Back to school! Priceless lessons of a great businessman and investor. Warren Buffett

Warren Buffett answers questions from students at the Wharton School of Business at the University of Pennsylvania (November 12, 2004)
Q: Is it fair to say that today it is much more difficult than in the past to find a predictable business, as most industries are constantly changing? Isn't that the reason why you've re-evaluated your long-term buy-and-hold investment strategy? After all, many consumer brands, such as Coca-Cola or Gillette, are no longer able to grow?

Answer: There are two main approaches to change. We believe that the changes have a negative impact on investment. Otherwise, the richest people would be librarians. Some industries are changing rapidly. We're looking for those who haven't been affected by the change. If you are able to predict the nature of changes, you will become a very rich person. But from the point of view of equity investors and net investments (such as those discussed in connection with Kitty Hawk [1] - in the aviation industry), change is a highly negative phenomenon.

For example, I have a list of 2000 companies that once made cars. Currently, the two remaining ones, GM and Ford, are in a lot of trouble. Hundreds and hundreds of companies have long gone out of business. Most of you are unaware that the Maytag and DuPont corporations were once involved in the production of cars. Thus, the net investment in these companies did not generate a profit.

We are looking for stability. You mentioned Gillette. 100 years after its founding, the company owns 70% of the market. There is nothing mysterious in its products, distribution and raw materials used, no secrets. The company survived under capitalism, and there is no doubt that its products will be in demand in the future.

The Coca-Cola Company accounts for 50% of the global carbonated drinks market. This is 1.3 billion bottles with a capacity of 240 ml. She sold more drinks this year than last year, and more last year than the year before. I guarantee that Coca-Cola, Gillette and Wrigley will continue to dominate. The Internet does not affect what brands people like.

We don't need change. Fruit of the Loom and Haynes sell 80% of underwear in the US for boys. I believe that underwear will be worn in the future. Nor is Bill Gates looking for change. He seeks to eliminate this factor from his business. It seems that Microsoft and eBay are protected from the rest of the market by deep moats. It's great if you can predict change, but then you have to consider the risks. Your strategy may not work. Therefore, we are looking for stable industries and companies.

We don't want to lose money. Capitalism is a cruel thing. We are looking for ordinary goods that people will always need. Patents are the worst way to secure demand. There are many other possibilities for determining predictable demand. The problem is not the lack of features, but the prices.

Question: In 1969, you liquidated the Buffett Partnership, in part because of the virtual disappearance of investment opportunities that would have been quantitatively attractive. Do you think the current situation is more suitable for investing than 1969? Is she better or worse?

Answer: In 1969 I encountered considerable difficulties in my work. My fortune grew from $105,000 to $100 million. I received many offers to sell the partnership. If I had the same company, I would have closed it in 2000, at the height of the Internet boom.

In March 2000, when the NASDAQ index reached a record high, all my funds were invested in real estate investment trusts (REITs). If I had a big company, I would close the activity, but I owned a small one. In this case, it was necessary to take into account not only my feelings, but also the feelings of partners. I suffered losses and felt like a scoundrel, although scoundrels usually make good money. I didn't want to be too pushy in my attempts to make money because I didn't really understand what was going on. Investing and risking other people's money is much more difficult than your own.

And yet we still had some options: for example, in 2002 the company invested $8 billion in junk bonds, and if we had the time, we would have invested $22 billion. We tried to buy as quickly as possible.

Investing is the best game in the world. I owned large stores. In this business, you need to keep up with competitors and constantly defend yourself. And I don't want to do that. Investing is the very business where not must be constantly defended. You just need to follow the flying balls, and then make a deft throw. We must learn to wait for the time to throw. The problem is that you have to invest in public. Every now and then shouts are heard from the “tribunes”: “Come on, come on, blockhead! What are you waiting for?!"

But people your age can get by with a little money, and I know how to do it.

Question: In an interview with Fortune magazine, you stated that you would make a 7% profit in the next decade.

Considering that, firstly, your profit margin should be at least 30% higher than the average, secondly, the price / GDP ratio should be 25% higher than the average values ​​and, thirdly, the interest rate should be 25 % below the average, and assuming a return to the average, can we argue that if economic income and dividend growth is 7%, then we are on an unsustainable cost plateau?

Answer: We are approaching the upper limit of the cost range, but have not yet reached it. I have already given my assessment of the market position four or five times in an interview with Forbes magazine (in 1969, 1974 and 1981, and in 1977 with Fortune magazine). In most cases, we can only say whether certain securities are overvalued or undervalued, that is, highlight extreme values.

Estimates usually vary widely. The main thing is to determine the extreme points. When I'm on the lookout for an attractive business, I'm looking for energetic people. It is much easier to notice what is worth 98 or 6 points, and not 63 points. This rule applies both in life and in business. You mentioned my article published in 2001. But the profit did not exceed 7%, so I guess the estimate of the cost range was not entirely accurate.

I think that securities are now overvalued. Everything is so expensive that I don't see particularly good deals. But, I think, someday you will be able to "get into a fish swimming in a barrel." You have to be ready to play for real when the moment is right. This means that you do not have the right to "flirt" with everyone and everyone.

Question: You once said that it is better to have a great business at a fair price than an honest business at a great price. But if the price suits both the seller and the buyer, and the second failed to significantly improve the business, then I don’t understand how he can get super profits? After all, the price paid for the company led to a decrease in the value of the business.

It is obvious that you are counting on a large profit. Не могли бы вы объяснить, каким образом вам удается покупать компании по справедливой цене, которая, тем не менее, делает возможными super profits?

Answer: Sometimes prices in the securities market are set irrationally. In the past, great companies have been sold at prices that are ridiculously low. Unlike negotiations to sell a particular company, the market is more like an auction. Traded securities are generally not perceived as an ownership interest in a business. For example, prices for farmland or apartments in Nebraska do not differ much from the average, and we cannot expect significant deviations. On the other hand, the value of securities in some cases may differ by 50% or even 100%. Thus, we have the opportunity to purchase shares of companies at low prices.

Therefore, we really strive to buy great companies at ridiculous prices. For example, in 1973, The Washington Post was put up for sale for just $80 million (5 million shares of $16).

At that time, this corporation owned several newspapers (including The Washington Post), four television channels and a number of magazines (including Newsweek). Most analysts believe that the real value of these assets was $400-500 million. But you have the opportunity to acquire small "pieces" of the company at a much lower price. Using it, Mr. Buffett bought 9% of the company's shares for $10 million in 20-30 transactions from institutional investors who wanted to quickly get rid of securities. He bought, and the owners of the shares were sure that their price would decrease.

No one disputed that the company was worth at least $400 million. However, its share prices were falling. Gradually, Mr. Buffett increased Berkshire Hathaway's stake to 22%. Today, The Washington Post is worth about $10 billion in business.

Buying on contract markets, the purpose of which is to acquire the company as a whole, is a specific occupation. You can get great results. Such transactions are almost unaffected by the auction market. Peter Lynch often repeats that companies will pluck flowers and water weeds. In a difficult situation, they very often put up for sale "crown jewels", their most valuable and profitable assets.

Question: How do you think, what value will have in a year 1 dollar that you personally invest in the business?

Answer: It all depends on its purchasing power during the year. Using a