WARREN BUFFETT and His WISDOM 

"THE FACT THAT PEOPLE WILL BE FULL OF GREED, FEAR OR FOLLY IS PREDICTABLE. THE SEQUENCE IS NOT."

 

         All the passages below are taken from the book by Andrew Kilpatrick, “Of Permanent Value---The Story of Warren Buffett” It is an Updated and Expanded Edition, printed in 2001.

 

Visualizing success at age seven: "I don't have much money now but someday I will and I'll have my picture in the paper." (Attributed to his mother Leila Buffett about 1937. Thoughts of Chairman Buffett, Simon Reynolds)

 

"The investor of today does not profit from yesterday's growth." (The Commercial and Financial Chronicle, December 6, 1951)

 

The joys of compounding: "One story stands out. This, of course, is the saga of trading acumen etched into history by the Manhattan Indians when they unloaded their island to that notorious spendthrift, Peter Minuit in 1626. My understanding is that they received $24 net. For this, Minuit received 22.3 square miles which works out to about 621,888,320 square feet. While on the basis of comparable sales, it is difficult to arrive at a precise appraisal, a $20 per square foot estimate seems reasonable given a current land value for the island of $12,433,766,400 ($12'/z billion). To the novice, perhaps this sounds like a decent deal. However, the Indians have only had to achieve a 6'/z% return (the tribal mutual fund representative would have promised them this) to obtain the last laugh on Minuit. At 61/2%, $24 becomes $42,105,772,800 (42 billion) in 338 years, and if they just managed to squeeze out an extra half point to get to 7%, the present value becomes $205 billion." (Buffett Partnership letter, January 1965)

 

"The course of the stock market will largely determine.. .when we'll be right, but the accuracy of our analysis will determine whether we'll be right. In other words, we... concentrate on what should happen, not when it should happen ...If we start deciding, based on our guesses or emotions, whether we will.. .participate in a business where we...have some long-run edge, we're in trouble. We will not, sell our interests in businesses when they are attractively priced just because some astrologer thinks the quotations may go lower even though forecasts.. .will be right some of the time.. .The availability of a quotation for your business interests should always be an asset to be utilized if desired. If it gets silly enough in either direction, you take advantage of it. Its availability should never be turned into a liability whereby its periodic aberrations in turn form your judgments." (Buffett Partnership letter, July, 1966)

 

"All of our investments usually appear undervalued to me---otherwise we wouldn't own them." (Buffett Partnership letter, July, 1966)

 

"I am not in the business of predicting general stock market or business fluctuations. If you think I can do this, or think it is essential to an investment program, you should not be in the partnership.' (Buffett Partnership letter, July, 1966)

 

`As Ben Graham said: `In the long run, the market is a weighing machine---in the short run, a voting machine.' I have always found it easier to evaluate weights dictated by fundamentals than votes dictated by psychology." (Buffett Partnership letter in 1969)

 

"Maybe grapes from a little 8-acre vineyard in France are really the best in the whole world, but I have always had a suspicion that about 99% of it is in the telling and about 1% of it is in the drinking." (Warren Buffett Speaks, Janet Lowe, p. 36 quoting SEC file No. HO784, Blue Chip Stamp et a1lWarren Buffett, letter to Charles N. Huggins, December 13, 1972)

 

"The sillier the market's behavior the greater the opportunity for the business-like investor. Follow [Ben] Graham and you will profit from folly rather than participate in it." (Preface to the fourth edition of The Intelligent Investor, 1973)

 

"I shave my face on the same side every morning and put on the same shoe first and people are creatures of habit." (Courier Express U Evening News testimony, November 4, 1977)

 

"We ordinarily make no attempt to buy equities anticipating favorable short-term price behavior. In fact, if the business experience continues to satisfy us, we welcome lower prices as an opportunity to acquire even more of a good thing." (1977 Annual Report)

 

"When companies with outstanding businesses and comfortable financial positions find their shares selling far below intrinsic value in the marketplace, no alternative action can benefit shareholders as surely as repurchases." (widely quoted)

 

(The) argument is made that there are just too many (investment) question marks about the near-term future; wouldn't it be better to wait until things clear up a bit? You know the prose: `Maintain buying reserves until current uncertainties are resolved,' etc. Before reaching for that crutch, face up to two unpleasant facts: the future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values." (Forbes, August 6, 1979)

 

"Your charitable preferences are as good as mine." (1981, announcing that Berkshire shareholders could designate their choice of charitable contributions.)

 

"We do not need more people gambling in non-essential instruments identified with the stock market in this country, nor brokers who encourage them to do so. What we need are investors and advisers who look at the long-term prospects for an enterprise and invest accordingly. We need intelligent commitment of investment capital, not leveraged market wagers. The propensity to operate in the intelligent, pro-social sector of capital markets is deterred, not enhanced, by an active and exciting casino operating in somewhat the same arena, utilizing somewhat similar language and serviced by the same work force." (From a letter Buffett wrote to John Dingell, Chairman of the House Subcommittee on Oversight and Investigations, in March 1982, when Congress was considering whether to allow the Chicago Mercantile Exchange to trade futures contracts.)

 

"Geometric progressions eventually forge their own anchors." (1982 Annual Report)

 

"The market, like the Lord, helps those who help themselves. But unlike the Lord, the market does not forgive those who know not what they do." (1982 Annual Report)

 

"Although our form is corporate, our attitude is partnership. Charlie Munger and I think of our shareholders as owner-partners, and of ourselves as managing partners. (Because of the size of our shareholdings we also are, for better or worse, controlling partners.) We do not view the company itself as the ultimate owner of our business assets but, instead, view the company as a conduit through which our shareholders own the assets." (1983 Annual Report)

 

Quoting John Maynard Keynes: "The difficulty lies not in the new ideas but in escaping from the old ones." (1983 Annual Report)

 

"I heard a story recently that is applicable to our insurance accounting problems: a man was traveling abroad when he received a call from his sister informing him that their father had died unexpectedly. It was physically impossible for the brother to get back home for the funeral, but he told his sister to take care of the funeral arrangements and to send the bill to him. After returning home he received a bill for several thousand dollars, which he promptly paid. The following month another bill came along for $15, and he paid that too. Another month followed, with a similar bill. When in the next month, a third bill for $15 was presented, he called his sister to ask what was going on. `Oh', she said. `I forgot to tell you. We buried Dad in a rented suit.' " (1984 Annual Report)

 

"I have seen no trend toward value investing in the 35 years I've practiced it. There seems to be some perverse human characteristic that likes to make easy things difficult." (Talk to Columbia Business School in 1985)

 

"Complete anonymity would be the best way for me to operate, but because of size that's not possible anymore." (Financial Review, December 9, 1985)

 

"All I want is one good idea every year. If you really push me, I'll settle for one good idea every two years." (Financial Review, December 9, 1985)

 

"The failure of business schools to study men like Teledyne's Henry Singleton is a crime. Instead they insist on holding up as a model executives cut from McKinsey & Company cookie cutters." (Talk to Columbia Business School in 1985)

 

"When I get an investment proposal, I can look at it in five minutes or less. I can filter out 99% of the ideas in five minutes." (Financial Review, December 9, 1985)

 

"The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable." (Channels magazine, talk to Patricia Bauer, 1986)

 

"Money, to some extent, sometimes lets you be in more interesting environments. But it can't change how many people love you or how healthy you are." (Channels magazine, talk to Patricia Bauer, 1986)

 

Author's note: of course others say: "Money cannot buy happiness. but then happiness cannot buy groceries" or "I'm tired of love, I'm still tired of rhyme, but money gives me pleasure all the time."

