During the 2023 Berkshire Hathaway Annual Meeting, Warren Buffett discussed the importance of removing emotions from investment and business decisions. He and Charlie Munger pride themselves on maintaining objectivity, highlighting that emotional decision-making has no place in successful investing.
While Buffett acknowledges that occasional emotional biases may arise, such as loyalty to long-serving managers, he argues these instances have had minimal impact on overall results. Using examples like Wesco, which grew substantially under their management, Buffett underscores the value of disciplined, rational thinking.
He differentiates between the importance of emotions in personal life and their detrimental effects in business, advocating for logic-driven decision-making in investments.
Here’s an excerpt from the meeting:
Buffett: Well, we make bad investment decisions plenty of times. I make more than Charlie. I like to think it’s because I make more decisions, but probably my batting average is worse. (Laugh) But I can’t recall any time in the history of Berkshire that we made an emotional decision.
I know the movie had Jamie Lee [Curtis] in there, (Laughter) but that was for laughs. I mean, Jamie Lee, she’s good, but she’s not good enough to get me or Charlie to make an emotional decision. (Laughter) Charlie, I’m sure you have something to add on that.
Munger: Well, it’s a different movie than is shown in most corporate meetings. (Laughter)
Buffett: But have we ever made an emotional decision?
Munger: No. (Laughter)
Buffett: That’s in business we’re talking about. Yeah, no. You don’t want to be a no emotion person in all of your life, but you definitely want to be a no emotion person in making an investment or business decision.
You can argue that we’ve probably made an emotional decision, perhaps, when a manager has been with us for some period, and we’ve ignored the fact that perhaps they weren’t quite what they were earlier.
But our businesses are so good that they run better sometimes when — I mean, I’ve talked about Wesco, for example, the wonderful Louis Vincenti. And it ran on automatic pilot for a while, but I don’t think we suffered by it.
But you can argue if Louis as much as we did, we might’ve spotted it a little bit earlier. But I don’t think it made any difference in the results. Would you agree with that, Charlie?
Munger: Yeah, (UNINTEL PHRASE) with it. I’m glad we the way we did at Wesco. By the way, we bought the thing for a few tens of millions, and it became worth $2 billion or $3 billion.
Buffett: Yeah, that wasn’t common in the savings and loan business, as you may have noticed. (Laugh) They really went crazy in that industry, and we had a wonderful guy in Louis.
Munger: We didn’t go crazy.
Buffett: Yeah, we didn’t go crazy. Yeah.
You can watch the entire discussion here:
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