Value Investing

Warren Buffett’s First Television Interview – Discussing Timeless Investment Principles

Warren Buffett’s first television interview from the year 1985, in which he discusses timeless investment principles.

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Warren Buffett's first television interview

Warren Buffett’s First Television Interview - Discussing Timeless Investment Principles

Transcript

First of all an investment is don't lose. And the second rule on investment is don't forget the first rule and that's all the rules there are.

I mean that if you buy things for far below what they're worth and you buy a group of them you basically don't lose money.

And what do you consider the most important quality for an investment manager.

It's a temperamental quality not an intellectual quality that you don't need tons of IQ in this business. I mean you have to have enough IQ to get from here to downtown Omaha. But what you do not have to be able to play three dimensional chess or be in the top leagues in terms of bridge playing or something of that sort.

You need a stable personality you need a temperament that neither derives great pleasure from being with the crowd or against the crowd because this is not a business where you take polls it's a business where you think and Ben Graham would say that you're not right or wrong because a thousand people agree with you and you're not right or wrong because a thousand people disagree with you you're right because your facts and your reasoning are right.

What do you do. That's different than 90 percent of the money managers who were in the market.

Certainly most of the professional investors focus on what the stock is likely to do in the next year or two.

They are all kinds of all kinds of arcane methods of approaching that.

But they do not really think of themselves as owning a piece of a business. The real test of whether you're investing from a value standpoint or not is whether you care whether the stock market is open tomorrow. If you're making a good investment in a security it shouldn't bother you if they closed down the stock market for five years. It is all the ticker tells me as the price and I can look at the price occasionally to see whether the prices are outlandishly cheap or outlandishly high but what prices don't tell me anything about a business business. Business figures themselves tell me something about a business but the price of a stock doesn't tell me anything about a business. I would rather value a stock or a business first and not even know the price so that I'm not influenced by the price and establishing my valuation and then look at the price later to see whether it's way out of line with what my value is.

So Buffett chose to stay in this world. Omaha Nebraska where corn grows just minutes from downtown Omaha is a nice town but nobody claims it's the World Financial Center secure the only Thundering Herd is actually on four feet.

Once you find them on and off the beaten track from the investment world well believe it or not we get mail here.

You get three articles on all the facts needed to make decisions and unlike Wall Street you'll notice we don't have 50 people coming up and whispering in our ear that we should be doing this or that this afternoon appreciate the lack of stimuli here. I like the lack of stimulation we get facts not stimulation here.

How can you stay away from Wall Street. Well that if I were on Wall Street I'd probably be a lot for a overstimulate and Wall Street and you hear lots of things. And you may. You may shorten your focus and a short focus is not conducive to long profits. And here I can just focus on what businesses are worth and I don't need to be in Washington to figure out what the Washington Post newspaper is worth and I don't need to be in New York to figure out what some other company is worth. Is simply an intellectual process and unless Savalas static there is in Atlanta electoral process really the better off you are. What is the intellectual process intellectual processes. Is defining your level defining your area of competence and valuing businesses and then within that area of competence. Finding whatever sells it at the cheapest price in relation to value and there are all kinds of things I'm not competent to value. However there are a few that I am comforted to value.

Have you ever bought a technology company now. I really haven't. In three years of investing not one I haven't understood any of you haven't ever owned. For example IBM never owned IBM as a company. Made a sensational.