What Would Warren Buffett Do If He Was 23 Years Old?

Photo: Matt Koppenhoffer, The Motley Fool

Every year, thousands of investors flock to Omaha to hear the wisdom of Warren Buffett and Charlie Munger. For as long as six hours, with only one break for lunch, the two business legends take questions from investors, the press, and analysts. Appropriately for a shareholders meeting, the focus is the business of  Berkshire Hathaway  (BRK.A -0.28%)(BRK.B -0.68%), but it's not the only topic they discuss.

This year, a young shareholder from New Jersey asked for advice on entrepreneurship. Below are my notes on the shareholder's question, along with responses from Buffett and Munger.

Shareholder: Being a young person without an ability to code or build robots, I don't know technology. If you were 23 years old, what non-tech industry would you start a business in?

Buffett: I'd probably do just what I did at 23. I would go into the investment business and I would look at lots of companies, talk to lots of people, and learn what I could about different industries. One thing I did when I was 23: If I got interested in a coal business, I'd go and see the bosses of eight or 10 coal companies. I'd ask a lot of questions.

One question I would always ask: If they had to put all their money in a company in the industry and go away for 10 years, which would it be? And if they had to sell short under the same conditions, which company would it be, and why? And if I talked to everyone in the industry like that, I would know more about the industry than anybody.

There's lots of ways to learn about the economic characteristics of companies, such as reading, personal contact, etc. ... But you need a real curiosity about it. It really has to turn you on. And what could turn you on more than asking questions about, for instance, coal companies? [Laughs] And in my case, the insurance industry was particularly interesting, and perhaps you could become well equipped to run such a business some day. If you just keep learning things, something will come along that will be very useful. But you have to be open to it.

Munger: Try the trick that Larry Bird used when he wanted a new contract. He asked all agents what agent he should hire if he didn't hire that agent, and when they all came up with the same second choice, he went with that second choice.

Buffett:We did the same thing for Salomon. I called in eight or 10 of the managers. We had to open for business, and I had to have someone to run the place. I said, "Who besides you would be ideal, and why?" And one guy told me no one could compare to him. He was gone within a few months [laughs], but it's not a bad system to use. You could really learn a lot just by asking. Sounds like a Yogi Berra quote, but it's true. People like to talk. You just have to be open to it, and you will find your spot. You may not find it the first day of the week, but you'll find what fascinates you. I found it when I was 7 or 8. Sometimes it'll take a while, but you'll find it.

Munger: It's a very competitive business. When I was at Cal Tech and studied thermodynamics, there was a guy who was tremendously talented at thermodynamics. I realized that I'd never be as smart as him in that field. I tried other industries with the same results, so I just kept doing that until I ended up here.

Buffett: I had a similar experience with athletics. [Laughs]