Enterprising Investor Forum

Warren Buffett MBA Talk – Part 2 Friday, October 5, 2007

We are continuing our writeup of Buffett’s session with MBA students. As from this 2nd part, he is taking questions from the public and using his answer to continue to share his wisdom and unique perspectives.

Here he mainly addresses the Long Term Capital Management issue where he had been rumored as a potential rescue buyer. He explains how, indeed, he had made a bid but what is really interesting, is his take on what actually happened. Despite stressing that all the people involved where not ‘bad people’ and that he was friends with most of them, he points out that what fascinated him was their behavior – and in general, why clever people do stupid things.

They key take-out is when he explains why he found LTCMs actions so foolish:

• to make money they didn’t have and didn’t need, they risked (and lost) money they did have and did need.

Ultimately, why risk something that is important to you for something that isn’t?

Enjoy: