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May 2007
June 2007

2007-05-22 »

Newsflash: rich people can be smart

A co-worker mentioned to me that Warren Buffet (aka Very Rich Person) has an annual newsletter that's worth reading. The 2006 letter to shareholders is written in a totally understandable, straightforward style that offers lots of insights into the business world. Check out the boring accounting notes, which remind you to eat your broccoli; be amazed by the spectacular decline of his stamp-collecting operation, acquired in 1970 and still in business (barely) today.

And here are some interesting quotes.

On government overspending:

    I want to emphasize that even though our course is unwise, Americans will live better ten or twenty years from now than they do today. Per-capita wealth will increase. But our citizens will also be forced every year to ship a significant portion of their current production abroad merely to service the cost of our huge debtor position. It won't be pleasant to work part of each day to pay for the over-consumption of your ancestors. I believe that at some point in the future U.S. workers and voters will find this annual "tribute" so onerous that there will be a severe political backlash. How that will play out in markets is impossible to predict - but to expect a "soft landing" seems like wishful thinking.

On long-term charitable foundations:

    Even if the people above ground make their decisions imperfectly, they should be able to allocate funds more rationally than a decedent six feet under will have ordained decades earlier.

On paying money to financial planners:

    Even so, the 2-and-20 action spreads. Its effects bring to mind the old adage: When someone with experience proposes a deal to someone with money, too often the fellow with money ends up with the experience, and the fellow with experience ends up with the money.

On investment strategy:

    When Walter and Edwin were asked in 1989 by Outstanding Investors Digest, "How would you summarize your approach?" Edwin replied, "We try to buy stocks cheap."

On business school:

    After all, if you are in the shipping business, it's helpful to have all of your potential competitors be taught that the earth is flat. Maybe it was a good thing for his investors that Walter didn't go to college.

On airline security:

    Stop by the NetJets booth at the Qwest to learn about viewing these planes. Come to Omaha by bus; leave in your new plane. And take all the hair gel that you wish on board with you.

On fairness:

    Charlie and I are extraordinarily lucky. We were born in America; had terrific parents who saw that we got good educations; have enjoyed wonderful families and great health; and came equipped with a "business" gene that allows us to prosper in a manner hugely disproportionate to other people who contribute as much or more to our society's well-being.

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