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We think like someone who buys a business as a whole, at the price you get by multiplying the price we pay per share by the number of shares outstanding, and we want the price of the entire business, calculated in this way, to look very attractive. So, we like to buy individual stocks at a price lower than what we think a rational person would pay if they could buy the entire business.
To his credit, of all the major figures, he is the only one who immediately said, "I was a complete fool. I am ashamed of my shortsightedness. I missed it." Who else, besides Alan Greenspan, says that? So, to me, he's kind of a hero because it's hard at his age to look back on such an illustrious career with such success and recognition and essentially say, "I was a complete fool," and that's exactly what he did.
So for me he is a hero. We need more of these How concerned are you about Berkshire Hathaway's falling stock price? The difficulty is that this is the third time Warren and I have seen our Berkshire stakes fall 50% from peak to trough. I think it's in the nature of long-term stock ownership with the normal vagaries of world events and markets that a long-term owner sees the quoted value of his shares fall by, say, 50%.
In fact, it could be argued that if you are not prepared to calmly react to a 50% drop in market price two or three times a century, you are not fit to be an ordinary shareholder and deserve the mediocre results you will receive compared to people of the appropriate temperament, who can relate philosophically to these market fluctuations.
It was successful on many fronts, and it was cheap compared to what was to come. This was a valuable insight. There are times when even a company as large as Coca-Cola is valued too cheaply by the market, considering what it will do for the shareholder. And there are times when we can understand it, and there are times when we can't .
And when we can understand that, we tend to invest heavily. For many months, we bought as much Coca-Cola stock as we could. About a third of the trading volume every day for many months. So we were very aggressively buying Coca-Cola. That's the nature of this game. And the reason it worked so well is because the people in the middle eventually stopped paying attention to the idiots on both sides .
And yet, from time to time, idiots come to power, and of course, this has terrible consequences. So you really are the nature of the system. You think about the last 10, 10 we went too far in financial deregulation. We and the people were making so much money and the economy was doing so well, because it was being inflated by this crazy boom and crazy expansion of consumer credit, that everyone was thinking, "Oh, isn't this great?" And of course, your life for the next three weeks would be more enjoyable if you used heroin, but in the long run, it would completely destroy you.
And that's exactly what the economy does when it allows itself to be seduced by the potential for a senseless boom, allowing all this gross immorality and madness to take hold. Berkshire would have been a huge success even if Charlie Munger had never lived. How often do you communicate with him ? Well, in the beginning it was almost every day, and now maybe once a week.
Only once a week? Yes. It's not a lot, but sometimes it's a long conversation. You and Warren are a real duo as chairman and vice chairman of the company. At some point, you probably want to retire, right? Get away from things, get some rest. Well, I don't think any of us want to quit our jobs unless the laws of physiology force us to do so.
And this, without a doubt, awaits us soon. But uh, you have to remember that Berkshire is probably the most decentralized large corporation in the world. I believe that Berkshire's very decentralization and the extraordinary talent pools across all of its subsidiaries will ensure Berkshire has a very worthy future long after we are gone.
And you have to remember that we started from almost nothing, and our successors are starting from what is no longer " almost nothing." And you should be able to achieve significantly more when you are given a powerful asset than when you start with nothing. Now they won't be able to multiply money so quickly per share, because that's impossible when you're working with such large sums.
But from the perspective of a trusted institution that serves the world, I think Berkshire's contribution after Warren's death will far exceed the contribution made during his lifetime. We must deal with what we are capable of understanding. And after passing this filter, we must have a business with certain internal characteristics that give it a sustainable competitive advantage .
And, of course, we would much prefer a management that has a lot of integrity and talent. And finally, as wonderful as it is, it's not worth the infinite price. So the price should be reasonable and provide a margin of safety given the variability of life. This is a very simple set of ideas. And the reason our ideas don't spread faster is because they're too simple.
Professionals cannot justify their existence if that is all they can say. I mean, it's all so obvious and simple. What would they have to do for the rest of the semester? Competition and rewards, what I call locker room culture. These are people who just have to win at football or something like that .
And by their nature, they are so competitive that whatever A does, they have to be the same or better than A. And of course, Warren and I don't have such obsessions, and I would rather live my life my way than theirs. They do a huge disservice to the rest of us with their damn locker room culture where winning is the main thing. And they are not too picky about what they have to do to win.
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