 

Business schools "reward complex behavior more than simple behavior; but simple behavior is more effective." (Channels magazine, talk to Patricia Bauer, 1986)

 

"The idea that you get a lifetime supply of food stamps based on coming out of the right womb strikes at my idea of fairness." (Channels magazine, talk to Patricia Bauer, 1986)

 

Arms control and population growth problems: "If we don't solve them, we don't have a world." (Channels magazine, talk to Patricia Bauer, 1986)

 

"The key in life is to figure out who to be the batboy for." (Broadcasting, June 9, 1986)

 

Patience: "You don't trade in houses, children and wives every year, so why trade companies around. I want to have fun with the companies, see them grow and develop. And also, I want to enjoy life. I can't understand the Carl Icahn's, Victor Posner's and Ted Turner's of the world. In the end all my money is going to charity. So it's crazy to live by being in uncomfortable situations, or being unpleasant towards others. What's the difference anyway, if the Buffett Foundation is worth "X" or "2X" at the end..." (Anagnos thesis, 1986, quoting Buffett)

 

"I do what I like to do. I don't spend five minutes a year doing what I don't like. And fortunately I have the luxury to do so. I don't care what anyone else does. I like people, and I like the people I associate with. I care about them and their businesses. And besides, I want to have fun!" (Anagnos thesis, 1986, quoting Buffett)

 

"Would anyone say the best way to pick a champion Olympic team is to select the sons and daughters of those who won 20 years ago? Giving someone a favored position just because his old man accomplished something is a crazy way for society to compete." (Fortune, September 29, 1986)

 

"Love is the greatest advantage a parent can give." (Fortune, September 29, 1986)

 

"We like to buy businesses, but we don't like to sell them." (Annual Meeting in 1987)

 

"Anything that can't go on forever will end." (Annual Meeting in 1987, paraphrasing Herb Stein)

 

"I like the fact it's a big transaction. I can't be involved in 50 or 75things. That's a Noah's Ark way of investing---you end up with a zoo that way. I like to put meaningful amounts of money in a few things." (Wall Street Journal, September 30, 1987, shortly after Berkshire's $700 million investment in Salomon)

 

"The public school teacher is probably the most under-compensated and under-appreciated person in the public arena." (Omaha World-Herald, October 1, 1987)

 

"There's no reason in the world you should expect some broker to be able to tell you whether you can make money on index futures or options or some stock in two months. If they knew how to do that, he wouldn't be talking to investors. He'd have retired long ago." (Money, Fall 1987)

 

"It looks.. .impressive if it comes out of a computer. But it's frequently nonsense. The person who's making the decision is far more important." (Outstanding Investor Digest, October 7, 1987)

 

"I'm an analyst basically. I try to figure out what businesses are worth, then divide by the number of shares outstanding." (Omaha World-Herald, October 18, 1987, quoting Money magazine)

 

"There's something about smart people explaining ideas to an orangutan that makes their decision-making better." (Fortune, October 26, 1987)

 

"We're far from believing that there is not a fate worse than debt. We are willing to borrow an amount that we believe---on a worst-case basis---will pose no threat to Berkshire's well-being." (1987 Annual Report)

 

"What I am is a realist. I always knew I'd like what I'm doing. Oh, perhaps it would have been neat to be a major league baseball player, but that's where the realism comes in." (US West, Autumn, 1987)

 

"I keep an internal scorecard. If I do something that others don't like but I feel good about, I'm happy. If others praise something I've done, but I'm not satisfied, I feel unhappy." (US West, Autumn, 1987)

 

"The market is there only as a reference point to see if anybody is offering to do anything foolish. When we invest in stocks, we invest in businesses. You simply have to behave according to what is rational rather than according to what is fashionable." (Fortune, January 4, 1988)

 

"Our goal is to attract long-term owners who, at the time of purchase, have no timetable or price target for sale but plan instead to stay with us indefinitely." (1988 Annual Report)

 

"I want to be in businesses so good that even a dummy can make money." (Fortune, April 11, 1988)

 

"We don't go into companies with the thought of effecting a lot of change. That doesn't work any better in investments than it does in marriages." (Fortune, April 11, 1988)

 

"If we get on the main line, New York to Chicago, we don't get off at Altoona and take side trips." (Fortune, April 11, 1988)

 

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." (widely quoted)

 

On turnarounds: "The projections will be dazzling---the advocates will be sincere---but in the end, major additional investment in a terrible industry usually is about as rewarding as struggling in quicksand." (widely quoted)

 

"I don't know what it'll (the stock market) do tomorrow or next week or next year. But I do know that over a period of 10 to 20 years you'll have some very enthusiastic markets and some very depressed markets. The trick is to take advantage of the markets rather than letting them panic you into the wrong action." (widely quoted)

 

"It's just not necessary to do extraordinary things to produce extraordinary results." (widely quoted)

 

The importance of a franchise business: Adam Smith: "So it's the power of the franchise?" Buffett: "It's the power of the franchise." (Adam Smith's `Money World" show, June 20, 1988)

 

"The most important quality for an investor is temperament, not intellect. You don't need tons of IQ in this business. You don't have to be able to play three-dimensional chess or duplicate bridge. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd. You know you're right, not because of the position of others, but because your facts and your reasoning are right." (Adam Smith's 'Money World" show, June 20, 1988)

 

"Our outlook for inflation is always the same. We feel there's a big bias toward inflation---both in the U.S. and around the world ...It's a world where prices are going to go up. It's just a question of how much. You could definitely have some explosive inflation at some point. Printing money is just too easy. I'd do it myself if I could get away with it." (Annual Meeting in 1988)

 

"We don't view precious metals and precious stones as great inflation hedges. But we don't bring anything to that game, so we don't play it." (Annual Meeting in 1988)

 

"It's hard enough to understand the peculiarities and complexities of the culture in which you've been raised, much less a variety of others. Anyway, most of our shareholders have to pay their bills in U.S. dollars." (Annual Meeting in 1988)

 

"We wouldn't care if the market closed for a year or two. It closes on Saturday and Sunday and we do just fine." (Annual Meeting in 1988)

 

"If principles are dated, they're not principles." (Annual Meeting in 1988)

 

On properly valuing a business: "To properly value a business, you should ideally take all the flows of money that will be distributed between now and judgment day and discount them at an appropriate discount rate. That's what valuing businesses is all about. Part of the equation is how confident you can be about those cash flows occurring. Some businesses are easier to predict than others. For example, water companies are generally easier to predict than building contractors. We try to look at businesses that are predictable." (Annual Meeting in 1988)

 

