In a recent interview with David Rubenstein from Bloomberg, Warren Buffet offered some fascinating insights into his decision-making process. It came as a surprise to me to see how quickly Buffett made such a massive investment with zero reliance on financial models or complicated review processes. Professional investors and finance writers stress the importance of process and in-depth analysis, which I fully support. However, it’s interesting to see Buffett’s throwback to a simpler time when stocks pickers identified great investments, rather than bury themselves in spreadsheets. Excerpts from the transcript below, with links to the full transcript and interview at the bottom.
David Rubenstein: The biggest deal you’ve ever done was Precision Castparts, about 47 billion dollars.
Warren Buffett: Yeah, it was between 42 and 43 billion of cash, and then we assumed about four billion of debt.
David Rubenstein: Okay, so how much… for to spend 47 billion, you spent a year studying the company?
Warren Buffett: No.
David Rubenstein: How much time did you spend with the CEO?
Warren Buffett: I met the CEO, I think on July 1, last year. And he happened to be calling on certain shareholders, and one of the fellows in our office had had a position for some time. It was an accident I met him. If I’d been out playing golf or something it never would have happened. When then I liked him. I heard him talk for thirty minutes I then said to the fellow in our office: “Call him tomorrow and say if he would like to receive a cash bid from Berkshire Hathaway. We would supply one, and if he didn’t like to receive one; forget we ever called.”
The other part that caught my attention was Buffett’s admission that he performs his calculations in his head.
David Rubenstein: So, you get the annual reports, and you read them. Just like other people read novels, you read annual reports?
Warren Buffett: That’s right.
David Rubenstein: And then, do you do the calculations in… what things are worth, in your head?
Warren Buffett: Sure.
While the interview offers many valuable bits of information, it’s worth remembering that few of us have the experience and skill of Warren Buffett, so his processes might not suit everyone.
The interview has been transcribed by Hurricane Capital here: (VIEW LINK)
Or you can watch the original interview on Bloomberg here: (VIEW LINK)
Patrick was one of Livewire’s first employees, joining in 2015 after nearly a decade working in insurance, superannuation, and retail banking. He is passionate about investing, with a particular interest in Australian small-caps.
Great post...thanks for sharing...an incredible human being.