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BuffettTalktoMBAStudentsatFloridaUniversity1998.1BuffettLectureattheUniversityofFloridaSchoolofBusinessOctober15,1998ThisspeechwasthefirstinaseriessponsoredbytheGraham-BuffettTeachingEndowment,establishedin1997bya$1milliongiftfrom(1970UFgraduate)MasonHawkins.:TheGraham-BuffettCoursesequenceisimportanttothiscollegebecauseitenablesustoattractstudentswhowantthisperspectiveoninvestingandmanagingcorporations—aperspectivethathasbeensuccessfullyemployedbyMr.Buffett,Mr.Hawkinsandbeforethem,BenjaminGraham.ThisperspectiveisquitesimplebutissometimeslostinthecomplexityofourUniversityanalysis.Theperspectiveisthatyouhavetounderstandtheunderlyingeconomicsofthebusinessesthatyouinvestin,workin.Youhavetobeclear-eyedandnotbeswayedbythecrowdorpassingfanciesofthemoment.Andyouhavetolearnandsticktodisciplinedprinciplesofbusinessvaluation.Inthelongrunthisdisciplinedapproachwillmoreoftenthannotbringsuccessormoreimportantlyavoidspectacularfailures.HopefullyattheUniversityofFloridawecansuccessfullyconveythoseprinciplesandcreateaprogramfortheverybeststudentsandintimetheverybestemployersaswell.WethankMr.Hawkinsforhisgift($1million)andsharehisthoughtstoday.MasonHawkins:HeissomeoneIhaveadmiredtremendouslyforthelast30years.Inaddition,heissomeoneeachofuscouldpatternourlivesafterasarolemodel.Itismyhonortointroduceourlifetime'sbestlong-terminvestor……-------------Buffett:(holdsmike)Testing:Onemillion$,twomillion$….threemillion$.Iwouldliketosayafewwordsprimarilyandthenthehighlightformewillbegettingyourquestions.Iwanttotalkaboutwhatisonyourmind.YourFutureIwouldliketotalkforjustoneminutetothestudentsaboutyourfuturewhenyouleavehere.Becauseyouwilllearnatremendousamountaboutinvestments,youallhavetheabilitytodowell;youallhavetheIQtodowell.Youallhavetheenergyandinitiativetodowelloryouwouldn'tbehere.Mostofyouwillsucceedinmeetingyouraspirations.BuffettTalktoMBAStudentsatFloridaUniversity1998.2Butindeterminingwhetheryousucceedthereismoretoitthanintellectandenergy.Iwouldliketotalkjustasecondaboutthat.Infact,therewasaguy,PeteKiewitinOmaha,whousedtosay,helookedforthreethingsinhiringpeople:integrity,intelligenceandenergy.Andhesaidifthepersondidnothavethefirsttwo,thelatertwowouldkillhim,becauseiftheydon'thaveintegrity,youwantthemdumbandlazy.Wewanttotalkaboutthefirsttwobecauseweknowyouhavethelasttwo.Youareallsecond-yearMBAstudents,soyouhavegottentoknowyourclassmates.ThinkforamomentthatIgrantedyoutheright--youcanbuy10%ofoneofyourclassmate’searningsfortherestoftheirlifetime.Youcan'tpicksomeonewitharichfather;youhavetopicksomeonewhoisgoingtodoitonhisorherownmerit.AndIgaveyouanhourtothinkaboutit.WillyougivethemanIQtestandpicktheonewiththehighestIQ?Idoubtit.Willyoupicktheonewiththebestgrades?Themostenergetic?Youwillstartlookingforqualitativefactors,inadditionto(thequantitative)becauseeveryonehasenoughbrainsandenergy.Youwouldprobablypicktheoneyourespondedthebestto,theonewhohastheleadershipqualities,theonewhoisabletogetotherpeopletocarryouttheirinterests.Thatwouldbethepersonwhoisgenerous,honestandwhogavecredittootherpeoplefortheirownideas.Alltypesofqualities.Whomeveryouadmirethemostintheclass.ThenIwouldthrowinahooker.Inadditiontothispersonyouhadtogoshortoneofyourclassmates.Thatismorefun.WhodoIwanttogoshort?Youwouldn'tpickthepersonwiththelowestIQ,youwouldthinkaboutthepersonwhoturnedyouoff,thepersonwhoisegotistical,whoisgreedy,whocutscorners,whoisslightlydishonest.Asyoulookatthosequalitiesontheleftandrighthandside,thereisoneinterestingthingaboutthem,itisnottheabilitytothrowafootball60yards,itisnottheabilitytherunthe100yarddashin9.3seconds,itisnotbeingthebestlookingpersonintheclass,theyareallqualitiesthatifyoureallywanttohavetheonesonthelefthandside,youcanhavethem.Theyarequalitiesofbehavior,temperament,characterthatareachievable,theyarenotforbiddentoanybodyinthisgroup.Andifyoulookatthequalitiesontherighthandsidetheonesthatturnyouoffinotherpeople,thereisnotaqualitytherethatyouhavetohave.Youcangetridofit.Youcangetridofitaloteasieratyouragethanatmyage,becausemostbehaviorsarehabitual.Thechainsofhabitaretoolighttobefeltuntiltheyaretooheavytobebroken.Thereisnoquestionaboutit.Iseepeoplewiththeseself-destructivebehaviorpatternsatmyageoreventwentyyearsyoungerandtheyreallyareentrappedbythem.Theygoaroundanddothingsthatturnoffotherpeoplerightandleft.Theydon'tneedtobethatwaybutbyacertainpointtheygetsotheycanhardlychangeit.Butatyourageyoucanhaveanyhabits,anypatternsofbehaviorthatyouwish.Itissimplyaquestionofwhichyoudecide.BuffettTalktoMBAStudentsatFloridaUniversity1998.3Ifyoudidthis…BenGrahamlookedaroundatthepeopleheadmiredandBenFranklindidthisbeforehim.BenGrahamdidthisinhislowteensandhelookedaroundatthepeopleheadmiredandhesaid,Iwanttobeadmired,sowhydon'tIbehavelikethem?Andhefoundoutthattherewasnothingimpossibleaboutbehavinglikethem.Similarlyhedidthesamethingonthereversesideintermsofgettingridofthosequalities.Iwouldsuggestisthatifyouwritethosequalitiesdownandthinkaboutthemawhileandmakethemhabitual,youwillbetheoneyouwanttobuy10%ofwhenyouareallthrou