Something Buffett doesn't lose sleep over: "We're actually prohibited from buying other savings and loans. But that's not a prohibition that keeps us up at night." (Annual Meeting in 1988)

 

Money: "I think if you found an athlete that was doing well---and I'm not comparing myself---but a Ted Williams or an Arnold Palmer or something---after they have enough to eat, they're not doing it for the money. My guess is that if Ted Williams was getting the high at salary in baseball and he was hitting .220, he would be unhappy. And if he was getting the lowest salary in baseball and batting .4O0, he'd be very happy. That's the way I feel about this job. Money is a byproduct of doing something I like doing extremely well." (Annual Meeting in 1988)

 

"Anything can happen in stock markets and you ought to conduct your affairs so that if the most extraordinary events happen, that you're still around to play the next day." (Buffett on Adam Smith’s “Money World" show, June 20, 1988)

 

"Valuing a business is part art and part science." (Esquire, October, 1988)

 

Quoting Casey Stengel, who once described his job as "getting paid for the home runs the other fellows hit." (widely quoted)

 

"Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised." (Fortune, December 19, 1988)

 

IMAGINARY NEWS ADVISORY: Buffett steps into elevator shaft July 4, 2084, leaving twenty trillion to the Buffett Foundation. Berkshire drops 23% in the first minute of trading to $99 million a share. Manger steps up to the easel. Lou Simpson, named vice chairman, initiates massive stock buy-back. Consults Gates. Starts talks to buy China. Berkshire ends trading session at $123 million as investors recall Buffett's famous words of December 19, 1988.

 

"Take the probability of loss times the amount of possible loss from the probability of gain times the amount of possible gain. That is what we're trying to do. It's imperfect, but that's what it's all about. We compete only within the circle of what we understand, which eliminates a lot." (Annual Meeting in 1989)

 

"Time is the friend of the wonderful business, the enemy of the mediocre." (1989 Annual Report)

 

"It's no sin to miss a great opportunity outside one's area of competence." (1989 Annual Report)

 

"I found in running businesses that the best results come from letting high-grade people work unencumbered." (Fortune, September 11, 1989)

 

On why Berkshire borrowed $400 million and put the cash into Treasuries: "The best time to buy assets may be when it is hardest to raise money." (Fortune, October 23, 1989)

 

"I've often felt there might be more to be gained by studying business failures than business successes. It's customary in business schools to study business successes. But my partner, Charlie Manger, says all he wants is to know where he's going to die---so he won't ever go there." (Talk to Emory Business College, November, 1989)

 

"I'm not like a steel executive who can think only about how to invest in steel. I've got a bigger canvas, simply because I have spent my life looking at companies, starting with Abbott Labs and going through to Zenith." (Fortune, January 29, 1990)

 

"I think it's a saner existence here [Omaha]. I used to feel when I worked back in New York that there were more stimuli just hitting me all the time, and if you've got the normal amount of adrenaline, you start responding to them. It may lead to crazy behavior after a while. It's much easier to think here." (New York Times Magazine, L.J. Davis, April 2, 1990)

 

"I love what I do. I'm involved in a kind of intellectually interesting game that isn't too tough to win, and Berkshire Hathaway is my canvas. I don't try to jump over seven-foot bars: I look around for one foot bars that I can step over. I work with sensational people, and I do what I want in life. Why shouldn't I? If I'm not in a position to do what I want, who the hell is?" (New York Times Magazine, L.J. Davis, April 2, 1990)

 

"Any young person who doesn't take up bridge is making a big mistake." (New York Times, May 20, 1990)

 

"Stocks are simple. All you do is buy shares in a great business for less than the business is intrinsically worth, with management of the highest integrity and ability. Then you own those shares forever." (Forbes, August 6, 1990)

 

Buffett's description of some of the ground rules for the Buffett Partnership. "I told them (limited partners), `What I'll do is form a partnership where I'll manage the portfolio and have my money in there with you. I'll guarantee you a 6% return, and I get 25% of all profits after that. And I won't tell you what we own because that's distracting. All I want to do is hand in a scorecard when I come off the golf course. I don't want you following me around and watching me shank a three-iron on this hole and leave a putt short on the next one.' " (1990 Investors Guide/Fortune)

 

"A hyperactive stock market is the pickpocket of enterprise." (widely quoted)

 

"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with a 130 IQ. Rationality is essential." (widely quoted)

 

"In a sense Berkshire Hathaway is a canvas, and I get to paint anything I want on that canvas. And it's the process of painting that I really enjoy, not selling the painting." (widely quoted)

 

"You can't be smarter than your dumbest competitor. The trick is to have no competitors." (widely quoted)

 

"In the insurance business, there is no statute of limitations on stupidity." (1990 Annual Report)

 

"The most common cause of low prices is pessimism---sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer. None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling." (1990 Annual Report)

 

"The most important thing to do when you find yourself in a hole is to stop digging." (1990 Annual Report)

 

How a corporation (specifically Salomon) should behave: "Anything not only on the line, but near the line, will be called out." (Wall Street journal, August 19, 1991)

 

"In the end we must have people to match our principles, not the reverse." (Salomon report to shareholders, third quarter, 1991)

 

"Someone's sitting in the shade today because someone planted a tree a long time ago." (Newslnc., January, 1991)

 

"Our stay-put behavior reflects our view that the stock market serves as a relocation center at which money is moved from the active to the patient." (1991 Annual Report)

 

"The best CEOs love operating their companies and don't prefer going to Business Roundtable meetings or playing golf at Augusta National." (Fortune, April22, 1991)

 

"To swim a fast 100 meters, it's better to swim with the tide than to work on your stroke." (Annual Meeting in 1991)

 

"There are a lot of profitable things you can do but you have to stick to what you can do. We can't find a way to knock out Mike Tyson." (Annual Meeting in 1991)

 

"We're not pure economic creatures.. . .And that policy penalizes our results somewhat, but we prefer to operate that way in life. What's the sense of becoming rich if you're going to have a pattern of operation where you continually discard associations with people you like, admire and find interesting in order to earn a slightly bigger figure? We like big figures, but not to the exclusion of everything else." (Annual Meeting in 1991)

 

On the desire for big positions in the right business: "We own fewer stocks today at $7 billion than we did when our total portfolio was $20 million." (Annual Meeting in 1991)

 

No frills. "Whatever colors were on the corporate jet when we bought it are the ones that are on it today. There's no 'WB' or 'BH.' And that's not likely to change." (Annual Meeting in 1991)

 

On not second-guessing the managers of his business: "If they need my help to manage the enterprise, we're probably both in trouble." (Outstanding Investor Digest, May 24, 1991)

 

"For me, it's what's available at the time. We're not interested in categories per se. We're interested in value." (Business Week, August 19, 1991)

 

"Easy access to funding tends to cause undisciplined decisions." (Salomon conference with clients, September 13, 1991)

 

On learning from mistakes: "I guess I had too much inclination originally to buy mediocre, or worse than mediocre, businesses at a very cheap price. That works OK, in the sense that you never lose money; but you never end up with a great business that way either. So that emphasis has shifted over the years. We don't want to buy the worst furniture store in town at the cheapest price; we want to buy the best one at a fair price." (widely quoted)

 

His biggest strength: "I'm rational. Plenty of people have higher IQs, and plenty of people work more hours, but I am rational about things. But you have to be able to control yourself; you can't let your emotions get in the way of your mind.

