Gurufocus notes from Munger's last annual Wesco meeting :

About half of Wesco shareholders took stock and the rest cash. Berkshire’s stock price went way lower than Warren or he expected so they had to issue more stock than they wished. But they try to behave well for those without power.

Lollapalooza effects come from multiple academic disciplines from the same direction. Academics can't figure out why Cokes and candy bars are too high priced at movie theaters.

Americans would not handle the Japanese situation nearly as well. Export driven but then new huge competition from Korea and China.

Just reread Matt Ridley’s book, "The Rational Optimist: How Prosperity Evolves." Power gets allocated to those that deserve it, with example of 20 restaurants in Pasadena driven down to the two best. Don't reach for the obvious/first answer.

Nothing more counterproductive than envy. Learning as they went. Did not initially understand the power of a brand. It changed Berkshire. You must be a continuous learner. Protect your own mind. Improve as much as you can.

For folly and evil to succeed, all that’s necessary is for wise and good men to remain silent.

Dick Fuld ruined Lehman with megalomania and evil — Munger would bet that he has no contrition. Don't behave like others just so you can make more money.

Thinks Bill Gross’ “new normal” (this) is probably correct. Europe having an adult experience.

Increasing hours to get higher pension is evil and dishonorable. Either saying always soak the rich or can't have any new taxes are both really dumb.

Combination of patience and opportunism is highly desirable as an investor. When a major opportunity comes along, don't be timid.

Three most important parts of his legacy. Self-improvement. Don't imitate a lot of his peculiarities. Irreverence can get you in a lot of trouble if you aren't Munger. Self-discipline is good.

Loves the Wall Street Journal. Likes the Economist, the best among magazines.

Index funds: I prefer to do considerably better. Said he’s un-humble by nature so willing to put up with a certain amount of misery.

Re: adversities: You simply must soldier through the best you can.

He thinks it’s perfectly obvious that there will be inflation over time.

Greece is contemptible. If he was running Europe he would not have taken Greece in. An ounce of prevention worth way more than a pound of cure.

It is hard for me to imagine Google (GOOG) not having a strong position. I don't know how you would displace Google.

Of course I have helped my children financially. The children that don't get anything hate their parents. Lose graciously. Will they be as driven? Not likely.

Admiration the best kind of love.

Lot of people want to be greedy jerks then nice at the end. Doesn't recommend that. Just consistent learning.

Do what you like to do. Follow your interests and your talents.

Is Coke (KO) as good as 20 years ago? No, but still one of my favorites. Very entrenched. Tough for the elephant to move fast. Likes branded companies selling cheap items that are entrenched. If he was running money, all accounts would own Coke.

Extremely reluctant/brutal to put something on his calendar. Once in, however, he does it. Keeps calendar open by design.

Don't preach one set of values and live another.

Some of you will live to see a Berkshire dividend but he hopes he does not. Sees parallels between the Roman Empire and US today. All empires pass the baton in due course. Every one.

We have had a huge positive influence on Asia. Chinese copied Singapore. Big admirer of Lee Kuan Yew. Admires the talent and culture of Asia but side consequence is competition.

Thinks employment will be a considerable problem for a considerable period.

Modern consultants with style boxes won't work worth a damn on average. How do pension consultants come up with 8%?

Company and CEO he admires the most: Costco (COST). Would argue Jim Sinegal one of top retail guys ever. Total meritocracy. Losing easy money in the short run.

Insurance business has always been a mediocre business conventionally applied. Will find more oil and gas than thought and there will be a lot of renewable energy from the sun. Solving energy problem will be done by our children. Certain class of people enjoy talking about climate problems rather than finding solutions. Not sure warmer isn't better. How many moving from California to North Dakota?

US Bank (USB) and Wells Fargo (WFC) are better than most at avoiding common stupidities of banking. CEO of Wells told him regarding a certain decision that he had his head up his ass. That made Charlie feel better about Wells. Level Three in his too tough pile.

