2004: What did Buffett read when he was younger to get investment ideas?

AUDIENCE MEMBER: My name is Oliver Graussa (PH) and I’m Vienna, Austria.

I have studied economics and I’ve read about 40 books about investing and want to be such a successful investor as you have been.

Mr. Buffett and Mr. Munger, when both of you were younger and had much less capital for investing, how many — which publications were the best to get a few excellent investment ideas to be so successful? And how many hours per week, on average, did you spend with reading about companies? Thank you.

WARREN BUFFETT: Well, when we were younger, we spent — probably Charlie, compared to now, spent a lot more time — I spent a fair amount more time — looking at companies.

But we would — if we were doing it over again, we would do it over again pretty much the same way.

We would look at everything in sight that we thought we could understand. And it — the world hasn’t changed in that respect. There may be some more people doing it, but there are a lot more companies to look at now.

And we would — we would read everything in sight about the businesses and the industries we thought we could understand.

We would look for things that jumped out at us as being very cheap in relation to the value. And we would have one enormous advantage because we would be working with far less capital, which means the universe of potential ideas would be far greater.

But there’s no — there’s nothing different, in my view, about analyzing securities now than there was 50 years ago.

Charlie?

CHARLIE MUNGER: Yeah, we read a lot and we thought a lot. I don’t know anybody who is wise who doesn’t read a lot.

On the other hand, that alone won’t do it. You have to have a temperament, really, which grabs the correct ideas and does something with those ideas. And I think most people who read a lot don’t have the necessary temperament, and they grab the ideas or they’re simply confused by the mass of material. And, of course, that won’t work.

WARREN BUFFETT: Yeah, there’s probably something — Phil Carret used to talk about having a “money mind,” and I would call it a “business mind.” And, you know, there are people that are better with, you know, identical IQs, that are better adapted for one than the other. And the temperament is all important.

I mean, if you can’t control yourself, no matter what the intellect you bring to the process, you know, you’re going to have disasters. And Charlie and have seen one after another that —

It’s not a business that requires extraordinary intellect. It does require extraordinary discipline.

That shouldn’t be so difficult. But as I look around the world sometimes, apparently it is quite difficult. I mean, the whole world went a little mad a few years back in terms of investments.

And you say to yourself, “How could that happen? Don’t they learn anything for the earlier ones?” But, you know, what we learn from history is that people don’t learn from history. And you certainly see that in financial markets all the time.

Incidentally, you mentioned books. Charlie, you didn’t recommend any books this year?

CHARLIE MUNGER: Well, one book I really like I couldn’t buy because it’s published only in England. But it’ll get here in due course. And that’s called “Deep Simplicity” by John Gribbin. It’s a perfectly marvelous book. And of course, that’s a great title: “Deep Simplicity.” That’s what we’re all looking for.

WARREN BUFFETT: I’ve been reading “A Short History of Nearly Everything.” It’s very impressive to — you know, to read about people pondering how to figure out the weight of the Earth or something in the 18th century.

And you would think that minds that would do that would do very well in financial matters. But, you know, if you remember, Isaac Newton spent a significant part of his life trying to turn lead into gold. And he might have made a good stockbroker. (Laughter)

But it didn’t do much for him financially. Charlie knows more about Isaac than I do, so —

CHARLIE MUNGER: Well, and he lost an enormous —

WARREN BUFFETT: Yeah, in the bubble —

CHARLIE MUNGER: —chunk of his net worth in the South Sea Bubble. So he invested in an absolute crooked mania. And here was the smartest man in the world. So just IQ points alone won’t do it.