– What's the seven principles you can learn from billionaire Warren Buffett, Charlie Munger, Bill Gates, on investing and making your money work for you? I'm here at the Berkshire Hathaway meeting. It's the largest investor meeting in the world. I'm a shareholder, this is my little badge. And, 20,000 people come from 50 or 60 countries, some of the sharpest people in the world. And, they listen to Warren Buffett and Charlie Munger. Bill Gates is there, he doesn't speak much, but he's there as a board member. They speak for about eight hours. And so, I'm gonna give you seven principles that, I took my notes here, and this is a closed meeting. Although, now I think they're live-streaming it. I'm gonna share with you some of the notes I took on my Evernote here. And, these are very important. I'll give you a few bonus ones too. You gotta know how to make money work for you. The definition of investing is very simple. People know how to trade their time for money, you know, you get a job nine to five.
You go there on time, you work eight hours, they pay you money. But, when you sleep you aren't making money. When you know how to invest and you understand the principles, while you sleep, the money you have is compounding and growing. You gotta know how to do that. These are the things they didn't tech us in school and I had to go out and learn on my own, fly out here. I've been doing that for years. I wanna share it with you in case you didn't have that opportunity. I'm gonna share with you these principles. Very important, so… Look at the line at this thing! There's literally 10 or 20 thousand people out here at– – [Tai Lopez] What's up Metta? – Man – Y'all come on in – You coming to make– – Metta's making some money with us! (laughter) How come you're the only athlete here, Metta? – I'm not sure man. I guess when you're almost retiring you gotta do some other things. – Athletics don't last forever.
– That's Charlie Munger, oh my God, that's Charlie Munger! (laughter) (applause) – [Man] I don't know if I can get any closer. – There's a lot of misinformation about investing. A lot of people think it's just, you know, day-trading stocks or flipping real estate, and all those things can work. But, you gotta understand the fundamentals. Just like, soccer, you gotta understand, you know, the basics before you get to the advanced stuff. Just like basketball, football, every great sport is about fundamentals. And, Warren Buffett really is about the fundamentals. So, the first thing he talked about: he showed a diagram of the great baseball player Ted Williams. And, it showed all the places that the pitcher can throw the ball and that he could hit it. I think he divided it into 70 areas that he could you know, hit the ball, hit a pitch.
And he showed that there's only about four or five of those little dots in the strike zone that he actually has a good percentage hitting. One of the greatest hitters of all time. He wasn't really that good. He was only good when the ball was in the right place. So, the lesson for investing is: you can't be good at a lot of things when it comes to investing. You gotta specialize in what you understand. So, you can't, you know, you could apply this, let's say you're investing in the stock market, do you really wanna know tech stocks? Do you wanna large-cap stocks, small? Do you wanna do index funds? Do you want to be active trading? Where do you make money? Well, when you're starting out you gotta experiment a little bit. And then, you gotta pay attention to where you get a lot of home runs and kill the rest. And I see that with business. Entrepreneurs forget that principle. They're successful in one business so they think they'll be successful in a lot of businesses.
Well, going back to the sports analogy, the great Michael Jordan, possibly and probably the greatest basketball player of all time, he tried to play baseball. He wasn't good at it. His circle of competence where he made all his money and his fame was just in basketball. And he learned he had to be satisfied with that. And so, you and I, we can't be good at everything. You try to be good at everything, you'll be good at nothing. Confucius said, "The man who chases two rabbits catches none." So, I thought that was a great– Principle number one is to focus on your circle of competence. Break time. – Yeah, I think somebody gonna steal our seats, you know. – [Tai Lopez] Ha, they're gonna steal our seats? – Somebody is definitely stealing our seats.
(laughter) – [Tai Lopez] You know I had to stop by the book section. This is an amazing book right here. – [Man] Nah, I wanna get that one. – [Tai Lopez] So, you wrote a book about mentors including Warren Buffett. – Warren Buffett, yeah. – So, to get Warrenn Buffett, the secret is to never say no. Is that how you got him? – Absolutely. I– – You didn't give up? – I didn't give up. – And you got 10 minutes with the man himself. – I got rejected by everybody before getting into everybody in this book, seriously. – That's awesome. – Number two: they were talking about all the scandals that there's been recently in business. Wells Fargo; which is one of the things Warren Buffett and them own. And they said, "Well, when it comes to problems" "in your life or in your business, obviously an ounce" "of prevention is better than a pound of cure" meaning: it's better to not have the problem by preventing it to start with. But, what Warren Buffett said is, "When a problem arises, deal with it quickly." And I think you can apply that to everything.
