4 Pearls of Wisdom From Warren Buffett and Charlie Munger

Foolish investors were glued to computer screens last Saturday.

It’s for good reason. For the first time ever, Warren Buffett’s Berkshire Hathaway streamed its annual general meeting (AGM) live to a worldwide audience. Buffett, together with his able sidekick Charlie Munger, was on hand to deliver nuggets of wisdom to the crowd – both online and offline.

From the session I picked out two thoughts which may interest investors:

1. Defects and advantages – click here

2. Going green with envy – click here

3. Focusing on micro, not macro

“Micro-economics is what we do and macro-economics is what we put up with.”

— Charlie Munger

The microeconomics of businesses is where Munger and Buffett are more interested in. This sentiment was summarised in Munger’s zinger above.

Berkshire Hathaway is involved in large swaths of the economy. From there, it would seem like Buffett would have a good sense of macroeconomic conditions. “We are familiar with almost all macroeconomic factors” Buffett said. “That doesn’t mean we know where they’re going to lead” he added.

It is likely that Buffett and Munger are more interested in companies that are able to survive different macroeconomic conditions.

4. When not to act

“It’s important to know what you can’t do. We try to take swings in our own strike zone. It doesn’t take a genius to do it, but we’ve generally managed to avoid self-destructive behavior.”

— Warren Buffett

Knowing what to do can involve knowing what NOT to do.

Investors have to keep their ego in check when investing. This also means maintaining our discipline on acting on ideas where we have knowledge on. Take DBS Group Holdings Ltd (SGX: D05). Shares are trading below book value and this may interest the value investor. However, investors might be better off leaving opportunities like this alone if they have little knowledge of banking. This might not be in their “strike zone”, as Buffett would put it.

In short, the path to investing well could start with avoiding of what we don’t know.   

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Berkshire Hathaway.