We try more to profit from always remembering the obvious than from grasping the esoteric.
So, economics should emulate physics' basic ethos, but its search for precision in physics-like formulas is almost always wrong in economics.
In the LBO field there is a buried covariance with marketable equities, toward disaster in generally bad business conditions, and competition is now extremely intense.
I have a black belt in chutzpah. I was born with it. Some people, like some of the women I know, have a black belt in spending. They were born with that. But what they gave me was a black belt in chutzpah.
A board member should be perfectly willing to leave at any time and willing to make the tough calls.
I think the foundation at Berkshire Buffett's stake in Berkshirewill pass to the Buffett Foundation upon his death will be a plus because there will be a continuation of the culture. We'd still take in fine businesses run by people who love them.
I think that, every time you saw the word EBITDA, you should substitute the word bullshit earnings.
The big money is not in the buying and selling ... but in the waiting.
The number one idea is to view a stock as an ownership of the business and to judge the staying quality of the business in terms of its competitive advantage. Look for more value in terms of discounted future cash-flow than you are paying for. Move only when you have an advantage.
Well in the history of the See's Candy Company they always say, I never did it before, and I'm never going to do it again. And we cashier them. It would be evil not to, because terrible behavior spreads.
You need a different checklist and different mental models for different companies. I can never make it easy by saying, 'Here are three things.' You have to derive it yourself to ingrain it in your head for the rest of your life.
No wise pilot, no matter how great his talent and experience, fails to use his checklist.
Just avoid things like racing trains to the crossing, doing cocaine, etc. Develop good mental habits.
We have to have a special insight, or we'll put it in the 'too tough' basket. All of you have to look for a special area of competency and focus on that.
If you, like me, lived through 1973-74 or even the early 1990s... There was a waiting list to get OUT of the country club -- that's when you know things are tough. If you live long enough, you'll see it.
A rough rule in life is that an organization foolish in one way in dealing with a complex system is all too likely to be foolish in another.
I think the notion...that liquidity is this -- of tradable common stock -- is a great contributor to capitalism -- I think that is mostly twaddle... The liquidity gives us these crazy booms, which have many problems as well as virtues.
I see almost no change in the price of the composite product that flows through Costco I don't feel sorry for the people who pay $27 million for an 8,000-square-foot condo in Manhattan. So inflation comes in places.
In my life there are not that many questions I can't properly deal with using my $40 adding machine and dog-eared compound interest table.
Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things.
We've got great flexibility and a certain discipline in terms of not doing some foolish thing just to be active -- discipline in avoiding just doing any damn thing just because you can't stand inactivity.
Accounting incomes were reduced by discrepancy but the net amount paid by lawyers for lawyerly discrepancy is close to zippo. In this case, the goddess of justice was blind.
In engineering, people have a big margin of safety. But in the financial world, people don't give a damn about safety. They let it balloon and balloon and balloon. It's aided by false accounting.
Strategic plans cause more dumb decisions than anything else in America.
We only want what success we can get despite encouraging others to share our general view about reality.
Even if you assume that the whole economy would work better had we never had double taxation, having the envy and resentment of the richest paying low or no taxes screams of injustice. You have to have a fair system.
A lot of our respected financial institutions are just casinos in drag.
Financial institutions make us nervous when they're trying to do well.
Our experience tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing some simple and logical thing, will often dramatically improve the financial results of that lifetime.
The reason we avoid the word 'synergy' is because people generally claim more synergistic benefits than will come. Yes, it exists, but there are so many false promises.Berkshire is full of synergies -- we don't avoid synergies, just claims of synergies.
The ethos of not fooling yourself is one of the best you could possibly have. It's powerful because it's so rare.
Almost all good businesses engage in 'pain today, gain tomorrow' activities.
Once you get into debt, it's hell to get out. Don't let credit card debt carry over. You can't get ahead paying eighteen percent.
Mankind invented a system to cope with the fact that we are so intrinsically lousy at manipulating numbers. It's called the graph.
The stupid and dishonest accountants allowed the genie of totally inappropriate accounting to descend on derivatives books. And once this has happened -- people get status, etc. -- it's impossible to get it back into the bottle.
Investing is where you find a few great companies and then sit on your ass.
Darwin paid particular attention to disconfirming evidence. Objectivity maintenance routines are totally required in life if you're going to be a great thinker.
I think the idea that the hedge fund manager gets lower taxes than the taxi driver or the physics professor is insane. The legislators who leave that policy in place are derelict in their duties to be rational and fair. There are plenty of them in both political parties. It's totally outrageous.
Look at those hedge funds -- you think they can wait? They don't know how to wait! I have sat for years at a time with $10 to $12 million in treasuries or municipals, just waiting, waiting...As Jesse Livermore said, 'The big money is not in the buying and selling...but in the waiting.'
