AUDIENCE MEMBER 00:09
My name is Leigh (inaudible). I’m from Los Angeles, California.
And I want to begin by thanking you for having Bob Hamman. It was a stroke of genius. I could shop at Borsheims and my husband was entertained while I did so. (Laughter)
WARREN BUFFETT 00:26
Well, Bob is not only the best bridge player around but he is an entertaining guy, too. We —
AUDIENCE MEMBER 00:31
WARREN BUFFETT 00:31
Yeah, he is great. I agree with you.
AUDIENCE MEMBER 00:33
My question. You owned Disney once before and sold it. You also owned advertising companies in the ’70s, I believe —
WARREN BUFFETT 00:45
AUDIENCE MEMBER 00:46
— and you sold them. Could we have some insight into your thinking as to why you sold them?
WARREN BUFFETT 00:53
I’m not sure I want to give you any insight into that thinking. (Laughs)
Well, we’ll start off with the fact that when I was 11, I bought some Cities Service preferred at 38 and it went to 200, but I sold at 40, so — (laughter) — grabbing my $2 a share of profit.
So I — everything we’ve ever sold has gone up subsequently, but some of them have gone up more painfully, subsequently, than others. And certainly the Disney sale in the ’60s was a huge mistake. I should have been buying, forget about holding, and —
That’s happened many times. I mean, we think that anything we sell should go up subsequently, because we own good businesses and we may sell them because we need money for something else, but we still think they’re good businesses, and we think good businesses are going to be worth more over time. So everything I sold in the past, virtually that I can think of, has gone on to sell at a lot more — for a lot more money. And I would expect that would continue to be the case.
That’s not a source of distress. But I must say that selling the Disney was a mistake, and actually the ad agencies had done very well since we sold them, too. Now, maybe some of that money went into Coca-Cola or something else, so I don’t worry about that.
I would worry, frankly, if I sold a bunch of things right at the top, because that would indicate that, in effect, I was practicing the bigger fool-type approach to investing, and I don’t think that can be practiced successfully over time.
I think the most successful investors, if they sell at all, will be selling things that end up going a lot higher, because it means that they’ve been buying into good businesses as they’ve gone along.
CHARLIE MUNGER 02:39
Well, I’m glad that the questioner brought this touch of humility, because it is really useful to be reminded of your errors. And I think we’re pretty good at that. I mean, we kind of mentally rub our own noses in our own mistakes. And that is a very good mental habit.
Warren can tell you the exact number of cents per shares that he sold at and compare it with the current price. It actually hurts him. (Laughter)
WARREN BUFFETT 03:12
It actually doesn’t hurt. (Laughs)
The truth is, you know, because, you know, you just keep on doing things. But it is instructive to look at — to do postmortems on everything and say — as long as you don’t get carried away with it.
But every acquisition decision, that kind of thing, you know, there should be postmortems. Now, most companies don’t like to do postmortems on their capital expenditures.
I’ve been a director of a lot of companies over the years and they’ve usually not spent a lot of time on the postmortems. They spend a lot of time on telling you how wonderful the acquisitions are going to be, or the capital expenditures, but they don’t like to look so hard, necessarily, at the results.
CHARLIE MUNGER 03:55
Think of how refreshing a board of directors meeting would be if they sat down, “And now we’ll spend three hours examining all our stupid blunders and how much we’ve blown.”
WARREN BUFFETT 04:05
And then after that the compensation committee will meet. Now — (laughter) — that’s not going to happen. (Laughter)
CHARLIE MUNGER 04:10
WARREN BUFFETT 04:14
OK. Area 5, please.
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