Buffett expanded on this during the meeting, highlighting that the commercial insurance “could be a business that reaches into the billions, and could be in the fair number of billions over time.” This, however, won’t be an overnight process. Berkshire is excruciatingly careful about its underwriting and always prefers underwriting profit over premium volume.
Buffett also isn’t keen on acquiring its way to a bigger commercial insurance presence. He noted that “it’s better to build than to buy if you can find the right people.” That seems to be the case at Berkshire. At the very top of the insurance unit is Ajit Jain — one of the best operators in the business. And it sounds like there’s strong interest for other insurance operators to join Berkshire. Buffett pointed out that the company “had a number of people reach out since the [AIG] announcement was made.”
4. Uncharted territory.
If you’re scratching your head over how the Federal Reserve’s quantitative easing efforts are going to work out over the long term, consider yourself in good company. When asked about the eventual impact of QE, Munger responded: “The basic answer is, I don’t know.” Buffett added that “it’s really uncharted territory. It’s a lot easier to buy things sometimes than it is to sell them.”
Both Buffett and Munger did, however, seem to agree that the course taken was better than the alternative. Buffett said that he has “a lot of faith in [Fed Chairman Ben] Bernanke.” As for the threat of inflation, while Buffett said that “it certainly has the potential for being very inflationary,” Munger warned “I worry about things more than inflation.”
Of course, it’s easier when you have the long term focus that Buffett and Munger have. In terms of dealing with the low-rate environment, Buffett emphasized that they “never stretch for yield.” It can be a costly policy in the short term, but one that protects the company over the longer term from the eventual change in the rate environment. And when that change comes? For Berkshire’s fixed-income portfolio “that would be a couple billion dollars in annual earnings that we don’t have now.”
5. Be a lifetime learner.
This last point was a very small moment in the meeting, but one that shouldn’t be overlooked. When the duo was asked by a shareholder for a list of the 10 books that influenced them the most that weren’t written by Ben Graham or Phil Fisher, Munger responded:
I can’t name 10 books that I regarded that much better than the next 10, my mind is a blend of so many books that I can’t even sort it out anymore. [emphasis mine]
This is such a great line because it conveys the idea that there isn’t one, two, or 10 books that are suddenly going to turn someone into a brilliant investor. Instead of burning cycles trying to find the “secret book” that will suddenly turn them into the next Buffett, investors should instead focus on being lifetime learners that are constantly learning, reading, and experiencing new things.
The article Warren Buffett Speaks: The 5 Key Takeaways From the Woodstock for Capitalists originally appeared on Fool.com is written by Matt Koppenheffer.
Matt Koppenheffer owns shares of Berkshire Hathaway, Goldman Sachs, Bank of America, and American International Group (NYSE:AIG). The Motley Fool recommends American International Group, Berkshire Hathaway, and Goldman Sachs. The Motley Fool owns shares of American International Group, Bank of America, Berkshire Hathaway, and General Electric Company and has the following options: Long Jan 2014 $25 Calls on American International Group.
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