Chris Lau - Seeking Alpha

Tuesday, August 31, 2010

Free MBA Lesson from Warren Buffett - Pt. 2

Lessons on LTCM
Continuing with the MBA lecture series with Warren Buffett, Buffett discusses Long-Term Capital Management (LTCM), a fund run by very, very smart people, but which collapsed in 1998. LTCM needed to be rescued, after a chain reaction of panic resulted first with Russia defaulting on its debt.

With respect to the managers of LTCM, Buffett comments:

To make money they didn't have and didn't need, they risked what they did have and did need... and that's foolish. (Re-enforced)  

If you risk something that is important to you, with something that is unimportant to you, it just does not make any sense...I don't care if the odds are 100:1 that you'll succeed, or 1000:1 that you'll succeed.

Things to know: Buffett owned Dairy Queen and held a position in Coca-Cola.