Investor Wisdom: Berkshire Hathaway 2015

As a long-time attendee of the Berkshire Hathaway meeting, I believe the best of part of the Berkshire Hathaway meeting is the numerous ideas and principles that carryover to everyday investors. This year, there were a number of valuable lessons and insightful under the radar comments. Below is my summary of the most impactful lessons investors should take-away from the meeting. No single model to evaluate businessesWarren and Charlie clearly dispelled the myth that there is a secret formula for buying great companies. Investors hunt for shortcuts, but were disappointed to hear that there is no easy solution. Charlie and Warren look for business that they can reasonably assess over the next 5 years with honest management teams. The best advice came when they described how they accept/reject opportunities. Their approach was not to look for positive attributes but look for negative attributes and eliminate those companies. This focus only leaves a small number of investable companies. Dont begin the search by focusing on great growth potential, but look for red flags first that can eliminate and narrow down choices. On Investment SuccessOne of Charlies best one-liners: If people werent so often wrong, we wouldnt be so rich. Its a blunt reminder about what drives success and failure in investing. There is nothing arbitrary about losing money. Warren and Charlie highlighted to obvious fact that their success is more about removing mistakes from their decisions than trying to know everything. Investors decisions would be much improved by focusing on avoiding the same mistakes that Berkshire avoids: buying story stocks, trading too much, avoiding leveraged companies, etc. Its simply easier to avoid bad decisions, than to make a good one. MacroCharlie mentioned they have never turned down a deal due to macro factors. They discussed that what they pay adjusts based on the environment, but they dont let macro factors override the ability to buy a great business at a fair price. As Charlie said, When you start making predictions you start thinking you know something. Investors need to avoid the habit of fooling themselves. In addition, investors spend an inordinate amount of timing thinking and worrying about macro conditions. They are much better served by focusing on dependable companies at attractive prices. Ive seen more investor money lost by macro-influenced mistakes than by any other category. EgoCharlie: Ego makes people do dumb things. Ego causes several problems to investors, including not admitting mistakes, not admitting ignorance, and overconfidence. Warren and Charlie admitted several times on stage that they dont know and had no trouble avoiding this trap. Investors need to stop chasing ego-induced decisions that dominate much of the professional and retail investment markets. MultitaskingCharlie: I have to think hard about one thing and the concept of multitasking doesnt appeal to me. He described how he doesnt get how people can manage three things at once. Certainly applies to everyday life, and its reassuring the best investors still focus on one subject at a time. LeverageBoth Warren and Charlie were asked about adding financial leverage to the business. They responded that they could have, but they prefer not to sweat at night. Berkshire Hathaway has done exceptionally well without additional leverage. Both prefer to sleep well rather than maximize potential returns.A critical concept to investors who are always trying to juice investment returns. It works for a while, but comes at a significant future cost. The cost is not apparent today but will be when an inevitable crisis hits. Leverage is often added near market peaks since emotions and confidence are high, leading to incredible investment losses when prices fall. Investors can simply build great portfolio without the burden of leverage.