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2008: How would Buffett invest differently if he had less than a million dollars?
AUDIENCE MEMBER: Hey. How you doing? I’m Eric Schleien from Larchmont, New York.
This is actually a follow-up question from a question that I asked last year at the meeting. I’d asked you guys, you know, what you would do with small sums of money since — you know, I run a small portfolio, under a million dollars.
And I asked you if you’d be doing things, you know, like the net-nets that Benjamin Graham used to talk about and, you know, liquidation arbitrage. You know, a lot of things you used to do at the Buffett Partnership.
And you acknowledged that you wouldn’t be just a buy-and-hold investor, that you — as you are today — but we would be doing a lot of those transactions.
And, Mr. Buffett, you also talked about how a lot of the investments you would do with under a million dollars would have nothing to do with stocks and would be with other types of securities, and you really don’t elaborate — neither of you really elaborated any more than that.
So I guess I was wondering if you could elaborate a little bit more on how your investment strategy, you know, back then, you know, in reference to non-stock investments, would be different than your buy- and-hold strategy today?
So what kind of stuff would you be doing? Maybe you could give me a past example that you did in the ’50s and the ’60s. That would be great. Thank you. Appreciate it.
WARREN BUFFETT: Well, if I work with small sums of money — and I’d be happy doing that — it would just open up thousands of possibilities to me.
And you might very well — certainly we found very mispriced bonds, where we could come nowhere near buying a position of enough size in Berkshire to make a difference, but where it would have made a difference if you were working with a million dollars.
But it would be bonds. It would be stocks of both in the United States and elsewhere. We found them in Korea a few years ago that were ridiculously cheap.
You know, you basically had to make very significant returns, but you couldn’t put big money on it.
So it could be in stocks. It could be in bonds. It wouldn’t be in currencies with small amounts.
But, you know, I had a friend who used to buy tax liens — you know, Tom Knapp, he’s got some relatives here. An enterprising person can find a lot of different ways to make money.
You’ll find most of them will be in small stocks. If you’re working with small money, they’ll be in small stocks or in some specialized bond situations. Wouldn’t you say that, Charlie?
CHARLIE MUNGER: Sure. (Laughter)