You've got someone in your life annoying you? Go speak to them right away. He said, "Problems don't go away." If you're in business, you have a weakness in business, and you just kind of ignore it like a lot of entrepreneurs, they don't keep their accounting up because it's a pain in the butt. It's not fun. But, you can't ignore that problem. Deal with it because it won't go away. It'll get worse over time, not better. Principle number three: one of the questions somebody asked Buffett was, "What was one of the most important lessons that he learned?" And he said, "A life of continuous learning" "is the life that's well-lived." He said, "Learn, learn, learn, learn, learn." And if you know anything about me, you know that I'm always talking about reading books.
You know, and Warren Buffett says, "The more you learn the more you earn." But these guy– Buffett is 86 or eight or something like that. Munger's 93. Bill Gates is– what is Bill Gates? Almost 70, or in his 60s? Guess What? He said, "Even at that age," "they're not satisfied with what they know." And they said, "The good decisions they've made recently," "they wouldn't have known to do even 10 years ago." So even billionares are going, "We can't rest on the education we have." That's why I always say, "Lifelong learning." I don't care if you've got a college degree. That's great. That means you learned at some point. The question is, what are you learning right now? Heh, people forget about that. That college degree gonna become outdated. Steven Johnson wrote a book called, I think it's: "Where Good Ideas Come From." He said, "At the speed of change in the world," "everything you learn basically becomes" "outdated by at least 20%." That means every five, six years, most of what you know no longer works.
So, it's a great principle. I think that's what, number three I learned. Number four: you can't catch all the investments. You're gonna miss some of 'em and you gotta be okay with that. Charlie Munger and Warren Buffett said they missed out, they didn't invest in Amazon and Google. They said they should've, but they missed it. They had a blind spot, they had a weakness. So Munger specifically said, "We will keep missing 'em." "But our secret is we don't miss 'em all." So when it comes to investing, a lot of people are always having FOMO, Fear Of Missing Out. They're always looking back regretting, "Oh man, my friend invested in this." "I didn't invest in it, I lost out." No you didn't.
You just gotta remember to catch a few of 'em. You don't need a lot of wins to make a lot of money as an investor. You just need a few. – [Charlie Munger] I think that a life properly lived is just learn, learn, learn all the time. And, I think Berkshire's gained enormously from these investment decisions by learning through a long, long period. Every time you appoint a new person that's never had big capital allocation experience, it's like rolling the dice. We're way better off having done it so long. But the decisions blend and the one feature that comes through is the continuous learning. If we had not kept learning, you wouldn't even be here. – So the next principle is related to what I'm talking about being a lifelong learner to be a great investor. But he said this, this is an interesting point. Charlie Munger, business partner Warren Buffett said, "While we do learn new things," "we're sure not to unlearn the old tricks." And that's important.
Sometimes, people are so interested in catching new stuff and finding new stuff, they forget some of the old-school principles that work. So, whatever you learned in life, I actually do this: I keep an Excel spreadsheet with the most important life lessons I've learned and I try to go back and review those. You can't unlearn stuff, and people do that. It's okay to make a mistake once. Try not to make the same mistake a hundred times. And I've been guilty of that, most people are. But, one of the tricks for great investors that make billions, they're kind of a one-mistake learner, not a 600 mistake learner like the average person. Here's an interesting point that be brought up about business; which is kind of a business-specific trick, He said, "Healthcare costs are the tapeworm" "of American businesses.
" And I think you can apply this because this is a political question. People were asking about Obamacare and Donald Trump and all that. You know, new change to the healthcare. Basically, I think the lesson there is: physical health. I see so many people, entrepreneurs, business people, even investors, they let they're health go down. You let your health degrade, it slowly, like a tapeworm, is a parasite on your productivity. Keep your physical health up. If you're a business owner, incentivize– Pay for, you know, free gym memberships for your employees. Don't let that healthcare cost creep up, boy. Human body wants to, as Sigmund Freud said, "The death and dissolution of the human body, the decay." Alright, that's the next principle: keep your physical body up.
So, Kansas City real estate investing, you said, "Top 10 in the U.S." – Top 10 for cash, bro. – $60,000 for a house and $850 you can get for rent. – $850 rent – That's a great ratio compared to LA Midwest, yeah. – Midwest is awesome. – [Moderator] This question comes from a long-time shareholder who I should tell you accosted me last night in the lobby of the Hilton hotel with this question: (laughter) "Warren, for years you stayed away" "from technology companies" "saying they were too hard to predict" "and didn't have looks." "Then, you seemed to change your view about technology" "when you invested in IBM" "and again when you recently invested in Apple." "But then on Friday, you said that IBM" "had not met your expectations" "and sold a third of our stake.
