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January 14 - January 29, 2023
It is better to be approximately right than precisely wrong.
Paradoxically, when “dumb” money acknowledges its limitations, it ceases to be dumb.
In the words of the prophet Mae West: “Too much of a good thing can be wonderful.”
For example, investors have regularly poured money into the domestic airline business to finance profitless (or worse) growth. For these investors, it would have been far better if Orville had failed to get off the ground at Kitty Hawk: The more the industry has grown, the worse the disaster for owners.
An investor needs to do very few things right as long as he or she avoids big mistakes.
If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes.
Nevertheless, we haven't yet scaled back our portfolio in a major way: If the choice is between a questionable business at a comfortable price or a comfortable business at a questionable price, we much prefer the latter.
“Having a dog teaches a boy fidelity, perseverance, and to turn around three times before lying down.”
Mae West: “I was Snow White, but I drifted.”
After 25 years of buying and supervising a great variety of businesses, Charlie and I have not learned how to solve difficult business problems. What we have learned is to avoid them.
Charlie and I have never been in a big hurry: We enjoy the process far more than the proceeds—though we have learned to live with those also.
“More money has been lost reaching for yield than at the point of a gun.”
By being so cautious in respect to leverage, we penalize our returns by a minor amount. Having loads of liquidity, though, lets us sleep well.
But bubbles blown large enough inevitably pop.
(Thomas J. Watson Sr. of IBM followed the same rule: “I'm no genius,” he said. “I'm smart in spots—but I stay around those spots.”)
“Most men would rather die than think. Many do.”
No financial instrument is evil per se; it's just that some variations have far more potential for mischief than others.
The only way Berkshire can achieve satisfactory results from its four preferred issues is to have the common stocks of the investee companies do well.
Whatever the outcome, we will heed a prime rule of investing: You don't have to make it back the way that you lost it.
“There's really nothing to it. Start as a billionaire and then buy an airline.”
In a business selling a commodity-type product, it's impossible to be a lot smarter than your dumbest competitor.
“eating my words has never given me indigestion.”
“I would have enjoyed the play except that I had an unfortunate seat. It faced the stage.”
The range of derivatives contracts is limited only by the imagination of man (or sometimes, so it seems, madmen).
History teaches us that a crisis often causes problems to correlate in a manner undreamed of in more tranquil times.
Fault me for dithering. (Charlie calls it thumb-sucking.) When a problem exists, whether in personnel or in business operations, the time to act is now.
“My wife ran away with my best friend, and I sure miss him a lot.”
“I liked you better before I got to know you so well.”
Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It's not just whom you sleep with, but also whom they are sleeping with.
I should note that the cemetery for seers has a huge section set aside for macro forecasters.
“Sorry, son, all my money's tied up in currency.”)
“Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”
It was Scarlett O'Hara all over again: “I'll think about it tomorrow.”
Unfortunately, however, stocks can't outperform businesses indefinitely.
Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.
Performance comes, performance goes. Fees never falter.
“In investment management, the progression is from the innovators to the imitators to the swarming incompetents.”
“When a person with money meets a person with experience, the one with experience ends up with the money and the one with money leaves with experience.”
People who buy for non-value reasons are likely to sell for non-value reasons. Their presence in the picture will accentuate erratic price swings unrelated to underlying business developments.
“What is smart at one price is stupid at another.”
for every dollar retained by the corporation, at least one dollar of market value will be created for owners.
“Practice doesn't make perfect; practice makes permanent.”
Such favored business must have two characteristics: (1) an ability to increase prices rather easily (even when product demand is flat and capacity is not fully utilized) without fear of significant loss of either market share or unit volume, and (2) an ability to accommodate large dollar volume increases in business (often produced more by inflation than by real growth) with only minor additional investment of capital.
(We neglected the Noah principle: predicting rain doesn't count, building arks does.)
(Don't ask the barber whether you need a haircut.)
A cumulation of small managerial stupidities will produce a major stupidity—not a major triumph.
Over time, the skill with which a company's managers allocate capital has an enormous impact on the enterprise's value.
“It is hard for an empty sack to stand upright.”
A line from a country song expresses our feeling about new ventures, turnarounds, or auction-like sales: “When the phone don't ring, you'll know it's me.”
“Our interest in new ventures, turnarounds, or auction-like sales can best be expressed by the Goldwynism: ‘Please include me out.’”]