"In 1986, my biggest accomplishment was not doing anything stupid. There is not much to do; there is not much available right now. The trick is, when there is nothing to do, do nothing.

"I love what I do. All I want to do is do what I'm doing as long as I can. Every day I feel like tap dancing all through the day. I really do. (widely quoted)

 

Advice to graduating MBA students. "Go to work for whomever you admire the most. You'll be turned on; you'll feel like getting out of bed in the morning; and you'll learn a lot.

"That is what I did. I wanted to work for Ben Graham, but he didn't hire me immediately. I offered to go to work for him for nothing too, so it's even worse than it sounds. So I started trying to be useful to him in various ways. I did a number of studies I dreamt up. I tried to suggest ideas.

"If I were a student today, I would probably try to show the people where I worked what I could do. If I wanted to be starting quarterback on the Washington Redskins, I'd try to get them to watch me throw a few passes.

"As a corollary, I would never go to work for an operation that I had any negative feelings about." (widely quoted)

 

"Investment must be rational; if you don't understand it, don't do it." (Forbes, October 19, 1992)

 

Restaurants as investments: Not good, because "a similar one can open up across the street." (Business Week, Robert Stoval column, January 5, 1993)

 

"Growth is always a component in the calculation of value, constituting a variable whose importance can range from negligible to enormous and whose impact can be negative as well as positive." (1992 Annual Report)

 

"What counts for most people in investing is not how much they know, but rather how realistically they define what they don't know. An investor needs to do very few things right as long as he or she avoids big mistakes." (1992 Annual Report)

 

"If options aren't a form of compensation, what are they? If compensation isn't an expense, what is it? And if expenses shouldn't go into the calculation of earnings, where in the world should they go?" (1992 Annual Report)

 

"Mrs. Blumkin recently sold her Mrs. B's Warehouse to the Mart and announced plans to operate her carpet business alongside a new store operated by the Mart. I am delighted that Mrs. B has again linked up with us. Her business story has no parallel and I have always been a fan of hers, whether she was a partner, or a competitor. But, believe me, partner is better." (1992 Annual Report)

 

"Overhead costs are under 1% of our reported operating earnings and less than '/2 of 1% of our look-through earnings. We have no legal, personnel, public relations, investor relations, or strategic planning departments. In turn this means we don't need support personnel such as guards, drivers, messengers, etc." (1992 Annual Report)

 

Two kinds of information: "Those things you can know and those things important to know. Those things you can know that are important constitute an extremely small percentage of the total known." (widely quoted)

 

On investing: "Investing is not that complicated. You need to know accounting, the language of business. You should read The Intelligent Investor. You need the right mindset, the right temperament. You should be interested in the process and be in your circle of competence. . .Avoid over stimulation. Read Ben Graham and Phil Fisher, read annual reports and trade reports, but don't do equations with Greek letters in them." (Annual Meeting in 1993)

 

"I read annual reports of the company I'm looking at and I read the annual reports of the competitors...That's the main source material.' (Annual Meeting in 1993)

 

Munger: "We like to keep things simple.. .so the chairman can sit around and read annual reports." (Annual Meeting in 1993)

 

Berkshire's price: "At no time has Berkshire's price been ridiculously out of line from intrinsic value. All along it's been reasonably priced." (Annual Meeting in 1993)

 

On selling off businesses: "We try not to sell the flowers to water the weeds." (Annual Meeting in 1993, quoting Peter Lynch)

 

"If you advertise for an opera and a rock concert, you get a different audience ...We try to attract the long-term shareholder. We don't want a lot of seat-changing. If you get the wrong shareholder, he'll leave you in six months.. .We're very unlikely to split the stock." (Annual Meeting in 1993)

 

On media reports of what he's buying: "Some are erroneous.. .We don't announce our acquisitions (unless legally required). Everyone in this room is a little richer because of that policy." (Annual Meeting in 1993)

 

"Daily newspapers are still good businesses, just not as good as before." (Annual Meeting in 1993)

 

On giving: "My feeling is you pick high-grade younger people to do it ...I'm not going to give a tightly drawn document about it. You hope that they are a lot smarter above the ground than you are below ground. You should concentrate your shots in death as well as life." (Annual Meeting in 1993)

 

Inflation prospects: "It's basically just in remission." (Annual Meeting in 1993)

 

Restructurings-"That's a word for mistakes." (Annual Meeting in 1993)

 

The investment professional as a whole doesn't add value: "One factor people have not focused on enough is that obviously professional investment management in aggregate will deliver a poorer return than a simple indexed investment because of the frictional costs Charlie mentioned. Such a significant percentage of the $4 trillion equity market is managed by managers who are getting paid to do the job that their aggregate performance has to be a little less than average simply because of frictional costs. So therefore you have a profession where practitioners as a whole can add nothing to what you can do yourself. In fact, they subtract from it." (Annual Meeting in 1993)

 

"There's good money out of cigarettes which in turn kill people." (Annual Meeting in 1993)

 

Berkshire's future: "I see a lot of interesting things happening, but I haven't the faintest idea what they'll be." (Nightly Business Review, April26, 1993)

 

On the wealthy paying a fair share under President Clinton's deficit reduction proposal: Buffett, who makes a $100,000 annual salary and $148,000 in director's fees, said, "If I make it into the top 1% (of taxpayers), I don't mind at all. It would be bad for America if we didn't do anything. We can't sit there and choose among 20 bills. I like the idea of more progressivity on the tax rates. I just wish it had been achieved more in spending cuts." (USA Today, August 6, 1993)

 

Where will you take your next vacation? "There's nothing to get away from." (Forbes reporter Robert Lenzner's query of Buffett for an October 19, 1993 story)

 

How's the 1993 stock market? "Common stocks look high and are high, but they are not as high as they look." Buffett quoting Ben Graham's response before the 1955 Fulbright hearings in Washington, D.C. (Forbes, October 19, 1993)

 

Buffett as admirer of the British economist and investor John Maynard Keynes: "Keynes essentially said don't try and figure out what the market is doing. Figure out businesses you understand, and concentrate. Diversification is protection against ignorance, but if you don't feel ignorant, the need for it goes down drastically." (Forbes, October 19, 1993)

 

Summing up Ben Graham's teachings: "When proper temperament joins with proper intellectual framework, then you get rational behavior." (Forbes, October 19, 1993)

 

International portfolio: "I get $150 million earnings pass-through from international operations of Gillette and Coca-Cola. That's my international portfolio." (Forbes, October 19, 1993)

 

"I am a better investor because I am a businessman, and a better businessman because I am an investor." (Forbes, October 19, 1993)

 

"Children should be given enough to do what they want to do, but not enough to be idle." (WOWT-TV in Omaha, October 14, 1993)

 