" "Do you view IBM and Apple differently?" "And, what have you learned" about investing in technology companies?" – [Warren Buffett] Well, I don't view differently. But, obviously, when I bought the IBM, started buying it, six years ago, I thought it would do better in the six years that have elapsed than it has. I think of them in being quite a different business. I think Apple is much more of a consumer products business. In terms of, sort of, analyzing moats around it, and consumer behavior and all that sort of thing, it's obviously a product with all kinds of tech built into it. But, in terms of laying out what their perspective customers will do in the future as opposed to, say, IBM's customers it's a different sort of analysis. That doesn't mean it's correct and we'll find out over time.
– Someone asked Charlie Munger what they wanted him to say at his grave. They wanted him to say, "That's the oldest looking corpse he'd ever seen." AKA, trying to live a long time. And Buffett's legacy, he wanted to be remembered as a great teacher. I thought that was interesting. Not as a billionaire. So, pick a legacy that's cool like that, you know? Munger said, next principle he said, because he's 93, he said, "If you have something to do," "don't wait until you're 90." (laughter) Which, it's kind of a tongue in cheek, but man. Most people waiting their whole life, it's gonna to catch up on you, sneak up on you, age. This is interesting, next principle: When you pick your career– This was Buffett's advice, he said, "Don't pick the career based necessarily" "on what makes you the most money.
" "Money will come over time." "Pick a career around what you're interested in." I totally agree with that. Chasing money is important in life, but it can't be the primary thing you chase. It's too elusive. Couple of business principles: He said, "Be careful of evaluation your investments" "by something they call EBITDA," "Earnings Before Interest, Depreciation, Taxes, and Amortization." That's a fancy phrase for how a lot of stocks and a lot of publicly traded companies evaluate their profit. And it doesn't account– He said, "Depreciation's a real cost." So, he likes to invest in businesses that don't have a lot of depreciation. Meaning, they don't have a lot of equipment that's gonna need to be replaced every 10 years. Big factories have it, they depreciate. So, he likes Google for example, even though he missed investing in that, because Google doesn't have– once they have the search engine going it doesn't really degrade.
Sure, they have the servers and stuff, but he said they're making money without having to build factories. Meeting is now wrapped up. A little drama at the end. Some climate change resolutions. Some activists were attacking Warren Buffett saying he needs to not be invested in companies that burn a lot of fossil fuel. There was a native American that started crying. Kinda interesting. But they did a vote, it didn't go well for the climate change advocates. 5,000 votes for, 500,000 against. Probably not the right forum for that. – [Tai Lopez] This is the peanut brittle that Charlie Munger eats the whole time and he doesn't care that he eats into the microphone. When you're 95 and you're a billionaire, you do not care what people think– or 93. Sorry, 93 – It is addicting. – [Tai Lopez] I was just corrected. – Come on man, you can't be making those mistakes.
– [Tai Lopez] She corrected me. Three last little bonus tips here. Talking about free trade because there's a lot of talk about NAFTA and you saw the Presidents debating this in the Presidential election. And, what Charlie Munger said is, "Capitalism will always hurt a few," "while is benefits the greater society." So, you see that where jobs move overseas. Let's say it hurts some individuals, but it lowers costs for the general society. And that's a tough pill. But what Warren Buffett said is, "If the general group, society becomes wealthy enough," "they can help the people that have displaced jobs." So if jobs move to China or move to Mexico; which they have been moving, what you gotta do as a government and society is help those people that lost their jobs find a new training and things like that. So, it's interesting. There's no solution. People want a utopia. Any economy, you could be socialistic like Bernie Sanders, you could be communistic like China, pure capitalist, or, America's not purely capitalist but, every one has pros and cons.
So, when people start telling you they have the perfect solution, you basically know they don't know what they're talking about. Everything's this trade-off. (laughter) This is great. Charlie Munger says, "Never tell anyone about your problems." "90% of the people really don't care." "The other 10% are glad you have them." And that is the truest words spoken. (laughter) It's true, be careful who you tell your problems. Like he said, most people don't care, and the people who do care are usually glad you have them. They're usually caring because they're envious. The last thing I thought was interesting: at the very end they had a shareholders vote, and they voted on climate change. And a Native American got up, and he was crying and talking about how Berkshire Hathaway, Warren Buffett's companies, are hurting the climate and the land, and mother Earth, he said. And, it was pretty much ignored. They did a vote: 5,000 people voted for changing, more pro-climate-change business reducing fossil fuel. 500,000 people voted against it. So, it's hard to make a change like that.
But, I don't know the answers but, gotta find some solutions. Anyway, those are the seven things, or so, actually a little more, that I learned. Remember: make your money work for you, that's what investing is. It takes money to make money, but it's not that simple. Whatever money you have, a dollar, a hundred dollars, get it working for you. You can start small. Whoever is faithful with a little bit will be faithful with a lot. And whoever blows a little bit of money when they got it, they'll blow a lot too. So, you know, anyway, there you go. Leave a comment with the best investment tip that I forgot that you've learned..