Alice Schroeder（巴菲特的自传作者）'s Interview (Long) - Very Good

dividend_growth

Seeking Alpha有着整段的采访，很长：http://seekingalpha.com/article/ ... her-alice-schroeder

这一段不错：

Miguel: Could you shed some light on Buffett’s daily life? What is his daily routine? Maybe you could comment on his interactions with the management teams.


Alice: Sure. He comes in the morning and his routine is to switch on CNBC with the sound muted and start reading while glancing at the crawl from time to time. The wooden shutters on the windows are always closed. You get no sense that a world exists outside, which is what he wants, no distractions. As far as I can tell, he doesn’t need sunlight.

He is already pretty well versed on the news by the time he gets in, through the Internet and television. But he still prefers newspapers. He reads the WSJ, NYT, Financial Times, Washington Post, the Omaha World-Herald. He reads some offbeat things like the NY Observer. He reads all sorts of trade press relating to the different businesses that Berkshire runs. American Banker, Oil & Gas Journal, A.M. Best, Furniture Today. There are stacks of reports from the different BRK subsidiary companies on his desk. Throughout his day he grazes through the reading pile.

Meanwhile he talks on the phone. He doesn’t make a lot of outgoing calls; people call him. That’s his day … most of the time.

People do come to visit him and he’ll sit and spend an hour with someone or have lunch or dinner. A lot of days he doesn’t have anything on his schedule. His interaction with managers is minimal. Some of them call him regularly, but he’s not kidding when he says that others, he speaks to maybe a couple of times a year, or they communicate in writing.

He responds if they call him. He almost never calls them. If they call him he’ll be very agreeable and talk but he keeps the conversation quite short. When they do call, he acts as a sounding board. The one thing he controls is capital decisions. But anything else, it’s pretty much up to them.

He is a very good listener who gives excellent advice, and he’s also pretty firm about not giving unasked advice. The managers vary in their desire (for asking for advice). The ones that do ask use words like “invaluable” to describe his advice.

Within headquarters he has low interaction with his staff other than with Debbie and the other secretaries. He talks to Marc Hamburg (the CFO) regularly, although not necessarily daily. He talks with his the bond trader. These conversations are very brief. You’ll notice this is a running theme… while he does have long conversations, it’s only with a few friends and only on occasions of his choosing.

In the office, he knows everyone’s name and occasionally walks down the hall and says hello to people. He is the furthest thing from a walk-around manager, though. He stays in his office (he is at one end of the hall) and everyone else sticks to their end.

Miguel: Is there anything that surprised you about his daily routine or communications?


Alice: While I was an analyst, he would always say, “Call me anytime,” but I rarely did. I had this false notion that he was busy all day and it would be an imposition to call him. Later I learned some of his closest friends feel the same way, and meanwhile Warren is sitting there in Omaha wishing more people would call him.

Only certain people, though, that should be stressed. Essentially, only people who he is certain have no expectations of talking to him get to talk to him.

You know his saying about potential acquisitions, “If the phone don’t ring, you’ll know it’s me.” That’s not coming out of a vacuum. If you want to connect with Warren Buffett, do it in writing.

Something to keep in mind is that Warren is extremely precise and literal in what he writes and says. You can tell this from reading his writings closely, but it was even more interesting to watch him create them in real time. It’s unwise to read more into his words than is there. It’s equally unwise to assume that everything you might want to know has been said.

One thing I found surprising initially, but with hindsight not, is that Warren relies on those people who do call him as his window on the world. He needs eyes and ears. You know, if you’re Warren Buffett, you can’t walk into a Dairy Queen to check things out. People are always putting on a show for him. He appreciates candid information and seeks it out.

Through this vast network of connections that he’s built, he’s created a sort of database of information about business and the economy that’s probably irreplaceable.

这一段是关于他的投资方法：

Miguel: How is Warren different than other value investors?


Alice: He’s more interested in money, for one thing (laughs).

In terms of how that affects his investing behavior, number one, in his classic investments he expends a lot of energy checking out details and ferreting out nuggets of information, way beyond the balance sheet. He would go back and look at the company’s history in depth for decades. He used to pay people to attend shareholder meetings and ask questions for him. He checked out the personal lives of people who ran companies he invested in. He wanted to know about their financial status, their personal habits, what motivated them. He behaves like an investigative journalist. All this stuff about flipping through Moody’s Manual’s picking stocks … it was a screen for him, but he didn’t stop there.

Number two, his knowledge of business history, politics, and macroeconomics is both encyclopedic and detailed, which informs everything he does. If candy sales are up in a particular zip code in California, he knows what it means because he knows the demographics of that zip code and what’s going on in the California economy. When cotton prices fluctuate, he knows how that affects all sorts of businesses. And so on.

