Warren Buffett MBA Talk | Part 1: Integrity


"Chains of habit are too light to be felt until they are too heavy to be broken."

These are some of the comments from this 10 minute video.

In determining whether you succeed, there is more to it than intellect and energy and I would like to talk about that for a while.

Look for three things when hiring someone; integrity, intelligence and energy. If the person did not have the first one, the latter two would kill him because if he doesn't have integrity, you want him dumb and lazy, you don't want him smart and energetic. He focuses on the first...Integrity.

If I granted you the right to buy 10% of one of your classmates for the rest of their lifetime, what characteristics would you look for? He says if you thought about it for an hour, you would look for qualitative characteristics; the person with leadership abilities, generous, admirable etc.

If you had to go short on someone, you would not choose the person with the lowest IQ, but you would look for the person with qualities that you would not like; people who are greedy, egotistical, lazy, dishonest.

If you looked at the qualities of these two side by side, you can see that the ones that you admire are highly achievable. They are qualities of behavior, temperament and character. If you looked at the qualities on the right, the ones that you dislike, you do not have to exhibit this behavior. These are not qualities that you have to have, you can get rid of them. Most behaviors are habitual. You have a choice to behave any way you like.

Benjamin Graham looked around to people he admired. He wanted to be admired as well, so got the great idea to behave like them and soon realized there was nothing impossible about that. One can also do the same for people that exhibit qualities one dislikes and get rid of those behaviors in oneself.

All one needs to do is write down the qualities one admire and practice them until they become habitual.


The main idea of the first 10 minutes of his talk is about the qualities of a person. Warren Buffett is known to be a good judge of character and it is a major part of him selecting companies; he seeks management that are competent and honest. He understands that the integrity of management is ultimately one of the most important factors for a business to be successful. It is therefore important to understand what those kind of behaviors are. It is also equally important to have the right role models or mentors or people you admire before looking for qualities of behavior to exhibit. You can have an idea of what kind of person you will be by the people you consider your role models, so choose the right role model.

These are some of the people I admire:

1. Dr. Wayne Dyer - He assisted me greatly in changing my thoughts, which ultimately lead to a change in the way I view life. He is my spiritual mentor and I was honored to meet him a few weeks ago in New York.

2. Dr. David Hawkins - My teacher of Enlightenment, God and the Evolution of Human Consciousness.

3. Warren Buffett - My value investing and finance mentor.

- My inspiration and motivation to be the best I can be. I see 4. My parents, sisters and niece what I have become through my parents, where I am with my sisters and the need to prepare for the future through my niece. I have truly been blessed to have these people in my life.

What are some of the qualities you admire in others and who are some of your role models?

Related Posts
Warren Buffett MBA Talk | Part 1: Integrity
Warren Buffett MBA Talk | Part 2: Smart Choices
Warren Buffett MBA Talk | Part 3: Choosing Businesses
Warren Buffett MBA Talk | Part 4: Share of Mind
Warren Buffett MBA Talk | Part 5: Circle of Competence
Warren Buffett MBA Talk | Part 6: Macroeconomic Factors
Warren Buffett MBA Talk | Part 7: Inactivity & Dividends
Warren Buffett MBA Talk | Part 8: Diversification
Warren Buffett MBA Talk | Part 9: Market Cap
Warren Buffett MBA Talk | Part 10: Ovarian Lottery

Buffett is buying into American companies.

"I am buying American companies"

I read this article written by Mr. Buffett himself this morning and couldn't help but comment on it. It is reassuring that the world's greatest investor has faith in the American economy, and at his age, is still able to see beyond the noise of today's financial markets.

What I have decided to do was go through his article and highlight some of the main points that teaches us about his investment philosophy. The bolded items are his ideas and my comments are the underlined statements that proceed. I hope it is as instructional for you as it was for me. ENJOY!!

[Source: The New York Times | October 16th, 2008 ]

THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. [It does not get any clearer than this.] This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.


A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. [ This is one of my favorite quotes. It allows me to stay focused in a time like this. It allows me to ignore the crowd and stick to the fundamentals of what he has taught.] And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions.   [He is advising to stay away from companies with debt, since these companies will be somewhat dependent on the capital markets. It is wise to focus on companies that are able to run their operations with cash they have generated internally. He also speaks of competitive advantages. It is also prudent to stick to the companies with wide moats as it is certain they will be able to survive this serious downturn.] But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. [Have faith in the American economy. There are very strong businesses here.] These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over. [ Do not try to read or time the market. All that matters is that the market tends to perform well over a long period of time. I love this quote. It will be my quote of the day "If you wait for the robins, spring will be over." ]

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. [This statement reminds me of another of his quotes; "In the short-term, the market is a voting machine, but in the long-term it is a weighing machine.]In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. [Cash is good to have, but it must be put to good use in times like this. If not, it will be losing value with each day that passes. Especially with so many opportunities and bargains out there right now. Cash is king, but only if it is earning a royal return]. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities. [Ultimately, stocks outperform any other security over the long-term. With so much fear in the market today, this is a once-in-a-lifetime opportunity. We all know that the economy will return to normal, so look into the future and just be an observer and active participant now. My sole advice, with Buffett as my guide, is to Buy American now, Ignore the crowd and Think Long Term]

Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.


