Charlie Munger, a book by Tren Griffin, tells various Charlie and Warren wise words and actions. Today I want to highlight for you guys one thing that Warren said in this book :
"Charles T. Munger, Berkshire Hathaway's vice-chairman, and I really have only two jobs. One is to attract and keep outstanding managers to run our various operation. The other is capital allocation." - Warren BuffettWhen they finally become a CEO, many managers do not have the skill in capital allocation. Maybe some of them are from chief accounting, marketing, sales, or law. Therefore they lack the skill most needed, which is capital allocation.
This potentially creates a problem for the business sustainability because their skills in capital allocation are pretty low. They tend to pass it to an accountant, finance staff, and so on. Forgetting that the most critical decision made by CEO is capital allocation.
In cases like that, please do remember that you can set your position in sell mode.
Warren tells a story about horses to make it more clear for your selling position.
A man says to a veterinarian: "Can you help me? Sometimes my horse walks just fine and sometimes he limps."
The vet replied: "Not a problem. When he's walking fine, sell him."One of the effects created by CEOs who pass the job desk in capital allocation to whoever staff is makes the companies in America so often do restructuring. Says Warren Buffett.
As a shareholder, it is so important to make simple and not so many decisions in our portfolio. Because once we decide to make a move (buy, sell, or hold), the results must be critical for our portfolio.
What I learned for the past two years is that almost everything I heard and see is noise. Not that I won't listen to the news and everything. But I always try to keep it outside my head in maybe filtering some of that. If I thought It is essential. Especially in a friend talk or group talks, It is sometimes speculative when people were just talking about the price rising or falling. Therefore keeping your belief system and analysis intact is one of the important skills to be mastered.
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