Although I am very interested in the subject of human misjudgment -- and lord knows I've created a good bit of it -- I don't think I've created my full statistical share, and I think that one of the reasons was I tried to do something about this terrible ignorance I left the Harvard Law School with.
It's a finite and very competitive world. All large aggregations of capital eventually find it hell on earth to grow and thus find a lower rate of return.
Berkshire was built on the eternal verities: basic mathematics, basic horse sense, basic fear, and basic diagnosis of human nature to make predictions regarding human behavior. We stuck to the basics with a certain amount of discipline and it has worked out quite well.
In the corporate world, if you have analysts, due diligence, and no horse sense, you've just described hell.
The definition of hell in the legal system is: endless due process and no justice; (in the corporate world) it would be: endless due diligence and no horse sense.
One could imagine a period like Japan13 years ago, however, in which indexing over time wouldn't work.
If you took our top fifteen decisions out, we'd have a pretty average record. It wasn't hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor.
If you buy something because it's undervalued, then you have to think about selling it when it approaches your calculation of its intrinsic value. That's hard. But if you buy a few great companies, then you can sit on your ass. That's a good thing.
Like the stocks of both Berkshire and Wesco to trade within hailing distance of what we think of as intrinsic value. When it runs up, we try to talk it down. That's not at all common in Corporate America, but that's the way we act.
The basic concept of value to a private owner and being motivated when you're buying and selling securities by reference to intrinsic value instead of price momentum -- I don't think that will ever be outdated.
If you don't keep learning, other people will pass you by. Temperament alone won't do it -- you need a lot of curiosity for a long, long time.
The name of the game is continuing to learn. Even if you're very well trained and have some natural aptitude, you still need to keep learning.
A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.
It's hard to predict what will happen with two brands in a market. Sometimes they will behave in a gentlemanly way, and sometimes they'll pound each other. I know of no way to predict whether they'll compete moderately or to the death. If you could figure it out, you could make a lot of money.
GEICO got to thinking that, because they were making a lot of money, they knew everything. And they suffered huge losses. All they had to do was to cut out all the folly and go back to the perfectly wonderful business that was lying there.
If we've been a little more successful than other people, is because we always realised that the school of life was always open, and if you were not learning more you are falling behind.
Let me know what your problem is, and I will try to make it more difficult for you.
By regularly reading business newspaper and magazines I am exposed to an enormous amount of material at the micro level.. I find that what I see going on there pretty much informs me about what's happening at the macro level.
Missing out on some opportunity never bothers us. What's wrong with someone getting a little richer than you? It's crazy to worry about this.
How do you compete against a true fanatic? You can only try to build the best possible moat and continuously attempt to widen it.
One metric catches people. We prefer businesses that drown in cash. An example of a different business is construction equipment. You work hard all year and there is your profit sitting in the yard. We avoid businesses like that. We prefer those that can write us a check at the end of the year.
If you skillfully follow the multidisciplinary path, you will never wish to come back. It would be like cutting off your hands.
It's natural that you'd have more brains going into money management. There are so many huge incomes in money management and investment banking -- it's like ants to sugar. There are huge incentives for a man to take up money management as opposed to, say, physics, and it's a lot easier.
The general systems of money management today require people to pretend to do something they can't do and like something they don't. It's a terrible way to spend your life, but it's very well paid.
There are all kinds of wonderful new inventions that give you nothing as owners except the opportunity to spend a lot more money in a business that's still going to be lousy. The money still won't come to you. All of the advantages from great improvements are going to flow through to the customers.
I like people admitting they were complete stupid horses' asses. I know I'll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.
You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long, time.
We look for a horse with one chance in two of winning and which pays you three to one.
After nearly making a terrible mistake not buying See's, we've made this mistake many times. We are apparently slow learners. These opportunity costs don't show up on financial statements, but have cost us many billions.
Spend less than you make; always be saving something. Put it into a tax-deferred account. Over time, it will begin to amount to something. This is such a no-brainer.
What matters most: passion or competence that was born in? Berkshireis full of people who have a peculiar passion for their own business. I would argue passion is more important than brain power.
Bull markets go to people's heads. If you're a duck on a pond, and it's rising due to a downpour, you start going up in the world. But you think it's you, not the pond.
Beta and modern portfolio theory and the like -- none of it makes any sense to me.
In the 1930s, there was a stretch where you could borrow more against the real estate than you could sell it for. I think that's what's going on in today's private-equity world.
I've heard that one-half of the students at elite schools want to go into private equity or hedge funds. They want to keep up with their age cohorts at Goldman. This can't possibly end well in terms of meeting these expectations.