Ben Franklin: When the citizens of a republic can vote themselves money, the end of the republic is near.

And from Motley Fool Notes :

On the Wall Street meltdown: It all started with an asinine bubble. The cause was a combination of megalomania, stupidity, insanity, and I would say evil on the part of bankers and mortgage brokers.

And it was widespread. Alan Greenspan was a smart guy, but he totally overdosed on Ayn Rand when he was young. You can't give bankers the freedom to create gambling games. That's what it was. Wall Street was a gambling house, and the house's odds were better than a Vegas casino. And real casino operators have to build parking lots, fly in entertainers, pay for bars and restaurants. It's expensive. Wall Street was like a casino with no overhead. It was hog heaven for them. But it created vast damage with terrible consequences to civilization.

On opportunity: Patience combined with opportunity is a great thing to have. My grandfather taught me that opportunity is infrequent and one has to be ready when it strikes. That's what Berkshire is. It's amazing how fast Berkshire acts when we find opportunity. You can't be timid -- and that applies to all of life. You can't be timid in marriage when you find the right spouse. It might be your only opportunity to be happy in life. Too many people don't act when they should. That's why half of all marriages don't work out.

On banks: Bernie Madoff expressed sorrow in court to get a lighter sentence, but it was all false. In prison he told a guy that he carried his clients for 25 years, and now he's serving 150 years. He doesn't think it's fair.

Many people don't. I bet Richard Fuld [former CEO of Lehman Brothers] doesn't have an ounce of contrition. It's just megalomania. When it's like that, you need rules to prevent catastrophe. When banks are borrowing the government's credit rating [FDIC insurance, etc.], you need rules to prevent stupid things.

Clever derivatives broke dozens of companies. It killed them. Bankrupt. We don't need these kinds of innovation in finance. It's OK to be boring in finance. What we want is innovation in widgets.

On the power of Berkshire: People make contracts with Berkshire all the time just because they trust us to do well. They trust us to behave because they know others won't. It's a wonderful position to be in. And as the saying goes, "How nice it is to have a tyrant's strength, but how wrong it is to use it like a tyrant."

On lifetime learning: When we bought See's Candies, we didn't know the power of a good brand. Over time we just discovered that we could raise prices 10% a year and no one cared. Learning that changed Berkshire. It was really important.

You have to be a lifelong learner to appreciate this stuff. We think of it as a moral duty. Increasing rationality and improving as much as you can no matter your age or experience is a moral duty. Too many people graduate from Wharton today and think they know how to do everything. It's a considerable mistake.

On accountants: Banks showed income and assets for things that were neither/nor, and the accountants were totally fine with it. They feel no embarrassment about it. They just want to get the job done. It's contemptible behavior. At the top of an idiot boom, a bank's allowance for bad debt goes to zero. That's the accounting rule. What kind of maniac thinks this is good? A certified public accountant, that's who.

On financial collapse: The world learned what happened after World War I when we demanded that Germany repay. It was chaos and hyperinflation. The result, of course, was the rise of Hitler. And Hitler could have been more successful than he was; his kids or family members could still be in power today had things gone just a little differently. You don't ever want to do anything to push an economy to collapse. Terrible things result.                                     

Now think about this. During World War II, Japan tortured our soldiers to death. They marched them around. The Germans put people in ovens. Just awful. And what did we do after the war? We gave them money to rebuild. We said, "Let bygones be bygones." The result was a magnificent global economic system and a win for human rights.

Who deserves the most credit for this? That would be John Maynard Keynes and his bookThe Economic Consequences of the Peace. People figured out he was right, and they just did it.

On our financial crisis vs. Japan's lost decade: There was an orthodoxy of the world that Keynesian tricks would goose an economy and solve and ameliorate recessions. Economists were so sure it would work that GDP would grind ahead. They thought it was a law, like the laws of physics.

