Berkshire Hathaway 1999 Annual Meeting Audience Question # 47

Warren’s investment advice: start young

Warren Buffett:

OK. Zone 5, please.

Audience Member:

Good afternoon, Mr. Buffett and Mr. Munger. My name is Grant Morgan, I’m here from New York City.

Earlier, you had acknowledged that it is a more difficult investment and business environment today than it was when you first started out.

My question is, if you are starting out again today in your early 30s, what would you do differently or the same in today’s environment to replicate your success? In short, Mr. Buffett, how can I make $30 billion?

Warren Buffett:

Start young.

Charlie’s always said that the big thing about it is we started building this little snowball on top of a very long hill. So we started at a very early age in rolling the snowball down.

And, of course, the snowball… the nature of compound interest is it behaves like a snowball of sticky snow. And the trick is to have a very long hill, which means either starting very young or living very… to be very old.

The… you know, I would do it exactly the same way if I were doing it in the investment world. I mean, if I were getting out of school today and I had $10,000 to invest, I’d start with the As.

I would start going right through companies. And I probably would focus on smaller companies, because that would be working with smaller sums and there’s more chance that something is overlooked in that arena.

And, as Charlie has said earlier, it won’t be like doing that in 1951 when you could leaf through and find all kinds of things that just leapt off the page at you. But that’s the only way to do it.

I mean, you have to buy businesses and you… or little pieces of businesses called stocks… and you have to buy them at attractive prices, and you have to buy into good businesses.

And that advice will be the same a hundred years from now, in terms of investing. That’s what it’s all about.

And you can’t expect anybody else to do it for you. I mean, people will not tell… they will not tell you about wonderful little investments. There’s… it’s not the way the investment business is set up.

When I first visited GEICO in January of 1951, I went back to Columbia. And I… that rest of that year, I subsequently went down to Blythe and Company and, actually, to one other firm that was a leading… Geyer & Co…. that was a leading analyst in insurance.

And, you know, I thought I’d discovered this wonderful thing and I’d see what these great investment houses that specialized in insurance stocks said. And they said I didn’t know what I was talking about. You know, they… it wasn’t of any interest to them.

You’ve got to follow your own… you know, you’ve got to learn what you know and what you don’t know. Within the arena of what you know, you have to just… you have to pursue it very vigorously and act on it when you find it.

And you can’t look around for people to agree with you. You can’t look around for people to even know what you’re talking about. You know, you have to think for yourself. And if you do, you’ll find things.

Charlie?

Charlie Munger:

Yeah. The hard part of the process for most people is the first $100,000. If you have a standing start at zero, getting together $100,000 is a long struggle for most people.

And I would argue that the people who get there relatively quickly are helped if they’re passionate about being rational, very eager and opportunistic, and steadily underspend their income grossly. I think those three factors are very helpful.

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