Warren Buffett emphasized that the best way to manage the current financial situation is to get back to basics at the Berkshire Hathaway annual meeting Saturday, as reported by New York Times’ DealBook editor Andrew Ross Sorkin. Sorkin was one of three journalists chosen to pose questions to Buffett at the meeting, which was attended by approximately 35,000 shareholders.
“If you need to use a computer or a calculator to make the calculation, you shouldn’t buy it,” Buffett said. “There is so much that’s false and nutty in modern investing practice and modern investment banking. If you just reduced the nonsense, that’s a goal you should reasonably hope for.”
Buffett’s business partner Charles Munger also agreed that creating an overly complex business model would hurt companies. “It seems like the higher mathematics with more false precision should help you, but it doesn’t. They teach that in business schools because, well, they’ve got to do something.”
Buffett show some mixed emotions in responding to questions e-mailed to the three reporters from shareholders, some who are upset with his investment decisions and some who still stand behind him. Those who were concerned with Buffett’s choices questioned him as to why he was still invested in Moody’s credit rating system, whose credibility has quickly dwindled, and about Buffett’s plans for a successor for himself and his reinsurance expert Ajit Jain.
While Buffett criticized Moody’s business model, he supported his own decision not to use his influence to encourage the company to change its ways. “We don’t tell Burlington Northern what safety procedures to put in, or AmEx who they should lend to. When we own stock, we are not there to try and change people.”
Although Buffett emphasized simplicity in his investments, he also said that he has money in the same derivatives that he once famously called “weapons of mass destruction.” However, he added that “derivatives aren’t evil” when discussing his futures and options contracts on stock indexes and foreign currencies.