But then came Japan. Japan's crash was caused by factors similar to ours -- an idiot boom that burst. They tried every Keynesian trick they could think of, and the result was stasis. And I mean they tried everything. I once noted that you cannot find a piece of garbage on a Japanese mountain. They hired as many people as possible to clean it up. Yet the result was still stasis. Twenty years of stasis! And think, this couldn't have happened to a better group of people than the Japanese. They're uniquely capable of handling tragedy. They're polite, respectful. The outcome of 20 years of stasis in the United States would not be nearly as good.

But it's more complicated than just looking at [Keynesian policies]. There are other explanations. Japan has an export-driven economy, and out of nowhere they suddenly faced huge and credible competition from China and Korea. Of course that will cause slower growth. It was a bad outcome all around.

On not jumping to conclusions: Matt Ridley wrote the terrific Book The Rational Optimist --and that really is a good book. I've read it several times. But even someone as smart as him is too quick to jump to conclusions and a single explanation. His explanation for the success of modern capitalism is Adam Smith's division of labor. He repeats it over and over again.

But this is a totally inadequate answer. Joseph Stalin can achieve division of labor and there would be benefits. That doesn't mean it's capitalism.

The major success of capitalism is its ability to drench business owners in feedback and allocate talent efficiently. If you have an area with 20 restaurants, and suddenly 18 are out of business, the remaining two are in good, capable hands. Business owners are constantly being reminded of benefits and punishments. That's psychology explaining economics.

On envy: There is nothing more counterproductive than envy. Someone in the world will always be better than you. Of all the sins, envy is easily the worst because you can't even have any fun with it. It's a total net loss.

On consumer credit: Banks don't offer free checking accounts because they don't want to make money. They do it because overdrafts generate big fees. Banks had computer programs to rank the largest withdrawal so as to generate the greatest number of overdraft charges. There's now a class action suit against this, as there should be.

I don't want to sell credit to people who are going to hurt themselves with it. You should only sell products that are good for the people who use them. Some disagree with this, but I know I'm right. That is to say, you're talking to a Republican who admires Elizabeth Warren.

On the investing climate: It's a very different world today. Bill Gross of PIMCO has a very good concept called "the new normal." Bond yields are so low, and prices will, of course, fall when interest rates rise. And there's so much other trouble in the world. It could mean very modest returns for some time to come.

On high-speed traders: Fancy computers are engaging in legalized front-running. The profits are clearly coming from the rest of us -- our college endowments and our pensions. Why is this legal? What the hell is the government thinking? It's like letting rats into a restaurant.

On tech stocks with low P/E ratios: I don't know much about them. But it's hard to imagineGoogle (Nasdaq: GOOG  ) not having a strong position in the future. I don't know how you can replace Google. For other tech companies, of course there are very real threats.

On what his favorite company is outside Berkshire: That's easy. It's Costco (NYSE:COST  ) . Costco is a different kind of place. It's one of the most admirable capitalistic institutions in the world. And its CEO, Jim Sinegal, is one of the most admirable retailers to ever live on this planet.

Costco will continue making huge contributions to society. It has a frantic desire to serve customers a little better every year. When other companies find ways to save money, they turn it into profit. Sinegal passes it on to customers. It's almost a religious duty. He's sacrificing short-term profits for long-term success. More of you should look at Costco.

On parallels between Rome and America: Of course there are parallels. Every great empire passes the baton. The failure rate of empires is 100%.

But in one sense, the greatness of the past stays with us. What was great about the Athens of the past is still with us. You can be 100% certain America will pass the baton, but our best values will go with that baton. The most important people in Asia studied at American universities and learn from America like sponges. Most of what is achieved now will never die.

Responding to a comment about the dollar depreciating 95% in past half-century: If you think the past half-century was bad, you will have serious problems in life.

Despite inflation, we've been a huge success. Real GDP has grown 2% per year per capita. That's fantastic. The period you describe as miserable was a tremendous time for the American economy. You've described success.

