You and I have memories longer than the road that stretches out ahead. - jobs on gates

I had an epiphany on my hour long walk at sunrise today. By focusing on negative comments others make, I actually diminish my own potential. I need to just focus on improving myself and my skills in the direction of my interests. Even if others don't approve, that shouldn't distract me beyond considering if their comments appeal to my rationality and frame of mind at the moment. If their comments don't appeal, I should discard them like water off a duck and push forward on my own agenda. A good method to avoid thinking too much about someones judgemental or negative comments is to also repeat one's favorite mantra silently, a form of meditation. When I do this, life suddenly seems to alive and full of promise. Extraneous thoughts and worries fall away. The meditation blanks my mind and I know what is the best action for me to take next.
Even if others comments are indeed justified, I think it is important to arrive at their conclusions independently,  I should make my own mistakes and live me own life even if its not optimal.

I should just be focusing on thoughts and actions that somehow move me forward, towards my goals and to achieving what I can truly achieve. Iam think joining toastmasters would be good too.

To truly discover love, one has to stop judging our parents and spouse. Also others. - A quote by Sri Bhagwan (not sure who he is but came across this quote by him). By judging or thinking too much about any comments any of them may have made, I lose focus from my goals. That should be the ultimate aim, to distract oneself as little as possible from achieving.

Wow, great compilation of WB and CM Q&As :

http://buffettfaq.com/

If you were to teach an investment course, besides works by Ben Graham and Phil Fisher and your book on the instalment basis, what would be on the syllabus?

[Q - how would you teach the next generation of investors?]

Buffett: I had 49 university groups, in clumps of six, [visit me] last year. [An education in] investing requires only two courses: How to Value a Business, and How to Think About Markets. You don’t have to know how to value all businesses. Start with a small circle of competence, things you can understand. [Look for] things that are selling for less than they’re worth. Forget about things you can’t understand. You need to understand accounting, which has enormous limitations. [You need to] understand when a competitive advantage is durable or fleeting. Learn that the market is there to serve you, not instruct you. In the investing business, if you have an IQ of 150, sell 30 points to someone else. You do not need to be a genius. You need to have emotional stability, inner peace and be able to think for yourself, [since] you’re subjected to all sorts of stimuli. It’s not a complicated game; you don’t need to understand math. It’s simple, but not easy.

CM: I never took a business class, except accounting

WB: Not thinking of depreciation as an expense is crazy. I can think of a few businesses where one could ignore depreciation charges, but not many. Even with our gas pipelines, depreciation is real -- you have to maintain them and eventually they become worthless (though this may be 100 years).

It [depreciation] is reverse float -- you lay out money before you get cash. Any management that doesn't regards depreciation as an expense is living in a dream world, but they're encouraged to do so by bankers. Many times, this comes close to a flim flam game.

People want to send me books with EBITDA and I say fine, as long as you pay cap ex. There are very few businesses that can spend a lot less than depreciation and maintain the health of the business.

This is nonsense. It couldn't be worse. But a whole generation of investors have been taught this. It's not a non-cash expense -- it's a cash expense but you spend it first. It's a delayed recording of a cash expense.

We at Berkshire are going to spend more this year on cap ex than we depreciate.

[CM: I think that, every time you saw the word EBITDA [earnings], you should substitute the word "bullshit" earnings.]

Recommendation of a book on accounting?

I haven't read an accounting book in years. I think I read Finney[?] in college. I'd suggest reading Berkshire reports and things like magazine articles about accounting scandals. You need to know how figures are put together, but also have to bring something else. Read a lot of business articles and annual reports. If I don't understand it [an annual report], it's probably because the management doesn't want me to understand it. And if that's the case, usually there's something wrong.

[CM: You start with basic rules of bookkeeping, and then you have to spend a lot of time [to really become knowledgeable]].

Would you comment on companies you say use questionable accounting practices to make their operations look good?

We follow a policy of ““criticize by practice, and praise by name.”” You could say we hate the sin, but love the sinner. So I can’’t really name names of companies that I think are doing this kind of thing; I’’ve found that if you go around criticizing others, pretty soon the criticism comes back on you.

Do you think an MBA is an important degree for students to have today?

If you are interested in business, or likely to be in business, an MBA is very useful. But, what is really important is what you bring to a class in terms of being interested in the subject. If you view a course like accounting as a drudge and a requirement, you are missing the whole game. Any course can be exciting. Mastering accounting is like mastering a new language, it can be so much fun. The attitude should be one of discovery, that you are coming there and discovering. Accounting is the Rosetta Stone of business. Economics is fascinating, the first page of economics describes how mankind deals with insatiable wants and creates the systems to fulfill these wants. It’s great stuff. Really how the world works. Business is a subsection, a fairly understandable subsection, not like black holes, which are fairly hard to visualize, but business is everyday stuff and you are learning how the world works.

