A tribute to Warren Buffett
A small compilation of lessons from Buffett and his partner Charlie Munger
On May 3, 2025, during Berkshire Hathaway’s annual general shareholders’ meeting, Warren Buffett (94) announced that he will transition the CEO role to his successor, Greg Abel, toward the end of the year.
Below is a small compilation of lessons from Buffett and his partner Charlie Munger, which have enriched our world over the last decades. (The years in parentheses refer to the publication year of the corresponding Shareholder Letter, available on Berkshire Hathaway’s website.)
Enjoy the read — and perhaps find some inspiration and learning along the way. The lessons below have taught me a great deal over the past few years.
Wealth creation, the ultimate goal of financial investing at both individual and collective levels, requires patience and discipline. Warren Buffett:
“Our business is one requiring patience. It has little in common with a portfolio of high-flying glamour stocks.” (1964).
Select stocks as you would evaluate the complete acquisition of a business:
“We select our marketable equity securities in much the same way we would evaluate a business for acquisition in its entirety.” (1977).
The same applies when selling a portion of a position: would you sell the entire business at the offered price? (1982). Other circumstances may justify reducing a position, but you should always ask this question when slowing the compounding process of a quality company in your portfolio.
Invest in businesses you understand, with favorable long-term prospects, led by honest and competent managers, and available at an attractive price. Buffett:
"We want the business to be (1) one that we can understand, (2) with favorable long-term prospects, (3) operated by honest and competent people, and (4) available at a very attractive price." (1977)
Companies largely attract the shareholders they seek and deserve. When they prioritize short-term results and their fleeting expressions in financial markets, they typically attract shareholders focused on the same factors (1979). Buffett:
“There are managers who actively deceive and defraud.” [...] “You can be sure that some managers and promoters will exploit [financial accounting] to produce such numbers, no matter what the truth may be” (1988)
Avoid small, mediocre commitments: “If something’s not worth doing at all, it’s not worth doing well” (1981). Time allocation is critical.
For business owners: treat your shareholders as partners, as a conduit through which they own the company’s assets (1983). Also, consider equity for those who work daily to enhance the intrinsic value of your enterprise: “Our directors are all major shareholders of Berkshire Hathaway.” [...] “We eat our own cooking” (1983).
Adopt a “til-death-do-us-part attitude” (1989) with portfolio companies and hold them firmly, barring extreme valuations or diminished prospects for sustained value creation.
Recognize the limits of growth: “A high growth rate eventually forges its own anchor” (1989). It is thus incumbent on a company’s management to seek opportunities to efficiently deploy and reinvest capital within the business for as long as possible, tapping into new, sustainably profitable growth avenues. After all, revenue growth is the primary driver of value creation. However, Buffett notes that exceptional capital allocation by management is rare:
“The lack of skill that many CEOs have at capital allocation is no small matter” [...] “In the end, plenty of unintelligent capital allocation takes place in corporate America. (That’s why you hear so much about ‘restructuring.’)” (1987).
Buffett described his and Charlie Munger’s role as (1) identifying talented management, (2) providing them with an environment to perform their work, and (3) wisely deploying the cash they send to Berkshire Hathaway’s headquarters (1990). Similarly, the task of individual or professional investors is to identify honest and visionary management capable of creating future value, then optimally reinvesting the excess returns (and any realized value creation) from these companies.
“Practice doesn’t make perfect; practice makes permanent” (1992): aim to buy great companies at reasonable prices rather than reasonable companies at great prices.
The longer you hold a stock, the less significant the impact of a premium or discount paid or received at purchase relative to its intrinsic value (1996).
Only those who are net sellers of stocks in the short term should rejoice when stock prices rise. Investors who have yet to allocate the majority of their future free cash flows should, to a greater extent, embrace declining market prices (1997)—assuming, of course, all else remains equal and the underlying intrinsic value of portfolio holdings continues to grow.
Intrinsic motivation is paramount in all aspects of life. Seek like-minded individuals driven by the same intrinsic motivation. Warren Buffett:
“We continue to be blessed with an extraordinary group of managers, many of whom haven’t the slightest financial need to work.” [...] “It’s simple — to be a winner, work with winners” (2002).
In this context, extrinsic motivators often serve as an additional means to celebrate successes together, where the rewards are frequently reaped far in the future or may not be realized at all if financial exposure is passed to future generations.
Investors must remember that excitement and costs are their greatest enemies (2004).
Trust is hard-earned and easily lost. In 2006, Buffett noted that Berkshire Hathaway had increasingly become “the buyer of choice” for business owners and managers, marking the year the company began its international expansion. When entrepreneurs choose to sell their life’s work—whether the right moment has arrived or because their business could create even greater value for society under Berkshire’s stewardship—the leadership of an buying investment firm has performed exceptionally well in trust building.
This earned trust continues to compound in Berkshire’s value creation, yielding benefits for the company, amplified by its growing scale: “At Berkshire, the whole is greater — considerably greater — than the sum of the parts” (2018).
A truly exceptional company, according to Buffett, must have an enduring moat that protects superior returns on invested capital (2007). He continues, the dynamics of capitalism ensure that competitors will relentlessly seek to storm the castles of the world’s most successful companies.