On hypocrisy of ripping on other financiers: To the extent that all I've done is pick stocks that have gone up, and sat on my ass as my family got richer, I haven't left much contribution to society. I guess it's a lot like Wall Street. The difference is, I feel ashamed of it. I try to make up for it with philanthropy and meetings like this one today. This meeting is not out of kindness. This is atonement.

On patience: Blue Chip Stamps was doomed a long time ago. But it had all this float, just like an insurance company. We had to do something intelligent with that float. Over decades, we only found three things to do with it: Buy See's Candy, the Buffalo Evening News, and Wesco. That's it -- just three ideas over the course of decades! That is very interesting, isn't it? Most think it's easy to go out and buy something. And it is. But most who do it will do so to the detriment of their shareholders. Study after study shows shareholders lose when management acquires businesses. Ours didn't. It was all because of patience.

On following his lead: Most people who try my way will end up unpopular and unsuccessful. There are certain peculiarities of my personality that I would not recommend. My irreverence. My insistence. These things will get most people into trouble. ... Basic morality works for everyone. Discipline works for everyone. Objectivity works for everyone. That's what you should focus on.

On pension funds: Public pensions are quite dishonorable. A police officer who earns $50,000 a year can work all this overtime in his last year and, because of it, collect a $100,000 pension for life. Of course, people think it's OK because he's an honorable police officer. But it's evil and overaggressive. It's wrong to have people behaving like that.

On Greek entitlement and bailouts: The Greeks describe failure as a job that consumes eight hours a day and five days a week. Of course, you're going to have problems with that mentality. Accepting Greece into the European Union was a huge mistake.

You can't let their big banks fail. But when I heard of Greece's bailout, my first thought was, "Those poor children." They'll be paying for it. At some point, you have to draw the line. We did. I think Lehman Brothers was a good place to draw the line.

Coke today vs. past: Coca-Cola (NYSE: KO  ) is not as good today as it used to be. It's just so big. Like Berkshire, it's hard to make the elephant move very fast.

But it's still one of our favorites. The trouble with selling an expensive product is that it gives people the incentive to knock you off. Coke isn't like that. Branded companies that sell cheap products, and lots of them, is a fantastic business model to have.

On an easy life: Assume life will be really tough, and then ask if you can handle it. If the answer is yes, you've won.

Asked if his children have benefited from his wealth: Of course they have. When rich parents make their kids sell newspapers on the sidewalk, the result is always the same: It breeds hate. It's no different than if a man indulges himself while leaving his wife in a small corner in the kitchen.

That doesn't mean you can't have good, constructive children. They just won't be as motivated as ones who start out half-starving. It's a huge advantage to start from nothing [but be given an opportunity]. Of course, you simply won't find that in the Rockefeller descendants. It's too damn bad if you've grown so rich that your kids don't have that kind of motivation to succeed.

On unemployment: I would be flabbergasted if jobs bounce back. Unemployment will be a considerable problem for a considerable amount of time. But it doesn't have to ruin your life. I was raised during the Depression, and people dealt with it. People with gumption today will deal with it.

In a sense, our jobs problem is the same problem Japan has faced over the past 20 years: Huge competition from China. Part of the problem is that Asians are so damn smart. For years they were in this Malthusian trap, stuck in agriculture. Now they're unleashed, and human talent is just awesome when unleashed. They're formidable competitors.

On picking a good investment manager: We have recent experience picking investment managers, and it's quite humbling. It's really, really difficult. Lots of people come to us and they're all high-quality folks. You'd think it'd be like shooting fish in a barrel, but it's not. Most of them are good in small niches, but they can't scale. Warren and I could scale. You had to with Berkshire.

On success: You have to love what you do. My whole life I've never been good at anything that I wasn't interested in. Architecture is a terrible way to make a living, but a friend of mine who is an architect says he loves it so much that he never has to work. That's a great way to live. Everyone should try it.