What do you remember about your education at the University of Nebraska?

I had a great experience at Nebraska. Probably the best teacher I had was Ray Dein in accounting. I think everybody in business school should really know accounting; it is the language of business. If you are not comfortable with the lan- guage, you can’ t be comfortable in the country. You just have to get it into your spinal cord. It is so valuable in business.

WB: I made a mistake when I bought US Air Preferred some years ago. I had a lot of money around. I make mistakes when I get cash. Charlie tells me to go to a bar instead. Don’t hang around the office. But I hang around the office and I have money in my pocket, I do something dumb. It happens every time. So I bought this thing. Nobody made me buy it. 

We bought it because it was an attractive security. But it was not in an attractive industry. I did the same thing in Salomon. I bought an attractive security in a business I wouldn’t have bought the equity in. So you could say that is one form of mistake. Buying something because you like the terms, but you don’t like the business that well. I have done that in the past and will probably do that again.

From http://www.oprah.com/oprahs-lifeclass/Wildly-Improbable-Goals/2

In any case, learning to invite and accept your own WIG (wildly improbable goal) can awaken you to a kind of ubiquitous, benevolent magic, a river of enchantment that perpetually flows toward your destiny.

You can't force a WIG to happen, but you can create conditions that will either prevent it or invite it. One precondition is absolutely necessary: You must befriend, protect, and nurture your own spirit. This means paying attention to your real needs, treating yourself not just fairly but kindly, and standing up for yourself even if that displeases people around you. Just as a run-down body may be unable to conceive a healthy new life, a run-down soul can't support the healthy development of the life you were meant to have.

 Take a pencil in your dominant hand (right for right- handers, left for lefties) and write down a few pointed questions, such as "What are you feeling?" "What do you need?" and "What do you want?" As soon as you've finished writing a question, switch the pencil to your other hand and write whatever words bubble up. You may be surprised. When your problem-solving mind is fully engaged, trying to master the task of writing with the "wrong" hand, hidden aspects of the self often surface. I've seen people encounter full-fledged WIGs in the shaky words written by their own nondominant hand.


Once you've written your WIG, the real work begins. I've had many clients who, impressed by the strange electricity of their WIGs, assume that this intense feeling alone will magically create the desired reward. Yeah, right. I think the reason WIGs have so much mojo is that we need a huge reservoir of desire to keep us slogging through the hard work needed to realize them. Almost invariably, the effort necessary to achieve a WIG is not less than we expect but more.
Clients reap the fruit of their labors only if they are willing to go out and "shake the trees," but weirdly, the fruit that falls almost never comes from the tree the person is shaking.

That pattern—the recognition of a WIG, followed by enormous amounts of work, followed by a miracle—has happened to me so many times that it's almost stopped surprising me. I see it strike my clients as well, when they prepare a safe space for their true selves, ask a few questions, and accept the answers. You already know your own WIGs, though you may not yet realize it. The part of you that is unhampered by illusion—the illusion of time, the illusion of powerlessness, the illusion of impossibility—is waiting for you to slow down and open up so that it can speak to your consciousness. 

Irene Nemirovsky

Had a good walk in Stanford trhis morning. I think I may not have been meant for higher education or research.
That I got this far is fortunate and lucky enough.

A great article on needing time for true thought. Read the whole article at : 
http://sciencecareers.sciencemag.org/career_magazine/previous_issues/articles/2006_10_13/opportunities_stealing_time

"I am very occupied with the courses, so that my real free time is less than in Bern."
--A. Einstein, in a letter to M. Besso, 1909

In his latest book, Einstein 1905: The Standard of Greatness, scientist and historian John Rigden analyzes Albert Einstein's landmark year, in which he published 5 seminal papers that changed physics forever. As you probably know, Einstein wasn't in a university or laboratory at this time: He was a junior patent clerk in the Swiss patent office in Bern. When he wrote that letter to Besso, he was a professor at the University of Zurich. It seems odd to most of us now, but the isolation and free time that Einstein enjoyed while goldbricking in the patent office may have contributed to his extraordinary intellectual productivity. Einstein's "alternative career" may have contributed to some of the most important breakthroughs in the history of science.

As you know, science and engineering are creative activities. We rely on inspiration and serendipity to generate the insights and make the connections that are the kernel of new inventions and discoveries. Creativity requires many things: a prepared mind, obstacles to overcome, and time. What Einstein had in 1905--and what he had less of by 1909 when he wrote to Besso--was time: time to think, time to tinker, time to explore.

