What I learned from Warren Buffett’s 2019 Annual Letter

If my $114.75 had been invested in a no-fee S&P 500 index fund, and all dividends had been reinvested, my stake would have grown to be worth (pre-taxes) $606,811 on January 31, 2019 (the latest data available before the printing of this letter). That is a gain of 5,288 for 1.

I first learned about Warren Buffett in 2006 when I picked up the Intelligent Investor. My immature mind discarded him completely as I loved getting rich quick schemes of speculators more. In 2013, after being hit for many years with heavy punches to the gut and receiving the final blow to my head, I decided to study the Oracle of Omaha to understand why he’s been so successful for such a long time while my idol speculators either killed themselves or died poor. The study took months as I poured into his writings and his talks.

The results:

  1. I stopped losing money feeling like a fool and a gambler.
  2. I founded a value investing fund to invest in Vietnamese companies. After 5 years of investing, what I learned from Warren Buffettt and practiced is working wonderfully.
  3. I became more at ease with being myself. The most notable is that I happily live a frugal lifestyle and pay almost no attention to what others say.

Every year at this time, I am eagerly waiting to receive the annual letter from Warren Buffett. Today is no difference. It’s the first thing I looked for when I woke up.

After many tries, I finally could download the letter. There must have been too many people trying to get his letter at the same time since Berkshire Hathaway’s website was extremely slow.

In this letter, Warren Buffett again showed his love for America and his belief in the long-term prospect of America.

Buffett’s buying criteria: “to buy ably-managed businesses, in whole or part, that possess favorable and durable economic characteristics. We also need to make these purchases at sensible prices.

Buffett has written many times that he paid little attention to daily fluctuation of stock prices, quarterly earning, and even one year earning. What he focuses on is the business and its prospect: “Focus on operating earnings, paying little attention to gains or losses of any variety.

Next, Buffett gave an outstanding lesson on “Focus on the Forest, Forget the Tree“. Berkshire Hathaway has many different businesses. If taken out to analyze each business, one might be very concerned as there are undoubtedly bad businesses or diseased trees in the forest. And there also are many healthy businesses/trees which will continue to grow in size. Taken as a whole, the forest is booming. “At Berkshire, the whole is greater – considerably greater – than the sum of the parts.

Will Buffett make more purchases in 2019?
My expectation of more stock purchases is not a market call. Charlie and I have no idea as to how stocks will behave next week or next year. Predictions of that sort have never been a part of our activities. Our thinking, rather, is focused on calculating whether a portion of an attractive business is worth more than its market price.

Where have fundings come from?

  1. Debt. Berkshire uses little or no debt though some of its subsidiaries might leverage debt when it makes sense.
  2. Equity. Buffett retained all the earning to invest and compounded it.
  3. Insurance float. Using float to invest has been a cornerstone in Buffett’s compounding machine.
  4. Deferred tax income.

Finally, as usual, Buffett dedicated the last portion of writings to teach. This year, he taught about American Tailwind or his belief in the long-term economic growth of America. This is worth reading several times.

Buffett made his first investment in the stock market with his $114.75 saving at the age of 11. “If my $114.75 had been invested in a no-fee S&P 500 index fund, and all dividends had been reinvested, my stake would have grown to be worth (pre-taxes) $606,811 on January 31, 2019 (the latest data available before the printing of this letter). That is a gain of 5,288 for 1. 

Is Gold safer than stock? If I ask people, the answer is mostly YES. However, history proved that most people are often more wrong than right.
If the same amount of $114.75 was to put in gold, by now it would be worth $4,200. “The magical metal was no match for the American mettle.

And it’s a dream to say the same: “For 54 years, Charlie and I have loved our jobs. Daily, we do what we find interesting, working with people we like and trust.

The full letter: http://www.berkshirehathaway.com/letters/2018ltr.pdf

What type of organizations would you commit a portion of your life to?

When Peter Drucker was asked: what should students ask a prospective employer about leadership and mission before making a decision to commit at least a portion of their life to the service to the organization?

