Focusing on good businesses—those that are understandable, with enduring economics, run by shareholder-oriented managers—by itself is not enough to guarantee success, Buffett notes. First, he has to buy at sensible prices and then the company has to perform to his business expectations. If we make mistakes, he points out, it is either because of (1) the price we paid, (2) the management we joined, or (3) the future economics of the business. Miscalculations in the third instance are, he notes, the most common.