It is not uncommon for faculty to long for the relatively simple days of grad school and postdoc: Back then, they had TIME! Sometimes you can find yourself with so many interruptions and emergencies in succession that the e-mail you began to compose at 8 a.m. is still unfinished by the time you head to lunch! 

This isn't just frustrating and stressful; it can be corrosive to your creativity, smothering the spark at the core of your intellectual engine. Can you imagine what it would be like if painters, playwrights, and composers had to produce their product in 5- to 10-minute bites between committee meetings and proposal reviews?

Stealing time

Creating time to think, explore, and tinker is critical to your effectiveness as a creative individual--as a scientist. Without time to explore, your chances of making a breakthrough are vastly diminished. And no matter where you end up professionally, your effectiveness--and your happiness--will depend on how well you manage your time.

Killing the time vampires

Time vampires are those small, seemingly helpful or innocuous things that nibble away at your day without really adding value to it. 

1. Keep e-mail in its place. Open Outlook only twice a day. 
2. Manage your interactions with the people around you. It's easy to get caught up in enjoyable, unplanned conversations with friends and colleagues. This may require a certain amount of tact and patience: You don't want to alienate others in your thirst for privacy.
3. Create meeting-free Fridays. When I started work at a large national laboratory, lots of meetings were inserted into my workweek. Given the time I spent preparing, attending, assimilating, and following up those meetings, it was little wonder that I struggled to spend 20% of my time on productive research!  I worked half days on Sundays, in peace and quiet, to get caught up on my real work.

Creating mind oases

1. Spend at least one 3-hour chunk of time each week outside your office. any place where you can isolate yourself and read, review, and cogitate. Walking stimulates thoughts and connections differently than sitting idle does. So get out and take a walk.
2. Think about big problems. In research, it's easy to get down to tiny details very quickly and spend the bulk of your time there. Making a habit of mentally stretching yourself from time to time can be intellectually stimulating and a lot of fun. This can be even more fruitful when done in conversation with the right people.
3. The trick to maintaining your professional (and personal) sanity is knowing what tasks you can afford NOT to do--not trying to pack ever more tasks into the same day. 

Even Einstein worried about his  career and whether he was on track apparently :
Einstein the Nobody

Character, the secret to a meaningful life ?

I came across this great (month old) article on NYtimes today. I thought it a tremendously useful and courageous contribution by these schools to teach the importance of character and to attempt to instill it. It may be even more important than academic grades. It may make all the difference especially in families where there aren't resources or a long background of education. The Gates foundation would do well to serve such efforts.

What if the Secret to Success Is Failure? 

From one of the comments :


Einstein himself said that had he been a junior professor rather than a clerk in the Swiss patent office, he might not have developed his thinking as he did. Being a junior professor would have obligated him to publish, as a clerk he earned a living and physics was his hobby. A faculty position, he said, would have made it hard to avoid "superficial analysis" - i.e. produce results to ensure promotion.

How can you create a learning environment that allows curiosity to predominate? Can it be done? John Holt addressed these issues in his classic "How Children Fail". It seems his ideas were never heeded and now we have Seligman with his Positive Psychology industry focusing on individual character traits while ignoring the social context in which the schools exist.

http://www.jamesaltucher.com/2011/04/the-100-rules-for-being-an-entrepreneur/

 Try not to hire people. You’ll have to hire people to expand your business. But it’s a good discipline to really question if you need each and every hire.


Exercise. Same as above. If you are unhealthy, your product will be unhealthy.


Fire employees immediately. If an employee gets “the disease” he needs to be fired. If they ask for more money all the time. If they bad mouth you to other employees. If you even think they are talking behind your back, fire them. The disease has no cure. And it’s very contagious. Show no mercy. Show the employee the door. There are no second chances because the disease is incurable.


Don’t go to a lot of parties or “meetups” with other entrepreneurs. Work instead while they are partying.


 Ideas are worthless. If you have an idea worth pursuing, then just make it. You can build any website for cheap. Hire a programmer and make a demo. Get at least one person to sign up and use your service. If you want to make Facebook pages for plumbers, find one plumber who will give you $10 to make his Facebook page. Just do it.

No friction. The harder it is for a consumer to sign up, the less consumers you will have. No confirmation emails, sign up forms, etc. The easier the better.

TTA) No fiction, part 2. If you are making a website, have as much content as you can on the front page. You don’t want people to have to click to a second or third page if you can avoid it. Stuff that first page with content. You aren’t Google. (And, 10 Unusual Things You Didn’t Know About Google)

UU)     No friction, part 3. Say “yes” to any opportunity that gets you in a room with a big decision maker. Doesn’t matter if it costs you money.

