The Essential Buffett: Timeless Principles for the New Economy Robert Hagstrom 2002
Fun:
“We enjoy the process far more than the proceeds.”
Habit:
“Chains of habit are too light to be felt until they are too heavy to be broken.”
Inactivity:
“You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.”
“We don’t get paid for activity, just for being right. As to how long we’ll wait, we’ll wait indefinitely.” – 1998BerkshireHathaway Annual Meeting
“I call investing the greatest business in the world because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47!U.S.Steel at 39! and nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it.”
“The stock market is a no-called-strike game. You don’t have to swing at everything–you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, ‘Swing, you bum!’” – 1999BerkshireHathaway Annual Meeting
“Our favorite holding period is forever.” Letter to Berkshire Hathaway shareholders, 1988
“I am out of step with present conditions. When the game is no longer played your way, it is only human to say the new approach is all wrong, bound to lead to trouble, and so on. On one point, however, I am clear. I will not abandon a previous approach whose logic I understand ( although I find it difficult to apply ) even though it may mean foregoing large, and apparently easy, profits to embrace an approach which I don’t fully understand, have not practiced successfully, and which possibly could lead to substantial permanent loss of capital.”
1969.
“One of the ironies of the stock market is the emphasis on activity. Brokers, using terms such as `marketability’ and `liquidity,” sing the praises of companies with high share turnover… but investors should understand that what is good for the croupier is not good for the customer. A hyperactive stock market is the pick pocket of enterprise.”
Inheritance
“When they open that envelope, the first instruction is to take my pulse again.” – 2001 Annual Meeting
“[The perfect amount of money to leave children is] enough money so that they would feel they could do anything, but not so much that they could do nothing.” Richard I. Kirkland Jr., “Should You Leave It All to the Children?” Fortune, 29 September 1986.
Intelligence:
“Success in investing doesn’t correlate with I.Q. once you’re above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.” – BusinessWeek Interview June 25 1999
Insurance:
“In the insurance business, there is no statute of limitation on stupidity.”
Investing:
“You ought to be able to explain why you’re taking the job you’re taking, why you’re making the investment you’re making, or whatever it may be. And if it can’t stand applying pencil to paper, you’d better think it through some more. And if you can’t write an intelligent answer to those questions, don’t do it.”
Forbes: “How do you feel?
“Like an oversexed guy in a whorehouse. Now is the time to invest and get rich.”
“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.” July 1999Sun Valley
“The important thing is to keep playing, to play against weak opponents and to play for big stakes.”- Nov. 2002 talking with students at Gaston Hall
“I never buy anything unless I can fill out on a piece of paper my reasons. I may be wrong, but I would know the answer to that. “I’m paying $32 billion today for the Coca Cola Company because…” If you can’t answer that question, you shouldn’t buy it. If you can answer that question, and you do it a few times, you’ll make a lot of money.”
“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
Investment banks:
“…Wall Street – a community in which quality control is not prized – will sell investors anything they will buy.” – 2000 Letter to Shareholders
“Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway.”
Journalism:
“The smarter the journalists are, the better off society is.
Love:
“The only way to be loved is to be loveable, which really irritates me.”
CityClub Seattle (July 21, 2001)
Luck:
I’m just lucky to have been in the right place at the right time. Another place, another time, I wouldn’t have been as successful. Society enabled me to make my money and my money should go to society.” http://cotellese.wordpress.com/feed/
“I just don’t see anything available that gives any reasonable hope of delivering such a good year and I have no desire to grope around, hoping to ‘get lucky’ with other people’s money. I am not attuned to this market environment, and I don’t want to spoil a decent record by trying to play a game I don’t understand just so I can go out a hero.”
Management:
“When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.”
“If you don’t know jewelry, know the jeweller.”
“When returns on capital are ordinary, an earn-more-by-putting-up-more record is no great managerial achievement. You can get the same result personally while operating from your rocking chair. just quadruple the capital you commit to a savings account and you will quadruple your earnings. You would hardly expect hosannas for that particular accomplishment. Yet, retirement announcements regularly sing the praises of CEOs who have, say, quadrupled earnings of their widget company during their reign – with no one examining whether this gain was attributable simply to many years of retained earnings and the workings of compound interest.” 1985 Chairman’s Letter to Shareholders
“Just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds… any business craving of the leader, however foolish, will be quickly supported by detailed rate-of-return and strategic studies prepared by his troops”
“The managers at fault periodically report on the lesson they have learned from the latest disappointment. They then usually seek out future lessons.”
“Of one thing be certain: if a CEO is enthused about a particularly foolish acquisition, both his internal staff and his outside advisors will come up with whatever projections are needed to justify his stance. Only in fairy tales are emperors told that they are naked.”
Margin of Safety
“If you understood a business perfectly and the future of the business, you would need very little in the way of a margin of safety. So, the more vulnerable the business is, assuming you still want to invest in it, the larger margin of safety you’d need. If you’re driving a truck across a bridge that says it holds 10,000 pounds and you’ve got a 9,800 pound vehicle, if the bridge is 6 inches above the crevice it covers, you may feel okay, but if it’s over the Grand Canyon, you may feel you want a little larger margin of safety…”- 1997 Berkshire Hathaway Annual Meeting
“You leave yourself an enormous margin of safety. You build a bridge that 30,000-pound trucks can go across and then you drive 10,000-pound trucks across it. That is the way I like to go across bridges.” – Financial World, June 13, 1984.
“Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.”- 1974 Letter to Shareholders
Market Timing
“Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.” Berkshire Hathaway 2004 Chairman’s Letter
“Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, ‘I can calculate the movement of the stars, but not the madness of men.’ If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.
