In one sentence: Recorded in Omaha, Phil and Danielle describe the Berkshire weekend, correct the "Buffett buys Amazon" headlines, explain "old Buffett" versus "new Buffett", and give their reading of why Berkshire holds so much cash and isn't buying back more stock. The readings of Buffett's reasons are their own inference.
Key ideas
- Meeting atmosphere. About 40,000 people attend; there is a shopping floor of Berkshire's consumer brands, and shareholder discounts at Borsheims and the furniture mart. Phil points to these as examples of strong businesses (a brand and price moat). [02:00–11:30]
- Buffett at a women-in-investing conference. He showed up unannounced the Friday before. Danielle says he answered that money is money, since a stock doesn't know who owns it. Phil's point: results speak, and a record of about 15% a year will attract clients. [11:30–16:00]
- Crawl, walk, run. Advice from Tom Gayner of Markel: start small with your own money, learn lessons cheaply. [14:00–16:00]
- Know what you don't know. Phil says Buffett and Munger have little of the grey area where you don't know what you don't know, so they stay away from their circle's edge. Gayner holds many small positions and then adds when he knows more, which Phil recognises as his own practice. [19:30–22:00]
- Amazon headlines were wrong. Phil's account: the purchase was by one of Buffett's portfolio managers (he names Todd Combs or Ted Weschler), and Buffett said so. [22:30–24:00]
- New Buffett versus old Buffett. Old Buffett = Graham-style cheap "cigar butts". New Buffett = Munger's influence: a wonderful company at a fair price. Phil says that is what Rule #1 follows. [24:00–26:30]
- "All investing is value investing." Phil's recollection of Buffett's answer to a questioner who said Amazon isn't value. You pay little now for a lot later, and no metric is sacred. [26:00–27:30]
- Missing Google, not Amazon. Munger said missing Amazon was forgivable, but he called missing Google his own fault, since Geico used the ads. [27:30–29:30]
- Intangibles. American Express (held since the 1960s–70s) shows value can include intangibles not on the books. [29:00–30:00]
- The cost of doubling. Gayner put cash on a table to show his board that each doubling of Markel's stock involved a fall of about half first. He said it happened every time, which Phil flags as generalisation. [30:00–32:00]
- Why not buy back more Berkshire? A questioner said Berkshire bought about $1 billion in a quarter while sitting on over $100 billion in cash. Phil reads Buffett's reply (capital on hand, buy only when remaining holders are better off) as implying a steep discount is needed and that he prefers to hold cash for downturns. Opinion, not stated by Buffett. [32:00–36:00]
- Why not the index? Danielle's inference: with only part of his capital in an index he would be hurt by a crash and couldn't use that money to buy when prices fell. [36:00–39:00]
How it maps to RuleOne
- Rule #1's core is "new Buffett": moat, management, price against value. The screen ranks by that, not by low P/E or book value.
- Berkshire's cash pile mirrors /holdings/ cash held until good opportunities arise (207).
- Buyback discipline: check share count history on /stock/TICKER/ against your value estimate (208).
Buffett, Munger and Graham links
- Graham's cigar-butt method (The Intelligent Investor, ch. 7 and 15), versus Buffett's later move toward quality, described in his 1989 and 2014 letters.
- Buffett's 2011 letter sets out Berkshire's buyback policy: repurchase only below intrinsic value.
- Buffett's stated advice on indexing for most people is in his 2013 letter (instructions for his estate) and 2016 letter.
Words to know
- Cigar butt: a poor business bought very cheaply for a last puff of value.
- Intangibles: brand, customer relationships and other value not on the balance sheet.
- Share repurchase (buyback): a company buying its own stock.
Try this
Take one company you hold or follow and write one paragraph on whether it is a "cigar butt" or a "wonderful company at a fair price", with one number from /stock/TICKER/ to support it.
Check yourself
- What is the difference between old and new Buffett?
Answer
Old: Graham-style cheap, mediocre businesses. New: Munger's quality businesses at fair prices. - What does Phil think Berkshire's cash is for?
Answer
Buying when markets fall; buying back stock only at a large discount. - What lesson did Gayner's cash-on-the-table demo teach?
Answer
Big falls happen on the way to doubling, so expect them and be able to hold through them.
Short quotes
"All investing should be value investing." (Phil, recalling Buffett, ~26:40, auto-transcribed)