Money lessons from Warren Buffett and Charlie Munger

The annual shareholder meet of Berkshire Hathaway was more like a family’s chat with the grandparents.

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If you postpone a two-day trip to Disneyland and are thus able to afford a seven-day trip decades later, it may not be the best choice.
By Dhirendra Kumar

Last week, the annual shareholders’ meet—AGM in Indian parlance— of Warren Buffett’s Berkshire Hathaway took place, as it does every year, in the city where the grand old man of investing is based—Omaha, in Nebraska, USA. By all accounts, the world’s most famous shareholder’s meet lived up to its billing.

There was a large exhibition where shareholders could buy or sample the products of the companies that Berkshire owns, ranging from See’s, a candy company to Netjets, which rents out private jets. However, the highlight of the show, as always, was an extended Q&A with Buffett and his deputy Charlie Munger. Despite the two’s advanced age (Buffett is 88 and Munger 95), the Q&A lasted most of the day.


As has been usual for a few years now, questions at the Berkshire meet came from two sources. One lot was selected from emailed questions by a panel of financial analysts and writers and the second from shareholders at the venue who were selected by a lottery held on the spot. Many of the questions were connected directly to Berkshire’s businesses, as one would expect at a shareholders’ meet. However, a good number were general questions about investing or business, or sometime even broader. In most of the cases, Buffett and Munger gave long, reasoned answers that often went into the principles underlying what they do.

Typically, Buffett made his point tactfully, and then looked at Munger and said, “Charlie?” Munger often said, “I have nothing to add,” but when he did speak, it was usually some comment or anecdote that was markedly less politic than Buffett’s. For example, there was this 27-year-old who said he “wanted to be a great money manager like you two” and wanted some advice on that.

Buffett gave a nice long answer but when it came to Munger’s turn, he narrated this story: A young man who had asked Mozart about how he could begin composing symphonies. Mozart told the man that at 22 years old, he was too young. “You were writing symphonies when you were 10 years old,” the man protested. “Yes, but I wasn’t running around asking other people how to do it,” Mozart responded.

There was another question this year whose answer was quite a surprise, and something of direct interest to young savers. A 13-year old boy, accompanied by his father, asked the two about how a young person could develop “delayed gratification”. The child said that his father made him watch many videos of the two and told him that was the key to success.

Given Buffett’s image as a miser, such a question was not too much of a surprise. Munger’s answer was blunt. Having raised eight children, he said he no longer believed it possible to teach delayed gratification. You are either born with it, or not. Buffett was more circumspect said that while saving was important, he did not believe that for all families, under all circumstances, saving was the best thing to do.

If you postpone a two-day trip to Disneyland and are thus able to afford a seven-day trip decades later, it may not be the best choice. If you are not happy with $50,000 or $1,00,000, you may not be happy with $50 million. You don’t see a correlation between money and happiness beyond a certain point.

Is this the kind of answer the boy and his father were looking for? I’m not sure. I got the feeling that while both Buffett and Munger gave a genuine and useful answer, it was also meant as an admonishment to the father of the child. Still, an awareness of how delayed gratification is an important part of being successful as an investor is something every saver should give a thought to.

(The writer is CEO, Value Research)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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