Berkshire Hathaway 1994 Annual Meeting Audience Question # 28

You don’t have to hire out your thinking if you keep it simple

Warren Buffett:

Some businesses are a lot easier to understand than others. And Charlie and I don’t like difficult problems. I mean, we… if something is hard to figure, you know, we’d rather multiply by three than by pi. I mean it’s just easier for us.

Charlie, you have any…?

Charlie Munger:

Well, that is such an obvious point. And yet so many people think if they just hire somebody with the appropriate labels they can do something very difficult. That is one of the most dangerous ideas a human being can have.

All kinds of things just intrinsically create problems. The other day I was dealing with a problem and I said, this thing… it’s a new building… and I said this thing has three things I’ve learned to fear: an architect, a contractor, and a hill.

And… if you go at life like that, I think you, at least, make fewer mistakes than people who think they can do anything by just hiring somebody with a label.

Warren Buffett:

We don’t comment… excuse me, go ahead.

Charlie Munger:

You don’t have to hire out your thinking if you keep it simple.

Warren Buffett:

You don’t have to do… we’ve said this before… but you don’t have to do exceptional things to get exceptional results.

And some people think that if you jump over a seven-foot bar that the ribbon they pin on you is going to be worth more money than if you step over a one-foot bar. And it just isn’t true in the investment world, at all.

So, you can do very ordinary things. I mean, what is complicated about this? But, you know, we’re $3 billion pretax better off than we were a few years ago because of it.

There’s nothing that I know about that product, or its distribution system, its finances, or anything, that, really, hundreds of thousands… or millions… of people aren’t capable of, that they don’t already know. They just don’t do anything about it.

And similarly, if you get into some complicated business, you can get a report that’s a thousand pages thick and you got Ph.D.s working on it, but it doesn’t mean anything.

You know, what you’ve got is a report but you don’t… it… you won’t understand that business, what it’s going to look like in 10 or 15 years.

The big thing to do is avoid being wrong.

Charlie Munger:

There are some things that are so intrinsically dangerous. Another of my heroes is Mark Twain, who looked at the promoters of his day and he said, “A mine is a hole in the ground owned by a liar.”

And that’s the way I’ve come to look at projections. I mean, basically, I can remember, Warren and I were offered $2 million worth of projections once in the course of buying a business and the book was this thick.

Warren Buffett:

For nothing.

Charlie Munger:

And, if we were given it for nothing, and we wouldn’t open it.

Warren Buffett:

We almost paid 2 million not to look at it.

It’s ridiculous. I do not understand why any buyer of a business looks at a bunch of projections put together by a seller or…

Charlie Munger:

Or his agent.

Warren Buffett:

…or his agent.

I mean, it… you can almost say that it’s naive to think that that has any utility whatsoever. We just are not interested.

If we don’t have some idea ourselves of what we think the future is, to sit there and listen to some other guy who’s trying to sell us the business or get a commission on it tell us what the future’s going to be… it… like I say, it’s very naïve.

Charlie Munger:

Yeah, and five years out.

Warren Buffett:

Yeah. We had a line in the report one time, “Don’t ask the barber whether you need a haircut.” And… it’s quite applicable to projections of… by sellers… of businesses.

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