I would probably tell that student of mine that he should hold that question a couple of years until he knows a little more both about himself and the organization, but then …
I would ask him, “Are you learning enough?”
That is always my question.
“Are you challenged enough?”
“Does the organization make use of your strengths or what you can do?” All together as a group of human beings,
“does the organization constantly challenge and make you more ambitious in terms of contribution?”
“Are you acutely suffering from creative discontent?”
I hope at age thirty that you are not content. That’s for six-year-olds. Being content is being a child, but there is a difference between negative and positive discontent.
If you say, “They aren’t any good; nothing ever gets done; and all they want is for me to come in from nine to five.” And if you say, “You know, the nice thing about this organization is that it gives me so much time to play tennis,” basically you are too young to retire.
If you say, “You know, I wish I had more time for my family, and my tennis game has gone to hell because we have that big project starting that new trauma unit, and it’s really not my job but I am on the team,” or, “We have that enormous job here in the new school we are building and [we are] recruiting faculty and so I spend all my weekends with the prospective faculty people”—OK, then you are growing but also the organization meets the first test, which is that it mobilizes human resources, challenges them, grows them.
My next question is: Look at the mission. Is it one in which you can make a difference?
Sure, none of us make a great difference. No institution is that important, but is it one that makes—I wouldn’t say [makes] the world richer; that’s such an ambitious statement—but it makes a difference. That emphasizes the more responsibility we as human beings have. Or is it one that just won’t really be missed? All right, none of us are going to achieve a great deal. But everyone has a chance to achieve.

A question worth focusing

In front of me is a master.

I came to see the master in a moment of struggle. In reality, I was at a cross-road. The master can detect my struggles by looking at me in a complete stillness.

The master: “I see that you have been struggling. It seems to me that your attention has been on how you will survive.”

Pausing for a long moment, the master continues: “You will probably survive.”

The master: “and you also focus too much on how to be successful…That’s a wrong question.”

Pausing again for a longer moment, looking at me in complete calmness of a master, he continues: “The question is how to be useful.”

With that, I am enlightened. A great teacher changes my life in a matter of seconds.

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About the author: Hoan Do is a certified leadership coach, a value-oriented investor, and an entrepreneur. Hoan led multiple teams at Symantec Inc. across the globe delivering world-class solutions to protect consumers and businesses. Hoan is an expert in building highly performing teams. He believes that the best leader is the leader that could grow his followers to be leaders. Hoan has trained many leaders via mastermind groups, workshops, and one-on-one coaching.

If you would like to have a conversation, open your email and send me an inquiry at coach@hoanmdo.com

Most impactful books I’ve read in 2018

What is the best book(s) you read in 2018? Which books would you recommend to your friends?

What is the best book(s) you read in 2018? Which books would you recommend to your friends?

2018 marked the biggest change in my life and hence the books I read reflected the same. I ended the road most travelled and ventured into the road most loved but afraid to travel.

I read countless books on entrepreneurship, startups, leadership, and investment this year. I said “countless” as I don’t remember how many books I read.

Besides the 3 books I read annually; yes they have the staying power; I added another one (which was recommended by the ultimate coach Steve Hardison from a question I posted on facebook): The Way of Mastery.

The following books have made the most impact for an entrepreneur who just started out on the road most loved but afraid to travel:

  1. Competing against giants by Uyen Phuong Tran. I witnessed how she has been living what she wrote in the book. The book is an excellent account of how her family-owned company, Tan Hiep Phat – the leading multi-billion dollar Vietnamese beverage company, competed against powerful multinationals such as Coke and PepsiCo. The author planted the philosophy behind Tan Hiep Phat’s success in every chapter. It reads like a business case study but also a biography of her family with her father as the leading figure. They truly live their credo: Nothing is impossible.
  2. The Billionaire Who Wasn’t: How Chuck Feeney Made and Gave Away a Fortune Without Anyone Knowing by Conor O’Clery. Chuck Feeney is the billionaire founder of Duty Free Shoppers who gave away all his wealth. Feeney lives a frugal lifestyle. He’s loved and admired by his employees. He cares for everyone, especially children. Feeney started Duty Free Shoppers from 0 and made it into the billion dollar company. I didn’t know till reading this book that Feeney has been probably the most generous giver to Vietnam.
  3. The First Billion Is the Hardest: Reflections on a Life of Comebacks and America’s Energy Future by T.Boone Pickens. Pickens was a very successful oil man. At 68, his company was sold (or he was forced to sell it). He decided to start up again trading futures (oil, natural gas) with 5 employees. He raised money by calling everyone he knew. In the first two years of trading, he lost 90% of the fund. However, he made it back many times over in the next year. Pickens like Warren Buffett and other long-term investors did due diligence before taking a position. He ignored daily fluctuation and held a long-term view. He believed that great profit is in the long-term, not in daily fluctuation.
  4. Am I Being Too Subtle? Straight Talk From a Business Rebel by Sam Zell. Sam is a model of living the credo “nothing is impossible.” He realized problems and found possible solutions.When facing a No, he listened actively and presented different angles. When you are not aware there are any limitations, nothing stops you from trying.“If you are really good at what you do, you have the freedom to be who you are.”“When there’s a scarcity, price is no object.”Take risk, test your limit, and ask “why not?”Formula for success: 1+1 = 3Sam started in real estate in Ann Arbor, a suburban. He found opportunities to buy an entire block by buying all homes and lands. He then either developed student apartment buildings or sold the entire block for more money. He repeated this method: high-growth real estate, small cities… The basis is that in small cities there would be less competition. Later, Sam changed his method: buildings that are available below replacement cost, good quality, and well-located. (replacement cost is the key. It can determine the price of future competition)Then his method became generalized: supply and demand, barriers to entry, and tax considerations.Sam spends most of his day listening to people. He asks questions, probe, and raise possibilities.
  5. The Habit of Labor: Lessons from a Life of Struggle and Success by Stef Wertheimer, the founder of ISCAR. Stef was an immigrant to Israel from Germany. He was kicked out of his high school as he didn’t listen to authority and bureaucracy. Stef joined the army and fixed weapons. Stef was working for the government after his army service till he was 26 years old. He didn’t see himself as someone who could climb the government rank nor do boring stuffs. He left his government job which provided a steady income, high status; and started ISCAR with little capital. He was a lieutenant when he left. It was a tough decision since he got 2 kids and a family to take care of.  “Take action when necessary and act in an unconventional way when there is no alternative.” When ISCAR first started, Stef had no capital. He couldn’t get bank loans. He couldn’t borrow money needed to buy materials and machines that he needed.

The takeaways from those reading can be summarized: nothing is impossible; just do it; there are many roads to success; pick one and go all out; people will laugh at you at first; let them laugh and carry on.

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About the author: Hoan Do is a certified leadership coach, a value-oriented investor, and an entrepreneur. Hoan led multiple teams at Symantec Inc. across the globe delivering world-class solutions to protect consumers and businesses. Hoan is an expert in building highly performing teams. He believes that the best leader is the leader that could grow his followers to be leaders. Hoan has trained many leaders via mastermind groups, workshops, and one-on-one coaching.

If you would like to have a conversation, open your email and send me an inquiry at coach@hoanmdo.com

Failure is never possible till you quit

It’s truly that a winner never quits and a quitter never wins. You can’t fail unless you quit.

As I am re-reading Think and Grow Rich, something is jumping out from the pages. I re-read several books annually.

Edwin Barnes was an unknown, poor man with no experience. Yet, he became the business partner of the famous inventor Thomas Edison. Barnes nurtured a thought/wish into a burning desire to become Edison’s business partner. Once the thought became a dominant thought, Barnes cut off everything else and set out a journey to join Edison (it sounded impossible given Barnes’ background). Barnes was so determined that he left himself no other options. It was rather a success or die. Barnes was like a great warrior facing a powerful enemy. The warrior burned off his boat, let go his horse, and left no other way to retreat but to win (Win or Perish).

It’s common that majority of mankind play safe. People stay on the job they hate or work with people they dislike because it’s safe. They maintain unhealthy relationships because it’s safe.

Fortunately, the world still has many people who burn their ships and cut all sources of retreat and leave themselves no other options but to win. More often than not, they did. Just like Edwin Barnes. Stef Wertheimer left a stable job with a good salary and a high status to start his own company with no capital. He built it into a multi-billion dollar business in a country where everyone thought was impossible. He left his job when he had a family with two young kids to take care of. It was that kind of decisions that separated the successful from the crowd who only wish to be successful.

It’s truly that a winner never quits and a quitter never wins. You can’t fail unless you quit.

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Other popular articles:

  1. 20 minutes that can change your life
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  9. A SPECIAL GIFT FOR YOU – WHY SHOULD I HIRE A COACH?

About the author: Hoan Do is a certified leadership coach, a value-oriented investor, and an entrepreneur. Hoan led multiple teams at Symantec Inc. across the globe delivering world-class solutions to protect consumers and businesses. Hoan is an expert in building highly performing teams. He believes that the best leader is the leader that could grow his followers to be leaders. Hoan has trained many leaders via mastermind groups, workshops, and one-on-one coaching.

If you would like to have a conversation, open your email and send me an inquiry at coach@hoanmdo.com