2010: Are the still opportunities to outperform the market?
AUDIENCE MEMBER: My name is Robert McArthur (PH) from Boston, Massachusetts.
I’m starting a career in investing, and many, if not most, investors my age think they’re value investors.
Also, there’s a record number of people here to see you this year, and the same value investors who were laughed at three years ago are now celebrated by the financial press.
Will there be fewer metaphorical $100 bills left on the street going forward, and if so, should I look for a career in managing a business instead of managing money?
WARREN BUFFETT: There will probably be fewer, but I would say there will always be — except in the most bubbly of markets, perhaps — but there will always be opportunities if you’re not working with large amounts of money.
The money manager — there’s a basic conflict. There’s conflicts in most businesses. Everybody’s pointing out the conflicts now in the investment banking business.
But the investment management business has a conflict that’s equally as significant in the fact that asset gathering can become a way more important part of your income than asset managing.
But if you manage moderate sums of money, I think there will always be opportunities to overperform. That doesn’t mean lots of people are going to do it, but they will be out there.
And, you know, it might have been easier many years ago when there were fewer people looking and not as much information was available on the internet and all that.
But people still make the same mistakes and they still get — well, I’ll give you an illustration.
Charlie has a company called the Daily Journal Company. And the Daily Journal Company has a bunch of cash. And it sat there with cash, and it sat there with cash, and I own 100 shares — which is all he’ll let me own — and I got their annual report here a while back.
And in their fiscal year of 2009, they never bought stocks before that I’d seen, and all of a sudden they’d bought $15 million worth of stocks and they were worth 45 million.
So by sitting around for a while, but waiting until things got really ridiculous in certain cases, he put $15 million out that became 45 million within, probably, a six month period or so.
So opportunities come around. You have to be prepared to grab them when they come. And you can’t do it with the kind of money — I mean, you can’t get the extraordinary things with the kind of money that we’re running.
With moderate amounts of money, I think there will always be opportunities. Charlie’s going to tell you something more pessimistic now, probably. (Laughter)
CHARLIE MUNGER: Yes. One piece of advice that Warren frequently gives — and it’s particularly useful to those going into money management — take the high road. It’s far less crowded. (Laughter and applause)
WARREN BUFFETT: Alan Simpson used to say, he said, “Those who take the high road in Washington are seldom bothered by heavy traffic.” (Laughter)
But getting to the last part of your question, there’s going to be opportunities for talent, whether it’s in money management, operating management, whatever. It’s going to work.
Money management, you know, is easier to scale up and easier to get into and all of that. So it was certainly my natural inclination, in any event.
I would not have wanted to work my way up to plant superintendent and all of that — (laughs) — until I got a job at the top, you know, about the time they were going to give me a gold watch.
But there’s opportunities in both places.