The third aspect is the way he looks at business models. The best way I can describe this is that it’s as if you and I see an animal, and he sees its DNA. He isn’t interested in whether the animal is furry; all he sees is whether it can run and how well it will reproduce, which are the two key elements that determine whether its species will thrive.

I remember when his daughter opened her knitting shop. Many parents would say, I’m so proud of Susie, she’s so creative, this is something of her own, maybe she can make a living at it. Warren’s version is, I’m so proud of Susie, I think a knitting shop can produce half a million a year in sales, they’re paying whatever a square foot for the storefront, and labor is cheap in Omaha.

It was similar when Peter was producing his multimedia show, The Seventh Fire. Many parents would say, wow, my son has pulled off a critically acclaimed show. Warren obviously thought that, but what he articulated was, they’re charging $40 a ticket, I think the Omaha market is too small for that price point, whereas in St. Louis they may cover the overhead, and I think he paid too much for the tent because the audience doesn’t really care what kind of tent it’s sitting in and it hurts margins, etc. etc.

老巴很会manipulate周围的人：

Miguel: Okay, so back to Warren tell us about his ruthless side?


Alice: Sure…sure… How he bought National Indemnity; how he bought stock back from his partners; how he bought and got his price for Nebraska Furniture Mart; how he has dealt with labor unions. Salomon is another instance, and probably the best publicly-known example.

To use a nonpublic example, I’ve seen him “encourage” people to do what he wants by subtly raising the possibility of what he might leave them in his will. But without promising anything. This is torture for some people; they are always working for a commitment that never comes.

Another aspect to it is the degree to which other people are the bad cop when it’s necessary to be ruthless. I once commented to him on the way he uses other people as surrogates to protect himself from being the bad guy, and his response was, “Prepare to be enlisted,” not really jokingly. Now that I think of it, in a sense, I did get enlisted.

Giving the managers sole responsibility for everything that happens at their businesses is always described as a unique and friendly aspect of Berkshire. While that is true on one level, it is also a way of protecting Warren. Warren takes being risk-averse to a level that is barely comprehensible. He has boundaries made of steel. If he can’t control something completely he doesn’t want to control it at all. It’s how he behaved with the partnership, and he’s extended this to Berkshire Hathaway.

Therefore, this way of delegating “to the point of abdication” (in his words) is actually filed with the SEC; the 10-K for Berkshire Hathaway emphasizes that it is unusually decentralized and that Warren delegates to an extreme degree. I’ve seen Warren claim that he cannot overrule a decision of Debbie Bosanek: not that he is delegating to her, but that he actually isn’t empowered to overrule her.

老巴对行业和macro的态度：

Miguel: Do you think there is particular reason for his focus on consumer and financial companies?


Alice: Yes. With financial companies you have leverage that can be controlled, “regulatory oligopoly,” and trust. Insurance float is only one example of leverage. The spread on “float” in banking can be controlled too, if you lend intelligently. Banking is a nice little business for the few who are willing to do it in a vanilla manner. “Regulatory oligopoly” is the entrenched competitive position that’s, in effect, provided by your regulator and its rules. It can give you quite a few, or few hundred, extra basis points of return.

I think Buffett’s consumer plays have been overrated as a theme. He likes good companies with enduring business models. Many happen to have been consumer companies. He got intrigued by the idea that a brand could be a very enduring asset. Then he was surprised at how quickly the value of brands eroded in the 1990’s. Brands with true “moats” are exceedingly rare. Of course he wants one when he can get it, but these companies usually also are expensive.

Miguel: Maybe I can ask you a tangential question. Many value investors follow this lead of avoiding all macroeconomics, whether it’s risk, etc. Tell us about the way he looks at the economy as a whole? How does he factor that into his database and decisions?


Alice: Buffett is keenly aware of the economic cycle and relevant data. He uses economic data to put context around what is happening in specific businesses. Meaning that it lets him visualize macro-risks at the company-specific level. Second, macro data signals to Buffett where Mr. Market is going awry, for example, what parts of the stock market might be fertile digging grounds.

For example, he knew to some degree that we were in a bubble in the past few years (leading up to 2008) because you could do some statistics that would show corporate profits being at unsustainable levels and housing growth exceeding demographics to a ridiculous degree. He didn’t get into the mortgage business, although you’d better believe, people were showing up on his doorstep urging him to do it with all sorts of apparently lucrative deals. The economy is context.

Miguel: How else does he process macroeconomic information? How does this relate to his fascination with history?


Alice: History was one of Warren’s best subjects even when he was very young (in school). He has a liking for it. But at the same time pattern recognition is one of his primary skills and perhaps his greatest skill. So in terms of data points, unlike many people who learn by seeking information on an as-needed basis, Warren is always looking for fuel for pattern recognition before he needs it.