What do you think of his article? Do you have the temperament to follow? Or is it really different this time?

Buy a business any idiot could run.

"Buy a business that is so good that any idiot could run it, because sooner or later, one will". ~ Peter Lynch

Given the current economic conditions we are in, I thought this to be an appropriate video to reassure young investors that it is not a time to run from the stock market, but a time to start looking for bargains.

Buffett speaks to a group of MBA students at the University of North Carolina about his basic investment strategies. If you have been following his work, you would see that he is consistent; his message is basically the same. After the Peter Lynch quote above, he reiterates his underlying investment philosophy to the students once again.

"All I know is that if I buy the right kind of business, at the right price, with the right people, I will do well over time."

Let's really analyze what he means here.

The right kind of business
These few words mean a lot in the mind of Warren Buffett.
i. Look for businesses with great future economics. These are business that are able to earn high returns on investment 5 - 10 years from now.

ii. Look for businesses with wide moats. These are businesses that have a sustainable competitive advantage making it extremely difficult for competitors to reduce their margins. He loves the example of Wrigley's Chewing Gum.

iii. Look for businesses within your circle of competence. These are businesses that you understand. He believes firmly that any great investment is one that could be explained in a small paragraph. It should not be too complicated. Also, the important thing is not how big that circle of competence is, but to know where the line is. Basically, stick to what you know....simple as that.

The right price
This is another crucial investing strategy for Warren Buffett. He understands that not all great businesses should be bought because they are great businesses; the price must also make economic sense as well. I totally agree. What makes a great investment is the price you pay for the company. He has been known to follow some of his favorite companies for years without ever buying them because the price was not reasonable. This is a true test of patience.

The right people
I do not know anyone that places such a great emphasis on management as Warren Buffett does. After looking at the occurrences on Wall Street in the past few years, I understand why. Integrity of management is goodwill. He will be willing to pay a premium for a company because of the management. Great companies have fallen because of lack of integrity, therefore it is important to analyze the management before committing to the company. Fortunately it is something that he has always been able to do very well. As we delve more into his annual reports, we will do a piece on management to understand exactly what he looks at.

Over time
He reinforces that once an investor does all of these things, they will perform well over time. The 'over time' means that one must have a long-term outlook on investing. When a student asked about the most appropriate time to sell, he said "never". Good companies are so hard to come by, that when you find them, you buy a lot of them and hold on to them forever. It was a lesson that took him a very long time to learn.

That one statement, as you can see, has a lot of meaning and it is the fundamental of his investment philosophy. This is one of my favorite videos of him talking to students. The amount of information he is willing to share amazes me. I look forward to hearing what you all think. We have a lot to learn.

Love, peace and money.

About | Warren Buffett









[Image credit: Stephanie Kuykenal/Bloomberg News]

Age: 77

Fortune: Self-made

Source: Berkshire Hathaway

Net worth: $62.0 billion (as of first half of 2008)

Country of Citizenship: United States

Residence: Omaha, Nebraska

Industry: Investments

Marital Status: widowed, remarried, 3 children

Education: University of Nebraska Lincoln, Bachelor of Arts / Science
Columbia University, Master of Science

America's most beloved investor is now the world's richest man. Soared past friend and bridge partner Bill Gates as shares of Berkshire Hathaway climbed 25% since the middle of last July. Son of Nebraska politician delivered newspapers as a boy. Filed first tax return at age 13, claiming $35 deduction for bicycle. Studied under value investing guru Benjamin Graham at Columbia. Took over textile firm Berkshire Hathaway 1965. Today holding company invested in insurance (Geico, General Re), jewelry (Borsheim's), utilities (MidAmerican Energy), food (Dairy Queen, See's Candies). Also has noncontrolling stakes in Anheuser-Busch, Coca-Cola, Wells Fargo. Insurance operations flourished in 2007. "That party is over. It's a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008." The Oracle of Omaha issued a challenge to members of The Forbes 400 in October; said he would donate $1 million to charity if the collective group of richest Americans would admit they pay less taxes, as a percentage of income, than their secretaries. Had long promised to give away his fortune posthumously. Irrevocably earmarked the majority of his Berkshire shares to charity in 2006, mostly to the Bill & Melinda Gates Foundation. Gift was valued at $31 billion on day of announcement; donation will far exceed that sum so long as Berkshire shares continue to rise.
[Source: Forbes.com]

Companies in Berkshire Hathaway's Portfolio: The Coca Cola Company, American Express, Wells Fargo, Burlington Northern Santa Fe, Union Pacific, Proctor and Gamble, US Bancorp, Wellpoint, Johnson and Johnson, Conocophillips, POSCO, Wal-Mart, Washington Post, Nike, General Electric, Goldman Sachs, Suntrust Bank, Iron Mountain, COSTCO, Sanofi-Aventis, United Healthcare, Ingersoll-Rand, Home Depot, Lowe's, Kraft, Carmax, Bank of America.

Recommended readings: Security Analysis, The Intelligent Investor, Common stocks and Uncommon profits, The Theory of Investment Value, The Essays of Warren Buffett, Berkshire Hathaway Chairman's Letters to shareholders, Beating the Street, One Up on Wall Street


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