1. Foundations of Value Investing
- Value vs. Price: “Value is what a business is worth. Price is what you pay to get it.” The distinction is critical: never confuse market price with intrinsic worth.
- Intrinsic Value: Calculated as the present value of all future cash flows. The challenge is not the math—it’s realistically forecasting those cash flows.
- Margin of Safety: Always demand a buffer between value and price. Market mispricings are inevitable; protect yourself from the unknown.
- Circle of Competence: Focus only on businesses you truly understand. Eight to ten great decisions in a lifetime are enough.
2. Timeless Investing Principles
- Buy Great Businesses: “It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
- Think Long Term: Ignore short-term market noise and economic forecasts. Focus on what a business will look like in 5–10 years.
- Quality Over Quantity: Concentration, not diversification, creates outsized returns. Buffett has often placed over 50% of his wealth in a single conviction.
- Avoid Leverage: History shows leverage is what wipes investors out. Discipline, not high IQ, is the differentiator.
3. Dealing with Markets & Human Behavior
- Fear & Greed: These “super-contagious diseases” will always drive market extremes. The antidote: be fearful when others are greedy and greedy when others are fearful.
- Volatility ≠ Risk: Buffett rejects beta as a measure of risk. True risk is the chance of permanent capital loss, not price fluctuations.
- IPO Skepticism: Avoid new issues; insiders sell when it suits them, not you.
4. What Makes a Great Business?
- Key Traits: High return on capital, low capital requirements, strong cash flows, pricing power, and trustworthy management.
- Management Test: Judge leaders by how well they run the business and how well they treat shareholders. Integrity matters more than intelligence or energy.
- Permanent Holdings: Coca-Cola, GEICO, and The Washington Post exemplify Berkshire’s approach—understandable businesses with enduring economics and managers they trust.
5. Accounting, Numbers & Truth
- Accounting Literacy: Annual reports are Buffett’s main information source even today. If numbers are too confusing, it’s usually intentional.
- Beware EBITDA: Munger bluntly calls it “bullshit earnings.” Real costs like depreciation and taxes can’t be ignored.
- Cash Is King: Cash provides optionality and resilience when opportunities arise.
6. Life, Learning & Happiness
- Lifelong Learning: Read widely and constantly. Buffett still spends most of his day reading. Munger suggests going to bed wiser than when you woke up.
- Invest in Yourself: Your mind and body are your most important assets. Treat them like the only car you’ll ever own.
- Success Defined: True success is being loved by the people you hope love you—not money or fame.
- Work You Love: Choose jobs you’d do for free, with people you admire. Buffett never even asked his salary when working for Ben Graham.
- Attitude Matters: Envy is the most useless emotion; gratitude and humor are much better guides.
7. Final Takeaways
- Don’t predict markets—focus on businesses.
- Avoid complexity—stick to simple, understandable ideas.
- Stay disciplined, avoid leverage, and welcome volatility.
- Filter ruthlessly: only a handful of decisions will shape your results.
- Keep learning, stay humble, and define success on your own terms.
Conclusion
The University of Berkshire Hathaway isn’t just about investing—it’s about cultivating wisdom, patience, and character. Buffett and Munger remind us that wealth is built not only through numbers, but through discipline, integrity, and a lifelong commitment to learning.