He’s always looking for context. Having an interest in a broad sweep of history provides vast context for making many decisions because it enables analogies. And that I think has been very helpful for him in avoiding fallacies such as “This time it’s different.”

It allows him to make analogies between industries, for example between the internet/dotcom stocks and early auto stocks, as in the speech he gave at Sun Valley that is described in The Snowball.

Miguel: Tell me more about his pattern recognition skills? How is this one of his greatest skills?


Alice: Take this example. If you look at the dotcom stocks, the meta-message of that era was world-changing innovation. He went back and more patterns of history when there was a similar meta-message, great bursts of technological innovation in canals, airplanes, steamboats, automobiles, television, and radio. Then he looked for sub-patterns and asked what the outcome was in terms of financial results.

With the dotcoms, people were looking to see what was different and unique about them. Warren is always thinking what’s the same between this specific situation and every other situation.

That is the nature of pattern recognition, asking “What can I infer about this situation based on similarities to what I already know and trust that I understand?” There is less emphasis on trying to reason out things on the basis that they are special because they are unique, which in a financial context is perhaps the definition of a speculation. (Warren is not averse to speculation, by the way, as long as it’s what he calls “intelligent speculation,” meaning he’s got long odds in his favor.) But pattern recognition is his default way of thinking. It creates an impulse always to connect new knowledge to old and to primarily be interested in new knowledge that genuinely builds on the old.

老巴一些"surprising"的事实：

Miguel: How has Warren Buffett’s intellect surprised you over the years?


Alice: For example, he recognizes square roots and sometimes cube roots of very large numbers; which is slightly unnerving, especially when he starts telling you the square and cube roots of license plate numbers. It’s something he does as a mild form of entertainment while driving.

More unnerving is that he remembers conversations that he has with you better than you do. I don’t know if you’ve ever been in that situation –- where you realize the other person has asked you the same question some time ago. When Buffett does that, it’s often a test.

He will ask very probing and penetrating questions and then 2 months later he will ask again and you know he remembers the exact words you said. It can feel a little like getting deposed, and it’s a bit spooky to have a human tape recorder sitting in front of you. He doesn’t have a photographic memory, but sometimes it feels close enough. And of course, he’s reading you emotionally at the same time, and you know it.

Please understand, this only happens occasionally. Most conversations with him are really enjoyable because they’re full of witty repartee and a download of information from his unusual brain.

Other interesting situations: I have seen him make his famous 5-minute decisions on the phone. Five minutes is the outside amount of time it takes him to make a decision. If the person can be succinct and convey the salient points in 60 seconds he’ll say, “Yes” or “No” in 60 seconds.

The time is determined by how long it takes the person to convey the salient points, not how long it takes him to think about it. It’s virtually instant once he has grasped the 2 or 3 variables or points that are important to him.

Typically, and this is not well understood, his way of thinking is that there are disqualifying features to an investment. So he rifles through and as soon as you hit one of those it’s done. Doesn’t like the CEO, forget it. Too much tail risk, forget it. Low-margin business, forget it. Many people would try to see whether a balance of other factors made up for these things. He doesn’t analyze from A to Z; it’s a time-waster.

Lastly, the speed of thought is so startling. Remember the 60 questions I started with the first time I interviewed him, which he covered in 45 minutes or so. He later took me to Nebraska Furniture Mart carpet warehouse and started quoting how many yards they sell of each type of carpet each week and at x price and it costs y amount a yard and we mark it up at z. He was sprinting through the carpet warehouse pointing at roles of carpet and telling me which ones sell at what price.I jogged alongside him with my jaw dragging behind me on the floor in disbelief.

I used to spend 4.5 days a week in Omaha, and I would be so wrecked by the time I got home it was unbelievable. I thought it was me; then, when I started interviewing other people who are his friends and colleagues, they would tell me that they also needed time to recuperate after seeing him. Or that they could only take him in doses of 2 hours at a time. They all like him, but it’s so intense to have someone racing ahead of you mentally and you are trying to keep up. This is clearly one reason for his bond with Bill Gates. They don’t have to wait for each other to catch up.


Miguel: Tell me more anecdotes, particularly about his processing skills.


Alice: I don’t want to dispel any notion of his intuition. But he has internalized so much information over the years and uses so many mental models (to quote a Mungerism) that they have coalesced into an almost visceral reaction to an investing situation. And this is what you strive for. It’s not mystical, even if you can’t verbalize your analysis. Much of his decision-making has sunk to almost the unconscious realm, it is so refined.

Part of his skill and speed comes from a complete unwillingness to overpay for anything, which I think, is innate or formed in him by the time he very young. When he spots something it’s like a siren goes off telling him its overpriced (either quantitatively or qualitatively).

We would kick around insurance pricing at different times. He would say, “How much would you pay to write terrorism risk on this building from now 2002 until 2012 for X events?” I would give some number and then he would say yea or nay.

Because I like probabilities and have enough experience with insurance, I usually did okay with this game. But his ability was remarkable. You could describe a situation with many contingencies, many derivatives, many puts and calls and swaps, and he would instinctively know whether it was priced well or not.

Those equity index puts that created issues with the rating agencies. I think the reason he had difficulty with those is that he knew immediately how to price them and that the odds were very high that they would make money for Berkshire, if looked at on their own as contracts.

The other elements that were subjective — the way they would create short-term volatility in the balance sheet; the way hedgers might respond; the regulating agencies — these didn’t come into the equation because the trained, automatic part of his mind fastened on how much money could be made and the probability.

If you think about it carefully you realize how costly the equity index puts were in the financial crisis. Berkshire got the float from them to invest, but its negotiations with the rating agencies meant that, at a time when markets were in turmoil, during the very crisis that Warren had been waiting for all those years to put the tens of billions of dollars to cash to work, he couldn’t do it. He was able to participate in the market crash only in a tepid way. That opportunity cost has to be offset against the expected profit from those equity index puts. They weren’t worth it.

Miguel: So what kinds of questions are not being asked about Warren Buffett? And on the flip side, what is overplayed with regards to his investment style (such as focusing on brands)?

Alice: We touched on this earlier. He is great at distilling important concepts into memorable sayings. But these sayings are not a substitute for doing work and analysis and he doesn’t use them that way in practice. For example, be greedy when others are fearful and fearful when others are greedy, which is a Gus Levy (former CEO of Goldman Sachs) quote that he uses a lot.

I’ve seen people rationalize buying a beaten-down stock because other people are fearful. That’s not how Warren thinks. For the most part, he has a universe of stocks that he has analyzed. And when something hits his bid then he will buy it.

I think another thing people have gotten confused about is the sustainable competitive advantage and the moat. Durable competitive advantage and moats are not the same thing as brands. People sometimes use these terms interchangeably. I have also seen people ascribe competitive advantages to brands that don’t have them. For example, retailers — retailers have brands. We all know what Macy’s (M) is, but retailing is fundamentally a bad business.

In essence, the merits of a brand are not the brand itself; they are the qualities of the product that create the consumer loyalty. What attracted him, ultimately, to Coca-Cola (KO) is that Coca-Cola’s formula make you more, not less, thirsty, and supposedly has been tested to prove that it doesn’t wear out the palate, no matter how much is consumed. This implies infinite sales potential. The cute commercials and cheery red logo create an association in people’s minds with those qualities. They aren’t what makes it Coca-Cola.

While there are moats that include brands, a brand is not a moat. The moat is whatever qualities are innate to the business that make it difficult to compete with.

Lastly, investing is not a religion. It’s not like you have to follow a creed. Warren will buy things that are simply cheap. He’s pragmatic. There’s no rule that he has to be absolutely consistent. If he sees something that he thinks is undervalued he’ll occasionally buy it, even if it’s a Korean dairy company. Then he’ll sell it. Everything doesn’t have to fit into a perfect framework.


Miguel: What are other things to avoid?

Alice: One of Warren’s great strengths is that, despite his pragmatism, he is quite rigid when it comes to anything that could lead to emotional decision-making. This is the circle of competence. He never bought Intel, and if there is anyone who could have understood Intel it was him. I mean, he knows Andy Grove quite well and was around at the founding of the company and even knew Bob Noyce. There were times when it must have been obvious to him that Intel was a rocket.

This is another way of saying that he has managed to avoid style drift for the most part. There’s nothing wrong with learning new things or adapting to changing circumstances. What’s wrong with style drift is that emotions are forming the current that’s drifts you along. Style drift is just endemic whenever the market is briskly valued and it’s hard to find ways to put money to work. You could argue it’s the most common reason highly regarded investors get blown up.

Lastly, I would say that people got confused that leverage is okay in financial institutions as if they are exempt from the laws of leverage because of the nature of their business. That’s a mistake that people won’t be making again anytime soon.

People were investing in companies leveraged 30x where they would never dream of considering a stock like that in a value portfolio in any other industry. What is very interesting is that Warren did not do this (by this I mean investing in these types of financial institutions).

When he did finally invest, in Goldman, he bought preferred stock with mandatory interest payments and various forms of downside protection. It was primarily a bet on Goldman’s continued existence rather than its shorter or longer-term earnings trends. The $115 warrants were gravy.

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巴菲特是一个奇才，Berkshire Hathaway无他后能否运转得好是一个大大的疑问。

他现在指定的接班人David Sokol根本不是一个数量级的。

阿斗

好文章。巴菲特的公众形象和真实的巴菲特之间的区别还是不小的。巴菲特其实非常注意别人对他的看法，他的公众形象，是他精心打造出来的。

xiaochong

your xom is back