“Invert, always invert,” as mathematician Carl Jacobi advised—a principle later embraced by Charlie Munger. Whether you’re absorbing new information to apply to existing knowledge or processes, or tackling a complex problem from the outset (such as a novice investor approaching the world of investing), it’s wise to start by identifying what to avoid. This approach significantly narrows the range of possible choices. In his 2009 letter, Warren Buffett outlined what he and Charlie Munger sought to achieve in their deductive thinking processes:
Avoiding companies with futures that are difficult to evaluate—particularly regarding how future value creation will be distributed. Consider secular trends like the automotive industry (1910), aircraft (1930), and televisions (1950), where value creation, due to intense competition and lack of sustainable competitive advantages, largely accrued to consumers rather than shareholders.
Never relying on “the kindness of strangers.” In other words, maintaining self-sufficiency by relying primarily on internal liquidity.
Not attempting to oversee every detail of subsidiaries’ operations. While this might allow quick intervention in issues undetected by management, it’s better to trust the executives responsible for those operations. This forms a key pillar of Berkshire Hathaway’s success: “Most of our managers [...] use the independence we grant them magnificently, rewarding our confidence by maintaining an owner-oriented attitude that is invaluable and too seldom found in huge organizations” (2009). The benefits of delegating operational responsibilities outweigh the drawbacks.
Making no attempt to woo Wall Street (e.g., media, analysts, and shareholders driven by short-term opportunism). Buffett: “We want partners who join us at Berkshire because they wish to make a long-term investment in a business they themselves understand and because it’s one that follows policies with which they concur” (2009).
Honesty about your actions and transparency about your motivations contribute to long-term value creation in many areas of life. Buffett:
“We try to communicate with our owners directly and informatively. Our goal is to tell you what we would like to know if our positions were reversed” (2009).
In other words, treat others as you would wish to be treated.
Focus on companies with a long-term orientation. In 2012, Buffett wrote about CEOs who cited uncertainties in making capital allocation decisions. Buffett:
“At Berkshire, we didn’t share their fears, instead spending a record $9.8 billion on plant and equipment in 2012, about 88% of it in the United States. That’s 19% more than we spent in 2011, our previous high. Charlie and I love investing large sums in worthwhile projects, whatever the pundits are saying. We instead heed the words from Gary Allan’s new country song, ‘Every Storm Runs Out of Rain’.”
Bold in the eyes of short-term thinkers, but sound (and necessary) choices for those daring to think long-term—sometimes swimming against the current, but always positioning to ride the waves later.
Understanding the difference between types of fear is vital for investors. In 2016, Buffett distinguished between widespread fears, which are an investor’s friend, and personal fears, which are their greatest enemies.
Look beyond current quarterly results: “[Make decisions] from the viewpoint of the shareholders who are staying, not those who are leaving” (2018).
The current generation has a significant advantage over previous ones: investing has never been more accessible. While this comes with risks for those unaware of what they’re doing—“Risk comes from not knowing what you’re doing”—everyone now has the opportunity to acquire small ownership stakes in high-quality companies. According to Buffett, this is far more profitable and enjoyable than fully owning marginal businesses:
“It took me a while to wise up. But Charlie—and also my 20-year struggle with the textile operation I inherited at Berkshire—finally convinced me that owning a non-controlling portion of a wonderful business is more profitable, more enjoyable and far less work than struggling with 100% of a marginal enterprise.” (2020)
Build relationships that could yield for decades. With this commitment and mindset, you may be fortunate enough to forge a connection like the one between Warren Buffett and Charlie Munger. Their mutual efforts to support each other through both good times and bad resulted in a fruitful partnership and friendship spanning 65 years. Warren met Charlie at age 29 (Charlie was 35), and together they built the success of Berkshire Hathaway as we know it today. Beyond their material achievements, they contributed immeasurably to the world through a vast reservoir of knowledge and inspiration for investors, as well as by highlighting what is right and distinguishing it from what is wrong. Their lives offer numerous moral lessons for leading a “good life.”
On November 28, 2023, Charlie Munger passed away at the age of 99. Buffett: “In reality, Charlie was the ‘architect’ of the present Berkshire, and I acted as the ‘general contractor’ to carry out the day-by-day construction of his vision” (2023). These intangible aspects of life also compound over time. Like stocks, they exhibit a positive asymmetric distribution. Buffett:
“And our experience is that a single winning decision can make a breathtaking difference over time. (Think GEICO as a business decision, Ajit Jain as a managerial decision and my luck in finding Charlie Munger as a one-of-a-kind partner, personal advisor and steadfast friend.) Mistakes fade away; winners can forever blossom” (2024).
Thank you, Warren, for all the wisdom you and Charlie, as architects of Berkshire and beyond, have bestowed upon our world.
Interested in learning more about quality investing? Below are two links of the in-depth analyses I wrote earlier this year about Costco Wholesale and Amazon.
Disclaimer: NFA / E&OE. The information above is provided for general informational purposes only and should not be construed as investment, accounting and/or financial advice. You should consult directly with a professional if financial, accounting, tax or other expertise is required.