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My best takeaways of the Berkshire Hathaway 2017 AM via the WSJ

Warren Buffett:

– “I’m afraid a capitalist system will always hurt some people,”

– A very rich society is beneficial to society overall and can help people.

– (On Ebitda) : Excluding depreciation is ridiculous.

– Mr. Buffett says he “underestimated the brilliance” of Amazon’s Jeff Bezos, not just of vision, but of execution. The odds that he would succeed was “not at all obvious.”

– “I have gained no real knowledge about tech,” he says.

– He takes an unscheduled detour into a discussion of the major tech stocks that top the U.S. stock market’s market-cap tables. He doesn’t name them, but this group includes Apple, Microsoft, Amazon, Facebook and Google’s parent company, Alphabet. He marvels at how capital-light their operations are.

-“That is a very different world. It used to be that growing and earning large amounts of money required investment” but “you literally don’t need any money to run” these operations, he says with a bit of hyperbole.

– He also notes that all his Berkshire shares are going to charity, so his wife won’t get any. “The object isn’t to double or triple her money,” he says.

-Messiers. Buffett and Munger defended sugar and Coca-Cola. Mr. Buffett said he thinks Coca-Cola has been a very positive factor in America and the world for a long time.

“And I don’t want anyone telling me I can’t drink it,”said Mr. Buffett, noting he drinks about five 12 ounce Coca-Cola servings a day with 1.2 total ounces of sugar in them.

– “I was wrong” on IBM, Mr. Buffett says, a strong statement on a company that he still holds a large stake in.

– Buffett and Munger talked about two missed opportunities in tech: Google and Amazon, companies they admire greatly but didn’t invest in.

– On Google, Mr. Buffett notes that Berkshire was a customer of the search giant through Geico. He learned early on that Geico was paying money to Google directly every time someone clicked through. There was little capital needed in the transaction and tons of scale.

– On Amazon, the two had immense praise for the business, and specifically founder Jeff Bezos. Mr. Buffett was particularly impressed by Mr. Bezos’s stewardship of both Amazon and The Washington Post. That said, neither investor saw themselves in Mr. Bezos.

– Mr. Buffett has said in the past that they didn’t anticipate how much Amazon would threaten the retail industry.

– All businesses have problems, Mr. Buffett says, but “those (portfolio of Berkshire) are businesses we like very much.”

– He adds: “We did not buy American Express or Wells Fargo or United Airlines or Coca-Cola with the idea that they would never have problems or they would never have competition. But we did buy them because we thought they had very, very strong hands.”

– Mr. Buffett kicks off a discussion of insurance by telling the audience that no one has made them more money as shareholders than Mr. Jain. And that includes Mr. Buffett himself.

– “Jack Bogle has probably done more for the American investor than any man in the country,” said Mr. Buffett.

(Mr. Bogle is the founder of Vanguard Group–the Malvern, Pa. index fund giant.) Mr. Buffett said that when Mr. Bogle first started his indexing crusade, no one on Wall Street wanted to help.

But today, index funds have delivered more for shareholders than nearly any other financial product.

– “The index fund wouldn’t have happened without him,” said Mr. Buffett, who estimates that at a minimum index funds will save investors hundreds of billions over time.

(Fun : Mr. Bogle, who turns 88 on Monday, was in attendance at the annual meeting on Saturday. In addition to a nice ovation, Mr. Bogle also got some good news during the meeting as Mr. Buffett jokes that at 88, he’ll be eligible for an executive position at Berkshire Hathaway in two years. )

Charlie Munger

– “Just learn, learn, learn all the time,” Mr. Munger said. “If we had not kept learning, we wouldn’t even be here.”

– Ebitda Is a ‘Horror’ “You’ve understated the horrors of the subject and the disgusting nature of the people who brought that term into the valuation of business,” says Mr. Munger. “Now they use it in the business schools. That is horror squared.”

– “A lot of people are trying to be brilliant, and we are just trying to stay rational.”

– Mr. Munger also noted that Berkshire made a mistake in its Wal-Mart investment, most of which had been sold by the end of 2016.

– “We’ve gotten a lot of credit for being smarter than we were,” said Charlie Munger.

via – http://www.wsj.com/livecoverage/berkshire-hathaway-2017-annual-meeting-analysis

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Alok Kejriwal is a digital entrepreneur, based in Mumbai. He sold his last Company to Disney. He currently runs Games2win and is the founder of therodinhoods.com – India’s only social network for entrepreneurs. Connect with Alok on Linkedin, Twitter @rodinhood Facebook. Read his best articles here!

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