On ETFs: I never look at them. In general, I approve of low-cost index funds. Most investors will do better with them -- and that goes for both individual and professional investors. But I don't touch them. I prefer to do better than average.

On valuation: When we buy businesses, we often pay liberal prices. Sometimes this comes at a great cost. Dexter Shoe, for example, which we bought with stock. We utterly failed on that one. But we rarely get cheap businesses. If you average it out, though, I like it that way, because we end up with good businesses. [You get what you pay for].

On adversity: Quitting under adversity or while being frightened just brings contempt. Living with adversity is the best chance for opportunity.

There will always be panicky people. If someone else panics and you're calm, people will remember the calm one. Think about when Bobby Kennedy was brain dead and dying. Jackie was the only person in the family who could say, "It's over. Pull the plug." She was the only calm one. And who do people remember from that family? Jackie.

On investing in banks: A friend of mine won't touch banks. His attitude is that sooner or later the bastards will go crazy. I think that's irrational. You have to be able to recognize the ones that stick out. Wells Fargo (NYSE: WFC  ) and US Bancorp (NYSE: USB  ) avoid stupidity better than most. And Wells admits that it had its head up its ass when it made some of its mortgage loans. They know it wasn't their finest moment. I'm comfortable with people like that.

On humility: I like people admitting they were complete stupid horses' asses. I know I'll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.

On diverse learning: Economists have long been divided by a simple problem. When you go to the movie theater, soda and popcorn costs a totally unfair price compared with other locations. This just tortures economists. At least 1 million man-hours have gone into trying to solve this problem. Economists understand that a first-class ticket on an airplane costs more than coach. They get that one. It's marginal utility. But they can't figure out the movie theater to save their lives.

Here's the Munger approach to the problem. In the auto world, a car manufacturer will sell a car for $40,000, and charge $200 for the extra gizmo. No one cares about the extra $200 when you're already spending $40,000. It's insignificant. The movie theater is basically the same thing. People are OK paying that much for a soda after they've paid so much for an admission ticket.

Now, psychologists can explain this clearly. Economists can't for the life of them. It's so simple what happens when you think beyond your trained field. It's amusing to see someone spend 1 million man-hours on something I can solve with my left hand.

On the success of Iscar: Failure isn't an option in Israel. You're surrounded by enemies and you have no hydrocarbons.

On energy: It's like they say: It's the best of times and the worst of times.

It's the worst with things like corn and ethanol. This was the most asinine idea in all of human history. People are just now starting to figure this out.

But it's the best in things like renewable energy from things like wind. It can't happen everywhere or match coal, but without it, imagining a world without hydrocarbon looks so glum. And we'll find more hydrocarbon. Shale, for example, is seriously interesting.

You can solve almost any problem with enough energy. Israel gets half its drinking water from the ocean.

A typical day in the life of Munger: Both Warren and I have amazingly open calendars. We're particularly brutal about saying no to new commitments. We just like to read and talk with people. It's an enormous advantage.

Why he likes BYD: Partly because they work hard at engineering problems, and partly because when they fail they put their heads down and admit it.

On improvement: When I was young I would sell the best hour of the day to myself. The most important investment was in myself. The rest of the hours I sold to clients.

On his favorite morning reads: I love the Wall Street Journal, but I've never liked its op-ed pages. The one I like the best is the Economist. I regard it as the adult publication of the modern world. But, in its field [news], The Wall Street Journal is still first.

Asked about parenting advice: Don't preach one set of values and live another. Whatever values you want to teach need to come with examples day after day.

