University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting

by Daniel Pecaut

Let’s say you want to buy a farm, and you calculate that you can make $70/acre as the owner. How much will you pay for that farm? You might decide you wanted a 7% return, so you’d pay $1000/acre. If it’s for sale at $800/acre, you buy, but if it’s for sale for $1200/acre, you don’t.