Six Lessons We Learned From Buffett & Munger 2021 Annual Meeting

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Every year, people travel from far and near to attend Berkshire Hathaway annual meetings. There they listen to the wisdom of Buffett and Munger. It’s always so profound how much both usually have to share every year. And the investing community never gets tired of them. For context, saying “people” means an average of 40,000 people from all around the world come to listen to Buffett and Munger talk for at least 4 hours. This year was not an exception.

Instead of listening to the 4 hours long conversation, we want to share six lessons of the most profound takeaways from the meeting. Here’s a sneak-peek into what that number of people usually gather around to listen to.

1. Don’t bet against America

Buffett started this year’s session by sharing two insightful statistics. He showed the data of the top 20 companies as of March 2021 and compared it with that of 30 years ago. In a profound turn of events, none of the companies that were on the list 30 years ago are still on the list today. Beyond that, 30 years ago, only 5 US companies were in the top 20. But today, there are 13 of them.

Buffett used the opportunity to emphasise America’s position as the world’s capital for wealth accumulation. Knowing that the US moved from 25% dominance of the top 20 to 65% under 30 years is instructive. As Buffett noted, the economic system in the US powers growth of this nature. It is almost by design that the US will prosper.

Now, this is not an article to glorify the US. What we aim to call your attention to is simple. As a Nigerian, the opportunity for you to have a share of the wealth created in the US in the last 30 years or even further was not available to you. But that opportunity is available to you at your fingertip with Risevest.

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2. Buffett and Munger are still living in the house they bought 62 years ago

This year’s Annual Meeting was held in a different location (Munger’s state). While commenting on that, Buffet mentioned how Munger has been living in the same house he bought 62 years ago. And of course, we know the same is true of Buffett who has been living in the same house for as long as well.

When a lot of people think about wealth, what comes to their mind is the number of things they want to spend on. But wealth is built out of what we don’t spend, not out of what we spend. Munger has more than enough to buy a new house. But the focus of wealth is not in the multitude of houses or material things that one possesses. Rather, it is in how much you didn’t spend but stash in an investment.

Another lesson from this has to do with not replacing items that are not due for replacement. For example, it’s okay to use the latest iPhone if you can afford it. But why make it a goal to always use the latest when you have to squeeze your pocket to do so? Understand what matters to you as you build wealth and focus on it.

Also read: Long-Term Investing is Hard

3. Even Buffett Makes Investment Mistakes

Everyone investing – new or old – has likely made one mistake or the other on their journey. You might have invested money you shouldn’t invest. You might have invested in what you shouldn’t invest in or any other mistake. Well, we are here to tell you that even Buffett makes mistakes.

Some people questioned why Buffett sold part of his stake in Apple. The Oracle of Omaha admitted that was probably a mistake. “Charlie in his usual low-key way let me know it was a mistake,” he added.

You can take solace in the fact even someone of Buffett’s stature can make the same sort of mistakes that you make. And then move forward with your investing without relenting. Don’t let past mistakes stop you from investing now that you are better aware.

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4. Munger on Bitcoin

Buffett decided to dodge the question on Bitcoin asked by an attendee. He wanted to “avoid making the hundreds of thousands of viewers who own the cryptocurrency unhappy.” Munger didn’t hold back though. “I hate the Bitcoin success,” Munger said. “The whole damn development is disgusting and contrary to the interest of civilization.”

We like to highlight two point from this:

  • Reminding everyone to be on the side of caution when investing in cryptocurrency.
  • Telling you that even if you disagree with Charlie Munger, you can still learn from him. That you disagree with someone on a point doesn’t mean you can’t agree with them on another point. And Munger is someone you can learn a tone from. 

5. Buffett and Munger disagree on the S&P 500 vs. Berkshire

Buffett has often advised investors to keep things simple and invest in an S&P 500 index fund. “I’ve never recommended Berkshire to anybody,” Buffett said.

Munger has a different opinion. “I personally prefer holding Berkshire to holding the market,” he said, arguing that Berkshire’s set of businesses and investments are in his view “better than the average” across the stock market.

These two individuals hold two different views and they still respect each other.  And have even conducted business together for this long.

You can have a different investment philosophy with someone, it doesn’t mean you conflict with that person. Just do what works for you.

6. On Robinhood and Stock Trading Apps

Buffett said of Robinhood, “the gambling impulse is very strong in people worldwide. And occasionally it gets an enormous shove and conditions lead to this place where more people are entering the casino than are leaving every day.” Buffett added, “and it creates its own reality for a while and nobody tells you when the clock’s going to strike 12 and it all turns to pumpkins and mice.”

More importantly, Buffett said that “there’s nothing illegal about it. There’s nothing immoral, but I don’t think you’d build a society around people doing it.”

What Buffett is saying here is that many more people have entered the stock market in the recent period. Albeit, with gambling mindset than an investing mindset. The caution here is to know what you are doing, if you gambling, know it as such and if you are investing recognize it for one. When you are making money, it is easy to think that’s how it always is, no that’s not. Markets don’t always go up and individual companies may even be more irrational in their behaviour. Be careful and be aware of what exactly you are doing.