On reading: Most books I read I don't finish the first chapter. I'm not burdened by awful books.

fantastic burry video

Check out : http://www.gurufocus.com/news/139362/25minute-video-with-michael-burry

Magic Formula stocks. SK, lab

Just what I had been thinking the past few days, and sums up my current state:


So here's my weird bit of advice: If you've lost your life's true passion (or if you're struggling desperately to find passion in the first place), don't sweat it. Back off for a while. But don't go idle, either. Just try something different, something you don't care about so much. Why not try following mere curiosity, with its humble, roundabout magic? At the very least, it will keep you pleasantly distracted while life sorts itself out. At the very most, your curiosity may surprise you. Before you even realize what's happening, it may have led you safely all the way home.

Read more: http://www.oprah.com/spirit/Elizabeth-Gilbert-on-the-Importance-of-Curiosity#ixzz1SodzixT1




And he offers these observations of his own: "Part of the blessing and challenge of being human is that we must discover our own true God-given nature. This is not some noble, abstract quest but an inner necessity. For only by living in our own element can we thrive without anxiety. It is imperative that we find that vital element that brings us alive... the true vitality that waits beneath all occupations for us to tap into, if we can discover what we love. If you feel energy and excitement and a sense that life is happening for the first time, you are probably near your God-given nature. Joy in what we do is not an added feature; it is a sign of deep health." 

Read more: http://www.oprah.com/spirit/Oprah-on-Finding-Your-Calling-What-I-Know-For-Sure#ixzz1Sr4sAGEb

From How To Tune into the Voice Within :

This very day, two individuals are vying to be your personal adviser. The first, whose name is Fang, dresses in immaculate business attire, carries a briefcase full of neatly organized folders, and answers all e-mails instantly, via BlackBerry.

The other candidate, Buddy, wears shorts, a tank top, and a rose tattoo. When you ask advice on a pressing matter, Buddy hugs you. There are almost no words on Buddy's résumé (the few that do appear are jokes and song lyrics), and in the margins.

Who will you hire to advise you?
Long, long ago, as a teenager, I gave the name Fang to my socially conscious, verbal, educated mind. Buddy was what I called a perverse, disobedient aspect of my being, who apparently never evolved logical semantics and simply does not understand How Things Are Done Around Here.  Though I generally did listen to Fang, it was Buddy who was always right.



When clients tell me they need to find their "inner voice," I suspect they're already listening to one: a loud, logical, convincing Fang-voice that echoes parents, teachers, priests, and angry personal trainers. 

So if you're wondering whether a choice is wise or not, hold each option in your attention, then feel its effect on your body and emotions. When something's wrong for you, you'll feel constriction and tightness. The wise choice leads to feelings of liberation, even exhilaration. 

Send your attention downstairs, to a place in the center of your chest where Buddy is smiling in the stillness. It helps to take some deep breaths. You may have to lie down. But as you feel for that stillness, the yawping from your brain will seem less important. As you begin to relax, you'll find yourself guided to do unexpected things. These may include just resting, often the single wisest choice. 


Think of a challenging circumstance or difficult decision you happen to be facing right now—something that's been keeping you up at night. With this situation in mind, write the first answer that comes up when you ask yourself the following questions. Don't overthink the answers. In fact, don't think about the answers at all—just blurt.

With regard to your difficult situation... 

• What would calm do now?
• What would peace do now?
• What would relaxation do now?

The more often you ask yourself these strange questions, the more open you become to the gentle energy of your own inner wisdom. When you feel your body begin to let go of tension, you know you're headed in a wise direction.

Warren Buffett, Delegator in Chief

Mr. Buffett “manages” Berkshire’s 257,000 employees with just 21 people at his headquarters in a small office in Omaha.

Mr. Buffett’s business partner, Charles Munger, once described Mr. Buffett’s day. He spends half of his time just sitting around and reading, Mr. Munger said. “And a big chunk of the rest of the time is spent talking one on one, either on the telephone or personally, with highly gifted people whom he trusts and who trust him.”

When questioned once about why Berkshire didn’t take a more active role in fixing Moody’s, the troubled credit rating agency, in which he was the largest shareholder, he declared: “I’ve never been to Moody’s. I don’t even know where they’re located.”