Advice for someone coming into the investment field: "If he were coming in with small sums of capital, I'd tell him to do exactly what I did 40-odd years ago, which is to learn about every company in the United States that has publicly traded securities and that bank of knowledge will do him or her terrific good over time." Adam Smith: "But there's 27,000 public companies." Buffett: "Well, start with the A's." (Adam Smith's "Money World," October 21, 1993)

 

"The smartest side to take in a bidding war is the losing side." (Fortune, November 29, 1993, quoting Buffett's talk to Columbia Business School students October 27, 1993)

 

Picking the right business for a long-term holding: "If you're going to have a Catholic marriage, you'd better do it right." (Omaha WorldHerald, October 28, 1993, quoting from the same talk)

 

"I feel competent. ..in a very few cases. I think that Bill Gates is one of the best managers in the world, but I don't have the faintest idea of how to evaluate what the stream of coupons will look like on a bond called Microsoft. (Omaha World-Herald, October 28, 1993 quoting from the same talk)

 

"It may be a sensational stream of coupons, but I just don't know enough about it to evaluate that. But if I can't evaluate it...then I'm not investing. I'm betting on whether a stock will go up or down tomorrow or next week or next month ...I put a heavy weight on certainty." (Omaha World-Herald, October 28, 1993, quoting from the same talk)

 

"Risk is not knowing what you're doing." (Omaha World-Herald, October 28, 1993, quoting from the same talk)

 

"I would think very hard about getting into a business with fundamentally good economics. I would think of buying from people I can trust. And I'd think about the price I'd pay. But I wouldn't think about price to the exclusion of the first two. And that essentially, is what we're trying to do at Berkshire. And if I did that, would I think about whether I could buy it cheaper on Monday rather than on Friday or would I think about the January effect or other nonsense?" (Omaha World-Herald, October 28, 1993, quoting from the same talk)

 

Communications investments: "I don't like businesses where the technology is changing fast. Basically, I don't think I'm a great one for seeing the future when the future looks way different than the present. Generally, anything that is subject to a lot of change and technology, I tend to be critical of rather than excited by." (Omaha World-Herald, October 28, 1993, quoting from the same talk)

 

On common sense and believing in yourself: "In the end, I always believe my eyes rather than anything else." (Omaha World-Herald, October 28, 1993, quoting from the same talk)

 

"Invest within your circle of competence. It's not how big the circle is that counts. It's how well you define the parameters." (Fortune, November 29, 1993)

 

Taxes: "Speaking for our own shares, Charlie and I have absolutely no complaint about these taxes. We know we work in a market based economy that rewards our efforts far more bountifully than it does the efforts of others whose output is of equal or greater benefit to society. Taxation should, and does, partially redress this inequity. But we still remain extraordinarily well-treated." (1993 Annual Report)

 

"Diversification is a hedge against ignorance." (widely quoted)

 

Diversification: "The strategy we've adopted precludes our following standard diversification dogma. Many pundits would therefore say the strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort level he must feel with its economic characteristics before buying into it. In stating this opinion, we define risk, using dictionary terms, as `the possibility of loss or injury.' "Academics, however, like to define investment `risk' differently, averring that it is the relative volatility of a stock or a portfolio of stocks---that is, their volatility as compared to that of a large universe of stocks. Employing databases and statistical skills, these academics compute with precision the `beta' of a stock---its relative volatility in the past---and then build arcane investment and capital allocation theories around this calculation. In their hunger for a single statistic to measure risk, however, they forget a fundamental principle: It is better to be approximately right than precisely wrong." (1993 Annual Report)

 

"The pleasant but vacuous director need never worry about job security." (1993 Annual Report)

 

"There's no use running if you're on the wrong road." (1993 Annual Report)

 

"We know who the best baseball players are; why not know who the best teachers are?" (Interview with Tom Brokaw of NBC News, April 12, 1994)

 

"You can't get rich with a weathervane." (Annual Meeting in 1994)

 

"We'd rather multiply by three than pi." (Annual Meeting in 1994)

 

"Charlie and I never have an opinion about the market because it wouldn't be any good and it might interfere with the opinions we have that are good." (Annual Meeting in 1994)

 

"Virtually everything we've done has been by reading public reports and then maybe asking questions around and ascertaining trade positions and product strengths or something of that sort." (Annual Meeting in 1994)

 

Coca-Cola! "Coke in 1890 or thereabouts---the whole company---sold for $2,000. Its market value today is $50-odd billion. Somebody could have said to the fellow who was buying it in 1890, `We're going to have a couple of great World Wars. There'll be a panic in 1907. All of these things are going to happen. Wouldn't it be better to wait?' We can't afford that mistake." (Annual Meeting in 1994)

 

 "There's nothing that I know about that product or its distribution system, its finances or anything that hundreds of thousands or millions of people don't know, too. They just don't do anything about it." (Annual Meeting in 1994)

 

"So the important thing that we do as managers generally is find the .400 hitters and then not tell them how to swing. . .And the second thing we do is allocate capital. Aside from that, we play bridge. That's Berkshire." (Annual Meeting in 1994)

 

"There's a huge difference between the business that grows and requires lots of capital to do so and the business that grows and doesn't require capital." (Annual Meeting in 1994)

 

"We don't have any meetings of any kind at Berkshire, but we'd never have an asset allocation meeting." (Annual Meeting in 1994)

 

"I buy expensive suits. They just look cheap on me." (Annual Meeting in 1994)

 

Thinking for yourself: "You have to think for yourself. It always amazes me how high-IQ people mindlessly imitate. I never get good ideas talking to other people." (U.S. News & World Report, June 20, 1994)

 

A good business: "Look for the durability of the franchise. The most important thing to me is figuring out how big a moat there is around the business. What I love, of course, is a big castle and a big moat with piranhas and crocodiles." (U.S. News eT' World Report, June 20, 1994)

 

"Compound interest is a little bit like rolling a snowball down a hill. You can start with a small snowball and if it rolls down a hill long enough (and my hill is now 53 years long - that's when I bought my first stock), and the snow is mildly sticky, you'll have a real snowball at the end." (Talk to University of Nebraska students, October 10, 1994)

 

"I spend an inordinate amount of time reading. I probably read at least six hours a day, maybe more. I spend an hour or two on the telephone, and the rest of the time I think. We have no meetings at Berkshire. I hate meetings." (Omaha World-Herald, October 11, 1994)

 

"I'm sort of a Republican on the production side, and I'm sort of a Democrat on the distribution side." (Associated Press, October 16, 1994)

 

"All these people who think that food stamps are debilitating and lead to a cycle of poverty, they're the same ones who go out and want to leave a ton of money to their kids." (Associated Press, October 16, 1994)

 

“All we want is to be in businesses that we understand, run by people whom we like, and priced attractively relative to their future prospects." (Fortune, October 31, 1994)

 

"We don't know and we don't think about when something will happen. We think about what will happen." (Fortune, October 31, 1994)

 

"You're lucky in life if you pick the right heroes. Ben was mine." (New York Society of Security Analysts, December 6, 1994)

 

About Ben Graham being generous with his ideas: Quoting Oscar Hammerstein, "A bell's not a bell until you ring it. A song is not a song until you sing it. And love in the heart isn't put there to stay. Love isn't love 'til you give it away." (New York Society of Security Analysts, December 6, 1994)

