Few names in investing carry as much weight as Warren Buffett. The Oracle of Omaha, known for transforming Berkshire Hathaway from a struggling textile mill into one of the most valuable companies in the world, has consistently demonstrated an uncanny ability to identify undervalued opportunities.
But what if this legendary investor had to start over? What strategies would he employ with a more modest sum of $1 million? During a candid exchange at Berkshire Hathaway’s annual meeting, Buffett offered a rare glimpse into how he would approach investing if he were starting fresh today, revealing timeless principles that both novice and seasoned investors can apply to their own financial journeys.
Here is the transcript of the exchange:
Question from the audience:
“Towards the end of 2018, you mentioned that you guaranteed you could make a 50% annual return if you had to start again with under $1 million. The question is: if tomorrow you woke up in new body—and your name was now Warren Alakat, and you had some money to invest on a full-time basis, what method or methods would you use to achieve that return? Would it involve flipping through 20,000 pages of Moody’s manuals or similar publications to find “butts”? Or would it be hunting for great companies at a fair price, as Mr. Munger suggests? Or would it be a combination of both, with opportunity cost serving as the final arbiter of which method to use, given that your investing opportunity has now broadened significantly?”
Warren Buffett’s answer:
“Good question—I’m glad you came.
The answer would be, in my particular case, it would be going through the 20,000 pages. And since we were talking about railroads—you know, I went through the Moody’s Transportation Manual a couple of times. That was 1,500 or 2,000 pages—well, probably 1,500 pages—and I found all kinds of interesting things when I was 20 or 21.
And I don’t imagine there’s anybody here who knows about the Green Bay and Western Railroad Company, but there were hundreds and hundreds of railroad companies, and I liked to read about every one of them.
The Green Bay and Western—in those days, everybody had a nickname for railroads. That was just what people did. Northern Pacific was “the Nipper.” “TB Snow” was one in the East that used to go up to Cornell. The Green Bay and Western was known as “Grab Baggage and Walk”—GB&W. They had a bond that was actually the common stock, and they had a common stock that was actually a bond. That could lead to unusual things.
But those things wouldn’t work if you had many millions of dollars. However, if you collected a whole bunch of those—which I set out to do—that’s actually that’s what impressed Charlie when I first met him. I knew all the details of all these little companies on the West Coast that he thought nobody else had ever heard of. But I knew about the Los Angeles Athletic Club or whatever it might be. And he thought he was the only one that knew about that.
That became an instant point of connection.
So, to answer your question, I don’t know what the equivalent of Moody’s Manuals would be now, but I would try to know everything about everything small. And I would find something. With a million dollars, you could earn 50% a year. But you have to be in love with the subject. You can’t just be in love with the money.
You really have to find it like—essentially like—people find other things in other fields. They just love looking for it. A biologist looks for something because they want to find it. It’s built-in.
I don’t know how the human brain works that well—and I don’t think anyone really does—but different people just find it exciting to expand their knowledge in a given area. I’ve known great bridge players and great chess players. Actually, Kasparov came to Omaha. I’ve had the luck of meeting a lot of people who are unbelievably smart in their own arena and do unbelievably dumb things in other areas.
All I know is that the human brain is complicated, but it does its best when you find out what your brain is really suited for—and then you just pound the hell out of that point.
And that’s what I would be doing if I had a small amount of money and I wanted to make 50% a year—but I also just wanted to play the game. And you can’t do it if you don’t find the game interesting. Whether it’s bridge, or chess, or in this case, finding securities that are undervalued.
But it sounds to me like you’re on the right track. I mean, anybody who comes all the way to this annual meeting has got something in their mind other than bridge or chess. So I’m glad you came—and come again next year.” [1]
Conclusion
Buffett’s approach to investing with a smaller capital base reveals several enduring principles that have guided his remarkable success. First, there’s an emphasis on thoroughness—the willingness to sift through thousands of pages of financial documents to uncover hidden gems.
Second, he highlights the importance of focusing on smaller, overlooked opportunities where significant returns are still possible. Perhaps most importantly, Buffett stresses that true investing success requires genuine passion—“you can’t just be in love with the money.
His advice reminds us that exceptional returns aren’t merely the result of mathematical formulas or market timing but rather stem from the disciplined application of knowledge in areas where one’s mind is “really suited.”
For those willing to put in the work and develop a genuine fascination with the hunt for undervalued securities, Buffett suggests the potential for remarkable returns remains achievable, even in today’s complex market landscape.
