Warren Buffett Explains How to Turn $1 Million into 50% Returns Per Year | Berkshire 2024

[Transcript]

AUDIENCE MEMBER: Good afternoon, Mr. Buffett, Mr. Abel. My name is Sirapob Wu. A resident of New Zealand but originally from Thailand. So here’s my question for you, Mr. Buffett. Towards the end of 2018, you mentioned that you guarantee you could make a 50% annual return if you had to start again with under $1 million. The question is: if tomorrow you woke up in the body of a man of —

WARREN BUFFETT: Your body.

AUDIENCE MEMBER: — 20 year old.

WARREN BUFFETT: Yeah, your body. (Laughter) But that's fine. (Laughter)

AUDIENCE MEMBER: And your name was now Warren À la carte. (Laughs) And you had some money to invest on a full-time basis, what method or methods would you use to achieve that return? Would it involve flipping through 20,000 pages of Moody’s Manual or similar publications or finding, you know, to find cigar butts? Or would it be hunting for great companies at a fair price, as Mr. Munger would? Or would it be a combination of both, with opportunity cost serving as the final arbiter of which method to use, given that your investing opportunity has now broadened significantly? Thank you. Kob khun krab.

WARREN BUFFETT: Good question. I’m glad you came. And the answer would be, in my particular case, it would be going through the 20,000 pages. And since we were talking about railroads, you know, I went through the Moody's Transportation Manual a couple of times. That was 1,500 or 2,000 pages — probably 1,500 pages. And I found all kinds of interesting things when I was 20 or 21. And I don’t imagine there’s anybody here that knows about the Green Bay and Western Railroad Company, but there were hundreds and hundreds of railroad companies, and I like to read about every one of them. The Green Bay and Western — In those days, everybody had a nickname for railroads. I mean, that was just what Northern Pacific was, the Nipper. And, you know, the Phoebe Snow was one of them in the east that used to go up to Cornell, and the Green Bay and Western was known as "Grab Baggage and Walk." (Laughs) GB&W. And they had a bond that was actually the common stock, and they had a common stock that was actually a bond. And, you know, that could lead to unusual things, but they wouldn’t lead to unusual things that would work for you with many millions of dollars, but if you collected a whole bunch of those, which I set out to do —

And actually, that’s what impressed Charlie when I first met him because I knew all the details of all these little companies on the West Coast that he thought I would never have heard of, but I knew about the Los Angeles Athletic Club, or whatever it might be, and he thought he was the only one that knew about that. And that became an instant point of connection. So to answer your question, I would—I don’t know what the equivalent of Moody’s Manuals or anything would be now, but I would try and know everything about everything small, and I would find something. And with a million dollars, you could earn 50% a year. But you have to be in love with the subject. You can’t just be in love with the money. You really got to just find it like a true — you know, essentially, like, you know, people find other things in other fields because they just love looking for it.

A biologist looks for something because they want to find something, and that's built into — I don’t know how the human brain works that much, and I don't think anybody understands too well how the human brain works. But there are different people that just find it exciting to expand their knowledge in a given area. You know, I know great bridge players, I know great chess players. Actually, [Garry] Kasparov came to Omaha, met Mrs. B. I’ve had the luck of meeting a lot of people that are unbelievably smart in their own arena and do some unbelievably dumb things in other areas. So all I know is the human brain is complicated, but it does its best when you find out what your brain is really suited for, and then you just pound the hell out of it from that point.

And that’s what I would be doing if I had a small amount of money and I wanted to make 50% a year, but I also wanted to just play the game. And you can’t do it if you really, if you don’t find the game of interest, whether it’s bridge, or whether, you know, whatever it may be, chess, or in this case, finding securities that are undervalued. But it sounds to me like you’re on the right track. I mean, anybody that’ll come all the way to this annual meeting has got something in their mind other than bridge or chess. So I’m glad you came, and come again next year.

Source: https://buffett.cnbc.com/2024-berkshire-hathaway-annual-meeting/

 

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