 

"The professional in almost any field achieves a result which is significantly above what the layman in aggregate achieves. It's not true in money management." (New York Society of Security Analysts, December 6, 1994)

 

The basic ideas of investing are to look at stocks as businesses, use market fluctuations to your advantage and seek a margin of safety. "That's what Ben Graham taught us ...A hundred years from now they will still be the cornerstones of investing." (New York Society of Security Analysts, December 6, 1994)

 

"We just try to buy businesses with good to superb underlying economics, run by honest and able people and buy them at sensible prices. That's all I'm trying to do. When I see a seven-footer, I think, `Is the guy coordinated, can I keep him in school and all those things. And then some guy comes up to me and says, `I'm 5-6, but you ought to see me handle the ball.' " Says Buffett: "I'm not interested." (New York Society of Security Analysts, December 6, 1994)

 

On being named pitchman for economic development in Nebraska: "Easiest job I ever had." (Omaha World-Herald, January 11, 1995)

 

"The best time to sell a stock is never." (USA Today, February 17, 1995)

 

"When you find a really good business run by first-class people, chances are a price that looks high isn't high." (London Independent, February 19, 1995)

 

"I'd be a bum on the street with a tin cup if the market were efficient." (Fortune, April 3, 1995)

 

"Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%." (1994 Annual Report)

 

"Fear is the foe of the faddist, but the friend of the fundamentalist." (1994 Annual Report)

 

"It's far better to own a significant portion of the Hope diamond than 100% of a rhinestone." (1994 Annual Report)

 

Quoting Wayne Gretzky, "Go to where the puck is going to be, not where it is." (1994 Annual Report)

 

"We try to price, rather than time, purchases. In our view, it's folly to forego buying shares in an outstanding business whose long-term future is predictable, because of short-term worries about an economy or a stock market that we know to be unpredictable. Why scrap an informal decision because of an uninformed guess?" (1994 Annual Report)

 

"If I can't make money in a $5 trillion market, it may be a little bit of wishful thinking to think that all I have to do is get a few thousand miles away and I'll start showing my stuff." (widely quoted)

 

"You don't have to make money back the same way you lost it." (Annual Meeting in 1995)

 

"We believe in managers knowing money costs money." (Annual Meeting in 1995)

 

"A stock doesn't know who owns it. You may have all of these feelings and emotions as the stock goes up or down, but the stock doesn't give a damn." (Annual Meeting in 1995)

 

"We try to find businesses with wide and long moats around them protecting a castle with an honest lord of the castle.. .all moats are subject to attack in a capitalistic society." (Annual Meeting in 1995)

 

"We like stocks that generate high returns on invested capital where there is a strong likelihood that it will continue to do so. For example, the last time we bought Coca-Cola, it was selling at about 23 times earnings. Using our purchase price and today's earnings, that makes it about five times earnings. It's really the interaction of capital employed, the return on that capital, and future capital generated versus the purchase price today." (Annual Meeting in 1995)

 

"There are certain kinds of businesses where you have to be smart once and the kind where you have to stay smart every day to defend it. Retailing is one of them. If you find a retailing concept that catches on, you have to defend it every day." (Annual Meeting in 1995)

 

Advice to managers: "Think like an owner and give us the bad news early." (Annual Meeting in 1995)

 

"I have no use whatsoever for projections or forecasts. They create an illusion of apparent precision. The more meticulous they are, the more concerned you should be. We never look at projections, but we care very much about, and look very deeply at, track records. If a company has a lousy track record, but a very bright future, we will miss the opportunity." (Annual Meeting in 1995)

 

First thing Buffett thinks about when buying a business: "Can I understand it?" (Annual Meeting in 1995)

 

"If the accounting confuses you, don't do it." (Annual Meeting in 1995)

 

"I look for what's permanent, and what is not." (Annual Meeting in 1995) [Author's note: see there!]

 

Coca-Cola: "It's not a bad measuring stick against buying the things. I don't have any plans to buy more right now, but I wouldn't rule it out. And when I consider buying another business, I'll say, `Why would I rather have this than Coca-Cola?' " (Annual Meeting in 1995)

 

"If you have to choose between a terrific management and a terrific business, choose the terrific business." (Annual Meeting in 1995)

 

Management: "If the company cannot be expected to stand on its own two feet for years after the ink is dry, we would not be interested." (Annual Meeting in 1995)

 

"It's not that I want money. It's the fun of making it and watching it grow." (Time, August 21, 1995)

 

Selling a familiar stock is "like dumping your wife when she gets old." (Business Week, August 21, 1995)

 

"Chains of habit are too light to be felt until they are too heavy to be broken." (PBS TV program produced by the University of North Carolina, Center for Public Television, 1995)

 

On waiting until the last minute to decide whether to take stock, cash or a combination in connection with the Disney/Cap Cities merger: "I never swing at a ball while it's still in the pitcher's glove." (Fortune, March 4, 1996)

 

"In the early years, we needed only good ideas, but now we need good big ideas." (1995 Annual Report)

 

A man with an ailing horse: "Visiting the vet, he said: ` Can you help me? Sometimes my horse walks just fine and sometimes he limps.' The vet's reply was pointed: `No problem---when he's walking fine, sell him.' In the world of acquisitions, that horse would be sold as Secretariat." (1995 Annual Report)

 

"We do have a few advantages, perhaps the greatest being that we don't have a strategic plan." (1995 Annual Report)

 

"We avoid the attitude of the alumnus whose message to the football coach is, `I'm 100% with you---win or tie.' " (1995 Annual Report)

 

A question folks at Berkshire always should ask: "And then what?" (Annual Meeting in 1996)

 

"There is no formula to figure (intrinsic value) out. You have to know the business." (Annual Meeting in 1996)

 

"If you find three wonderful businesses in your life, you'll get very rich." (Annual Meeting in 1996)

 

"We like businesses which are fundamental, simple and where the rate of change is not very fast." (Annual Meeting in 1996)

 

"If the business and the manager are right, you should probably forget the quote." (Annual Meeting in 1996)

 

"The definition of a great company is one that will be great for 25 or 30 years." (Annual Meeting in 1996)

 

"We do not view Berkshire shareholders as faceless members of an ever-shifting crowd. But rather as co-venturers who have entrusted their funds to us for what may well turn out to be the remainder of their lives." (Berkshire's Owner's Manual, June, 1996)

 

"Overall, Berkshire and its long-term shareholders benefit from a sinking stock market much as a regular purchaser of food benefits from declining food prices. So when the market plummets---as it will from time to time---neither panic nor mourn. It's good for Berkshire." (Berkshire's Owner's Manual, June, 1996)

 

An added principal: "To the extent possible, we would like each Berkshire shareholder to record a gain or loss in market value during his period of ownership that is proportional to the gain or loss in per-share intrinsic value recorded by the company during the holding period. For this to come about, the relationship between the intrinsic value and the market price of a Berkshire share would need to remain constant, and by our preferences at 1-to-1. As that implies, we would rather see Berkshire's stock price at a fair level than a high level. Obviously, Charlie and I can't control Berkshire's price. But by our policies and communications, we can encourage informed, rational behavior by owners that, in turn, will tend to produce a stock price that is also rational. Our it's-as-bad-to-be-overvalued-as-to-be-undervalued approach may disappoint some shareholders, particularly those poised to sell. We believe, however, that it affords Berkshire the best prospect of attracting long-term investors who seek to profit from the progress of the company rather than from the investment mistakes of others." (Berkshire's Owner's Manual, June, 1996)

