Gems from Warren Buffett: Wit and Wisdom from 34 Years of Letters to Shareholders

by Mark Gavagan

“The reaction of weak managements to weak operations is often weak accounting. (‘It’s difficult for an empty sack to stand upright.’)”

“Over the years, Charlie and I have observed many accounting-based frauds of staggering size. Few of the perpetrators have been punished; many have not even been censured. It has been far safer to steal large sums with a pen than small sums with a gun.”

“In the long run, of course, trouble awaits managements that paper over operating problems with accounting maneuvers. Eventually, managements of this kind achieve the same result as the seriously-ill patient who tells his doctor: ‘I can't afford the operation, but would you accept a small payment to touch up the x-rays?’ ”

“Managers that always promise to ‘make the numbers’ will at some point be tempted to make up the numbers.”

“We’ve always found a telephone call to be more productive than a half-day committee meeting.”

“Our gain in net worth during the year was $613.6 million, or 48.2%. It is fitting that the visit of Halley’s Comet coincided with this percentage gain: neither will be seen again in my lifetime.”

“This devastating outcome for the shareholders indicates what can happen when much brain power and energy are applied to a faulty premise. The situation is suggestive of Samuel Johnson’s horse: ‘A horse that can count to ten is a remarkable horse - not a remarkable mathematician.’ Likewise, a textile company that allocates capital brilliantly within its industry is a remarkable textile company - but not a remarkable business.”

Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”

“I won’t close down businesses of sub-normal profitability merely to add a fraction of a point to our corporate rate of return. However, I also feel it inappropriate for even an exceptionally profitable company to fund an operation once it appears to have unending losses in prospect.”

‘While the lamb may lie down with the lion, the lamb shouldn’t count on getting a whole lot of sleep.’

“When Richard Branson, the wealthy owner of Virgin Atlantic Airways, was asked how to become a millionaire, he had a quick answer: ‘There's really nothing to it. Start as a billionaire and then buy an airline.’ ”

“Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”

“When forced to choose, I will not trade even a night’s sleep for the chance of extra profits.”

“No matter how great the talent or effort, some things just take time: you can’t produce a baby in one month by getting nine women pregnant.”

“The rear-view mirror is always clearer than the windshield.”