputation, and only 5 minutes to ruin it.  

·        Price is what you pay, and value is what you get – another investment philosophy

·        Only buy stocks that you would be perfectly happy to hold if the market shuts down for 10 years – Buy and hold strategy that almost always pays off. One exception may be IBM.

·        It is difficult to compete with companies using high leverage and low equity - spoken recently on why Berkshire Hathaway is holding on to so much cash when interest rates are at historic lows and valuations are sky high.

·        I buy expensive suits. They just look cheap on me –All his suits are made by a lady from China that he has known for many years.

·        Risk is part of God’s game, alike for men and nations – General Re, his main insurance company,  re-insures a lot of risky but carefully measured and calculated events.  

·        Diversification is only necessary if you don’t know what you are doing – The reason why the majority of portfolio managers never even beat the S&P 500 index.

·        If you get to my age in life and nobody thinks well of you, it does not matter how big your bank account is, your life is a disaster – Well said, money is not everything!

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