 

"You can gain some insight into the difference between book value and intrinsic value by looking at one form of investment, a college education. Think of the education's cost as its `book value.' If the cost is to be accurate, it should include the earnings that were foregone by the student because he chose college rather than a job. For this exercise, we will ignore the important non-economic benefits of an education and focus steadily on its economic value. First, we must estimate the earnings that the graduate will receive over his lifetime and subtract from that figure an estimate of what he would have earned had he lacked his education. That gives us an excess earnings figure, which must then be discounted, at an appropriate interest rate, back to graduation day. The dollar result equals the intrinsic economic value of the education. "Some graduates will find that the book value of their education exceeds its intrinsic value, which means that whoever paid for the education didn't get his money's worth. In other cases, the intrinsic value of an education will far exceed its book value, a result that proves capital was wisely deployed. In all cases what is clear is that book value is meaningless as an indicator of intrinsic value." (Berkshire's Owner's Manual, June, 1996)

 

"That which is not worth doing is not worth doing well." (widely quoted)

 

"The much maligned idle-rich have received a bad rap: they have maintained their wealth while many of the energetic rich---aggressive real estate operators, corporate acquirers, oil drillers etc.---have their fortunes disappear." (widely quoted)

 

"It's the big, dumb acquisitions that are going to cost shareholders far, far more than all other things." (October 27, 1996 at Yeshiva University's Benjamin N. Cardozo School of Law)

 

"There is no question the leeway I have to report earnings as CEO of Berkshire is enormous. I don't know how to quantify it precisely, and some of it would catch up with you later on, in terms of insurance reserves, for example. In an insurance company, the long-tail business in particular, you can paint any picture you want, for a period that probably encompasses enough time to either buy out the public or to effect a major public offering." (Conversations from the Warren Buffett Symposium October 27, 1996 at Yeshiva University's Benjamin N. Cardozo School of Law)

 

"With enough inside information and a million dollars, you can go broke in a year." (widely quoted)

 

Buffett to Katharine Graham about the tough days in the 1970s at the Post: "When you're down for one day it doesn't change anything. If you're down for a year, you've lost the whole enterprise. Where in between do the lines cross?" What he was watching for was that line crossing point. Looking back, he admitted, "You didn't come near that point where you were in serious danger of losing the company, but it's like looking for a cure for cancer; you either find the cure or you die in six months. And if you find one in the fourth month, you say there was nothing to it." (Personal History, Katharine Graham, p. 552)

 

"I would not want you to panic and sell your Berkshire stock upon hearing that some large catastrophe had cost us a significant amount. If you would tend to react that way, you should not own Berkshire shares now, just as you should entirely avoid owning stocks if a crashing market would lead you to panic and sell." (1996 Annual Report)

 

Taxes: "In 1961, President Kennedy said that we should ask not what our country can do for us, but rather what we can do for our country. Last year we decided to give this suggestion a try---and who says it never hurts to ask? We were told to mail $860 million in income taxes to the U.S. Treasury. "Here's a little perspective on that figure: If an equal amount had been paid by only 2,000 other taxpayers, the government would have had a balanced budget in 1996 without needing a dime of taxes---income or Social Security or what have you---from any other American. Berkshire shareholders can truly say, `I gave at the office.' Charlie and I believe that large tax payments are entirely fitting. The contributions we thus make to society's well-being is at most only proportional to its contribution to ours. Berkshire prospers in America as it would nowhere else." (1996 Annual Report)

 

"Inactivity [in investing] strikes us as intelligent behavior." (1996 Annual Report)

 

"If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes." (1996 Annual Report)

 

"I would rather be certain of a good result than hopeful of a great one." (1996 Annual Report)

 

In comparison to 1% fees of most mutual funds: "We are here to make money with you, not off you." (1996 Annual Report)

 

"In the securities business, whatever can be sold will be sold." (1996 Annual Report)

 

"To invest successfully, you need not understand beta, effcient markets, modern porfolio theory, option pricing or emerging markets. You may, in fact, be better off knowing nothing of these. That, of course, is not the prevailing view at most business schools, whose finance curriculum tends to be dominated by such subjects. In our view, though, investment students need only two well-taught courses---How to Value a Business, and How to Think About Market Prices." (1996 Annual Report)

 

"If you were a jerk before, you'll be a bigger jerk with a billion dollars." (Forbes, April 21, 1997)

 

"I like guys who forget that they sold the business to me and run the show like proprietors. When I marry the daughter, she continues to live with her parents." (Warren Buffett Speaks, Janet Lowe, 1997, p. 80)

 

"I used to be too price-conscious. We used to have prayer meetings before we'd raise the bid an eighth and that was a mistake." (Annual Meeting in 1997)

 

"The single biggest recurring mistake I've made has been my reluctance to pay up for outstanding businesses." (Annual Meeting in 1997)

 

"I've got 99% of my money in Berkshire, but it was bought at a different price." (Annual Meeting in 1997)

 

"We like the idea of having it all in Berkshire, but we don't recommend it." (Annual Meeting in 1997)

 

"It's our job to focus on what we know and that makes a difference." (Annual Meeting in 1997)

 

"Money management is one field where you can get something for nothing. Money managers in aggregate have gotten something for nothing---stockholders' money---and the investors have paid for it." (Annual Meeting in 1997)

 

"Do something you enjoy, not to get money so you can do something you like later. If we were in this only for the money, we would have quit years ago." (Annual Meeting in 1997)

 

"Investment is about putting out money today to get more money back later on from the asset---and not about selling it to somebody else." (Annual Meeting in 1997)

 

"Regarding learning from your mistakes, the best thing to do is to learn from the other guys' mistakes. As Patton used to say, `It's an honor to die for your country, but make sure the other guy gets the honor.' Our approach is really to try and learn vicariously." (Annual Meeting in 1997)

 

"Our job really is to focus on things that we can know that make a difference. If something can't make a difference or if we can't know it, then we write it off." (Annual Meeting 1997)

 

"Price is what you pay; value is what you get." (widely quoted)

 

"Financial success is not a matter of genius. It's a matter of having the right habits." (Omaha World-Herald, November 12, 1997)

 

Credit cards are a bad idea unless people pay the full balance each month to avoid interest. "Nobody's ever gotten rich paying 18 to 21% on their money." (Omaha World-Herald, November 12, 1997)

 

Acquisitions often are described as " buyer buys seller." Buffett says what's actually happening is: "buyer sells part of itself to acquire seller." (The Essays of Warren Buffett: Lessons for Corporate America, Lawrence A. Cunningham, Cardozo Law Review, 1997)

 

"Act like owners." Advice to Dow Jones & Co. dissident shareholders. (Fortune, March 2, 1998)