“If I thought they needed me I wouldn’t have bought the stock,” he added.

He sees himself less of an activist than as a passive investor, a stock picker with a nose for a good deal. “We don’t tell Burlington Northern what safety procedures to put in or AmEx who they should lend to,” he said at his annual meeting two years ago. “When we own stock, we are not there to try and change people.”

Howard marks

From Howard Marks book "The most important thing"

-Risk avoidance is likely to lead to return avoidance as well. Risk control is the best route to loss avoidance.
None of us is in this business to make 4 percent. We could easily avoid all risk, and so could you. But we'd be assured of avoiding returns above the risk-free rate as well.

-The road to long term investment success runs through risk control more than through aggressiveness. Over a full career, most investors' returns will be determined more by how many losers they have and how bad they are than by the greatness of their winners. Skillful risk control is the mark of a superior investor.

It's easier to know what to do at extremes than it is in the middle ground, where I believe we are today(aug 2013)

When there's nothing clever to do, the mistake lies in trying to be clever.

-The process of intelligently building a portfolio consist of a) a list of potential investments b) estimates of their intrinsic values c) a sense of how their prices compare with their IV estimates d) an understanding of the risks involved in each, and of the effect their inclusion would have on the portfolio being assembled.

- The first step is to make sure that the things being considered satisfy some absolute standards, that they meet some minimum criteria. For example someone may narrow their list to those whose riskiness falls withing acceptable limits, since there are risks with which the investor may not be comfortable. Examples are risk of obsolescence in a fast-growing segment of technology, a risk that a hot consumer product will lose its popularity, subjects that some investors consider beyond their expertise, some companies may be unacceptable because their industries are too unpredictable or their financial statements are not transparent enough.

-Usually its price has been falling, making the first-level thinker ask, "who would want to own that"? (It bears repeating that most investors extrapolate past performance, expecting the continuation of trends rather that the far-more-dependable regression to the mean. First level thinkers tend to view past price weakness as worrisome, not as a sign that the asset has gotten cheaper.

- Convertible securities give investors advantages of both bonds and stocks, they were only issued as a last resort by weak companies lacking alternatives, such as conglomerates, railroads and airlines. Mainstream investors felt they unnecessarily introduced complexity. Well, when everyone feels there is no merit in something, its reasonable to suspect its unloved and thus possibly under priced.

-One of the things I want to point out that there aren't always great things to do, and sometimes we maximize our contribution by being discerning and relatively inactive.

-So here's a tip : You'll do better if you wait for investments to come to you rather than go chasing after them. You tend to get better buys if you select from the list of things that sellers are motivated to sell rather than start with a fixed notion as to what you want to own.

- At Oaktree, one of our mottoes is "we don't look for investments; they find us". We try to sit on our hands, we don't go out with a buy list.

-Sometimes things are mostly fairly priced. Its essential that we recognize the condition of the market and decide on our actions accordingly.  Ted Williams - one of the greatest hitters of baseball contributed to his own success by an intensive study of his own game. He broke down the strike zone into 77 baseball-sized cells and charting his results at the plate, he learned his batting average was much better when he only went after pitches in his "sweet spot".

- How to recognize the fat pitch? One way to be selective is to ascertain whether we're in a low return environment or a high-return environment.

-Forced sellers are beautiful and let down efficient markets. -Margin calls, withdrawals, ratings change etc. If chaos is widespread, plummeting prices, withdrawals of credit, feat among counter parties and prices can fall much below intrinsic value.

- Macro future is unknowable. The more we concentrate on smaller-picture, the better to gain advantage.

-Are forecasts as a whole consistently actionable and valuable ? Answer is NO

-If you know the future, its silly to play defence. You should behave aggressively and target the greatest winners; there can be no loss to fear. Diversification is unnecessary and maximum leverage can be applied. But its foolhardy since no one can know the future. Overestimating what you're capable of knowing can be extremely dangerous. Acknowledging the boundaries of what you can know - and working within those limits can give you a great advantage.