By Steve Jobs :

When you're a carpenter making a beautiful chest of drawers, you're not going to use a piece of plywood on the back, even though it faces the wall and nobody will ever see it. You'll know it's there, so you're going to use a beautiful piece of wood on the back. For you to sleep well at night, the aesthetic, the quality, has to be carried all the way through."
– Playboy magazine 1985

On motivation

"That's been one of my mantras — focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains."
– Business Week 1998

On money

"Being the richest man in the cemetery doesn't matter to me … Going to bed at night saying we've done something wonderful … that's what matters to me."
– Wall Street Journal 1993

"The most compelling reason for most people to buy a computer for the home will be to link it to a nationwide communications network. We're just in the beginning stages of what will be a truly remarkable breakthrough for most people – as remarkable as the telephone."
– Playboy 1985

On work

"Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle."
– Stanford commencement speech 2005

• “If Apple becomes a place where computers are a commodity item, where the romance is gone, and where people forget that computers are the most incredible invention that man has ever invented, I’ll feel I have lost Apple. But if I’m a million miles away, and all those people still feel those things … then I will feel that my genes are still there.”
• 
  
• “Sometimes when you innovate, you make mistakes. It is best to admit them quickly, and get on with improving your other innovations.”
• “Be a yardstick of quality. Some people aren’t used to an environment where excellence is expected.”
• 
  
• “Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”
• “Innovation … comes from saying no to 1,000 things to make sure we don’t get on the wrong track or try to do too much. We’re always thinking about new markets we could enter, but it’s only by saying no that you can concentrate on the things that are really important.”
• 
  
• “ ‘If today were the last day of my life, would I want to do what I am about to do today?’ And whenever the answer has been ‘No’ for too many days in a row, I know I need to change something.”

I had been wishing recently that I was a bit more gracious and generous spirited,especially to those at a disadvantage or who are somehow in inferior circumstances. I have begun to suspect that it is more due to my current lack of activity and my mind not being really engaged that is causing me to be unhappy and less than gracious. Again, I and I alone am responsible for my own downfall. I need to start doing more,procrastinating less, using my brain to learn skills in this off period so that Iam a happier and nicer person.

 I also found an interesting blog entry on being gracious at Alternative Mom. Excerpt from it :

Over the last few weekends, I have had many situations that challenge my personal graciousness.

4) My inlaws and family came for a visit and I had to severely compromise my time, routine and discipline with my baby. I was gracious to a certain point where I felt that I needed to sort out my thoughts. I had to get out of the situation (hid in the room and cried my heart out) and then stepped in with grace to handle the Angel. It wasn’t anyone’s fault in general but I learn that graciousness can only come when it is within a person’s limits to handle. When I’m only given the Angel at times of need, I felt my role as a mother severely compromised and challenged. I did not have enough graciousness to understand that it would be only a passing period but then again, I am having a hard time thereafter in picking up the pieces of a disarrayed child after everyone is gone.

A quick google brings up gracious as characterised by kindness, warm courtesy, tact and propriety; being pleasantly indulgent, especially towards an inferior, and only one definition includes generosity of spirit.

In my opinion, being gracious involves being flexible, listening, empathising and understanding. 

I remember once reading in a forum about a needy mother asking for baby products. The request for help turned into an accusation by donors and lengthy explanation from the mother. Again, where is the generosity of that spirit to give? Why so many judgements?

A speech by an ex-PM of Singapore : Mr Goh Chok Tong titled “Towards a Gracious Society”

The opinions that are held with passion are always those for which no good ground exists; indeed the passion is the measure of the holder’s lack of rational conviction.  - Bertrand Russell

How to Open Yourself to Your Life's Purpose   from Oprah.com | October 02, 2009

1. Listen to your inner voice. It takes practice to hear your true desires. Your passion will often come as a whisper or serendipitous event that reminds you of what's important and what makes you happy.

To begin, life coach Cheryl Richardson advises you to take better care of yourself. Cheryl suggests nurturing your body and mind with exercise, meditation and eating well. If you read a story in the newspaper that inspires you, take note of it! That story might lead you to your passion.

Cheryl recommends answering a series of questions:
What interest, passion or desire are you most afraid of admitting to yourself and others?
What do you love about yourself?
Who do you know that's doing something you'd like to do? Describe yourself doing it.
How could you make the world a better place for yourself and others?
What's stopping you from moving forward with exploring your passion?

Living with integrity is a good start.  Dauntless of spirit, soft of heart, convinced by experience that nothing based on fear—but everything based on love—is worth doing," she says. "Living this way doesn't guarantee an easy life; in fact, it will probably take you on a wondrously wild ride. But I promise, you won't regret it."

"If you gave me the choice of being CEO of General Electric or IBM or General Motors, you name it, or delivering papers, I would deliver papers. I would. I enjoyed doing that. I can think about what I want to think. I don't have to do anything I don't want to do." Warren Buffett

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.