You do not need to reinvent the wheel.
As Warren Buffett, Charlie Munger, Ajit Jain, and Greg Abel take on the stage of Berkshire Hathaway’s 2023 AGM, investors and the media had their attention glued to what’ll they would say, looking for hints of new insights to invest in 2023 and beyond.
I for one, have found in the past few years, most of Warren Buffett and Charlie Munger’s advice seems to be repetitive, albeit consistent.
Occasionally, Buffett and Munger would throw a new punchline or two. But this year, there were none.
That said, since their previous advice and approaches continue to hold their ground and withstand the test of time, I do not think that they would need to keep reinventing the wheel for new investment punchlines.
Here are some key reminders and reflections, that you might have heard before in prior AGMs, old but still gold, worthy for reflection and a reminder.
1. The USD will always be the reserve currency
This is a strong stance and claim, that would certainly irk and invite scorns from the crypto bros.
The “de-dollarization” has been an active topic again for the past few years, even though the inception of the thought goes way back.
With geopolitical uncertainties so high, the de-dollarization would hold more push factors right now compared to previous initiatives by some other countries.
Perhaps it is hard to appreciate and understand the strong stance and faith Warren Buffett has for the USD.
But to just stand back and think again – all currencies and even financial institutions, get bigger and stronger not due to economic moat, but more on how much trust it has accrued over the years.
Big banks have all escaped unscathed fundamentally during the banking turmoil sell-offs, not just due to the stability it offers, but also a certain level of trust accrued within its depositors and users.
When trust is impaired, even the largest bank can experience a bank run, and even the world’s most valuable currency can be worth zero.
2. People doing “dumb things” present opportunities
Rarely do you see both Warren Buffett and Charlie Munger disagree on something.
Charlie thinks that value investors should be prepared to get smaller returns as competition intensifies.
But in Warren’s view, there are still plenty of opportunities if people do “dumb things”, shrewd investors would still be able to find great investments and get great returns.
This reminds me subtly of one of Warren’s favourite quotes: “Only when the tide goes out do you learn who has been swimming naked.”
3. Diversification can be “deworsification”
Diversification has its own love-hate relationship among all investors. There are those who swear by diversification as the only free lunch.
There are those that think buying too much stock, increases your probability of errors as well.
Charlie Munger belongs to the latter camp.
After investing for a period of time, I can say that statistically, diversification can help mitigate certain risks, and could be useful since not everyone has a high-risk appetite.
Conversely, if you have strong convictions over a handful of stocks and a great track record, then diversification can actually cause deworsification.
One man’s meat can be another man’s poison in this case.
4. Hold the godd*mn stock
Of all the reminders, I personally think this simple one resonates with me the most.
According to Charlie, the simple solution of estate planning is straightforward. Just hold on to Berkshire Hathaway’s shares.
Now that doesn’t mean that everyone should buy and hold Berkshire shares, but rather, if you have unwavering conviction and believe that a stock could and should do well in the next 10 years or more, just hold on to the stock.
Selling it off when the market goes down and realizing unnecessary losses, will just make compounding your wealth even harder. It may be hard to look at a portfolio of stocks in the red, but if the selldown is temporary, short-term pain is all for the sake of long-term gain.
5. You do not need to be smarter, but wiser
Yet another lesson that I liked about this year’s annual meeting.
Fundamental and value investing would require a certain understanding of a business model of a company.
But one does not need to be a subject matter expert to invest in a business.
If a company’s business model is so easy to understand, that the economic moat is easy to determine, one does not have to learn the technical aspects of businesses.
For Warren, he did not understand the functions and technology of an iPhone, but understanding consumer behavior and the brand loyalty it has, where Apple users tend to continue becoming Apple users, is wise enough for him to make an investment decision into buying Apple stock back then.
Punchlines do not make you a better investor
It is easy to pick a leaf from the many quotes that have been coined and uttered by legendary and famous investors.
But no matter how much you know and quote, know that punchlines are only key lessons condensed into a simple-to-understand sentence.
Memorizing a punchline is easy. Practicing, embracing, and truly living the creeds spoken are much more important.
The 2023 annual meeting came at the right time, as most if not all of us would be pondering what the markets would be like in an uncertain geopolitical situation, ravaged by the US banking turmoil.
Well perhaps, any irrational selloffs in the coming months, could be the “dumb thing” that we should be taking advantage of?