- Cycles : 1) redouble our efforts to predict future 2) ignore cycles, just try make good investments with total disregard for cycles (buy-and-hold) 3) figure out where we are in the cycle, and what that implies for our actions.  To me, number 3 is the right one.

- The quality of a decision is not determined by the outcome. In the long run, there's no reasonable alternative to believing that good decisions will lead to investment profits. In the short run, we must be stoic when they don't. A good decision is one that a logical, intelligent and informed person would have made under the circumstances as they appeared at the time, before the outcome was known.

- the suboptimizers of the "I don't know" school put their emphasis on constructing portfolios that will do well in the scenarios they consider likely and not too poorly in the rest.

- In amateur tennis, the match goes to the player who hits the fewest losers. The winner just keeps the ball in play until the loser hits it into the net or off the court. Play defensive!

-There are two principal elements in defense. The first is exclusion of losers from portfolios. This is best accomplished by conducting extensive due diligence, applying high standards, demanding a low price and generous margin for error and being less willing to bet on continued prosperity, rosy forecasts and developments that may be uncertain.

-The second element is the avoidance of poor years and exposure to meltdown in crashes. In addition, this required thoughtful portfolio diversification, limits on the overall riskiness borne, and a general tilt toward safety.

-Sources of error are either analytical/intellectual or psychological/emotional. The former are straightforward:we collect too little information or incorrect information. Or perhaps we apply the wrong analytical processes, make errors in our computations or omit the ones we should have performed.

-one type of analytical error is "a failure of imagination". By this I mean either being unable to conceive of the full range of possible outcomes or not fully understanding the consequences of the more extreme occurrences.

-Inadequate due diligence leads to investment losses. 

Q : Could you tell us a little bit about your typical workday ? How do you manage your time so you get to play Halo 2 or whatever ?

A : Gates : Well, I don't get much to play Halo 2. I spend some time playing with new technologies, new PCs, softwares, which is why I think my job is the best. Iam in meetings a lot. My calendar gets very full with those. Then at night after the kids are gone to sleep, Iam on email a great deal then over the weekend Iam on mail a lot as well. I take two weeks a year to just go off and read and think, where Iam not interrupted by work or anything else, solidly trying to think about the future, people get to send me things to read as part of that think week. So its a nice mix of things.

A Buffett : Iam on think week about 50 weeks a year, I work about 2. You'd be surprised at my days, I mean they're very unstructured, no meetings, none. I mean, I don't like meetings. I read a lot. I wish I were a faster reader, you know I'd get a lot more done. but I do read a lot, and Iam on the phone a moderate amount. Our businesses basically run themselves, my job is allocating capital , and that's what Iam thinking about, but I don't like to have things packed you know, hour to hour to hour. And Bill and I are both extraordinarily lucky, we really get to do what we like to do the way we want to it, with people we choose to be around and that are terrific. We're very fortunate, and in his work he has a different kind of pace than I have,  but we both love it the way we do it and my guess is we're each most productive in that particular mode too, cause it fits our personalities and aptitudes.

Persistence. Keep doing, find what you love to do, something should click. To keep trying is key.

I feel like I wish I could have started out earlier, but I think what happened before was inevitable for me to get to where Iam now -  Wanting to explore and having the means to be able to do so. Also in terms on temperament, to go through disillusionment is invaluable in realizing what makes one truly happy.

Buffett:
Most people go through life using up a very very small percentage of their potential. I would follow my passion -  whatever turns you on. You don't want to take a job just for the money, you don't want to take a job in an organization that you don't feel good about or work with people you don't feel good about. You really want to be excited when you get out of bed every morning. And it won't necessarily be the job that you'll have 10 years later but you'll be learning so much as you go along. When I joined Ben Graham, I never asked about the salary, I just found out when I got my first paycheck because I just knew it was the right thing for me to be doing.