 

"For anyone deploying capital, nothing recedes like success." (1997 Annual Report)

 

"At our present size, any performance superiority we achieved will be minor." (1997 Annual Report)

 

"Smile when you read a headline that says `investors lose as market falls.' Edit in your mind to 'Disinvestors lose as market falls---but investors gain.' Though writers often forget this truism, there is a buyer for every seller and what hurts one necessarily helps the other. (As they say in golf matches: `every putt makes someone happy.')" (1997 Annual Report)

 

"Catastrophe bonds.. .may well live up to their name." (1997 Annual Report)

 

Options: "Their reported costs (but not their true ones) will rise after they are bought by Berkshire if the acquiree has been granting options as part of its compensation packages. In these cases, `earnings' of the acquiree have been overstated because they have followed the standard---but, in our view, dead wrong---accounting practice of ignoring the cost to a business of issuing options. When Berkshire acquires an option-issuing company, we promptly substitute a cash compensation plan having an economic value equivalent to that of the previous option plan. The acquiree's true compensation cost is thereby brought out of the closet and charged, as it should be, against earnings." (1997 Annual Report)

 

"I paid my first tax at 13 years old and I'm not that bothered---I'd rather be a big taxpayer than need government help." (Annual Meeting in 1998)

 

"It's much more fun to have a company that's largely owned by individuals than institutions. Neither Charlie nor I are working for the money. [Our success as managers] translates into changes in people's lives not some institutional manager's performance figures." (Annual Meeting in 1998)

 

"We will wait until we find something we like. We will love it when we can swing in a big way. That's our style." (Annual Meeting in 1998)

 

"An occasional dry stretch in new buying? This is no great tragedy in an investing lifetime." (Annual Meeting in 1998)

 

"I tap dance to work, and when I get there I think I'm supposed to lie on my back and paint the ceiling." (Fortune, July 20, 1998)

 

"If you look at the history of markets, you see everything under the sun." (Annual Meeting in 1998)

 

"We centralize money. Everything else is decentralized." (Annual Meeting in 1998)

 

"We try to think about things that are both important and knowable. There are important things that are not knowable.. .And there are things knowable but not important---and we don't want to clutter up our minds with those." (Annual Meeting in 1998)

 

"I really don't know what Berkshire is selling for today. It just doesn't make any difference. I can't tell you what it was selling on May 4th, 1983 or May 4th, 1986. And I don't care what it sells for on May 4, 1998. I do care what it sells for 10 years from now. That's what counts. And that's where all our focus is." (Annual Meeting in 1998)

 

On planning ahead: "It wasn't raining when Noah built the ark." (After Berkshire announced it would acquire General Re, in June 1998)

 

"In most acquisitions, it's better to be the target than the acquirer. The acquirer pays for the fact that he gets to haul back to his cave the carcass of the conquered animal." (Fortune, July 20, 1998)

 

His beef with EBITDA (earnings before interest, taxes, depreciation and amortization): "Why not report earnings before wages? Why not report earnings before rent? In fact, why not report earnings before all expenses? That's called sales." (Berkshire's special meeting,

September 16, 1998)

 

"We're risk adverse, not volatility adverse." (Berkshire's special meeting, September 16, 1998)

 

"I was in no position to offend anyone." On taking no role in 1992 presidential politics when he was involved in salvaging Salomon. (Omaha World-Herald, December 13, 1998)

 

The job of government, it seems to me, is to promote trade that will raise the standard of living of the country and at the same time have a safety net for those who are dislocated ...You need a policy that takes care of people who lose jobs through no fault of their own." (Omaha World-Herald, December 13, 1998)

 

"After you graduate, take a job you like, not one you think will look good on your resume. Take one that you would take if you were independently wealthy. Money isn't everything. Liking the people you work with is." (Miami Herald, December 27, 1998, quoting a talk at the University of Florida)

 

"I buy businesses, not stocks.. .businesses I would be willing to own forever. For a good diversified portfolio, you don't need to own pieces of a large number of businesses. If you can identify six good ones, that should be enough. If you go into a seventh, you may be stretching too far." (Miami Herald, December 27, 1998, quoting a talk at the University of Florida)

 

Macroeconomics: "If I were at a dinner with Alan Greenspan on one side of me and Robert Rubin on the other, what they said would mean nothing to me." (Miami Herald, December 27, 1998, quoting a talk at the University of Florida)

 

Low expectations is what you want. "I mean I've never told anybody to buy Berkshire stock. And if I were to give advice to somebody about how to have a marriage that would last and they could only seek one quality in their spouse, now, if the only thing you're interested in is having the marriage last .... then you want low expectations." (Interview on `Nightline, "March 2, 1999)

 

"You should understand just what an average gain of 15% over the next five years implies: It means we will need to increase net worth by $58 billion. Earning this daunting 15% will require us to come up with big ideas: Popcorn stands just won't do. Today's markets are not friendly to our search for `elephants,' but you can be sure that we will stay focused on the hunt." (1998 Annual Report)

 

"A majority of our shares are held by investors who expect to die still holding them. We can therefore ask our CEO's to manage for maximum long-term growth, rather than for next quarter's earnings." (1998 Annual Report)

 

"Money managers purposely work at manipulating numbers and deceiving investors. And, as Michael Kinsley has said about Washington: "The scandal isn't in what's done that's illegal but rather in what's legal." (1998 Annual Report)

 

"I like a company I can understand, management that I like and trust and a price that is sensible. But with the Dow near 10,000 points, I will have trouble finding No. 3." (San Antonio ExpressNews, March 20, 1999)

 

"Capitalism is brutal. We could all go count the restaurants for the next three miles, and in five years, many of them will not be there with the same names. There are no prizes if you don't run them right. That's why I buy good businesses to begin with." (San Antonio Express-News, March 20, 1999)

 

"I don't want a boat or 10 cars. I can drive only one car at a time. I might as well buy an auto dealership and say they're all mine. I don't want a 300-room house either. After awhile, the possessions possess you." (San Antonio Express-News, March 20, 1999)

 

"When we can't find things to invest in, the money piles up. When we can find something, we pile in." (Annual Meeting in 1999)

 

"Stocks are not items that wiggle around in the paper and have charts attached to them." (Annual Meeting in 1999)

 

"Essentially, you're being a reporter. It's very much like journalism. If you ask enough questions.. .It's an investigative process---a journalistic process. And in the end, you want to write the story." (Annual Meeting in 1999)

 

"There's a lot of difference between making money and spotting a wonderful industry." (Annual Meeting in 1999)

 

"Why do smart people do dumb things that are against their self interest? Our success has probably been driven mostly by avoiding mistakes." (Annual Meeting in 1999)

 

"I read the Financial Times every day, but if there is something in their headline, `What I think the world will look like next year' by anybody prominent in the world of economics, I don't read the article. The time spent doing that I could spend looking at businesses. I'm not interested in soothsaying." (Financial Times, May 17, 1999)

 

"You tell me who somebody's heroes are, and I will tell you how they will turn out. If you get the right heroes, it gets you through a tremendous amount." (Financial Times, May 17, 1999)

 

"I was lucky to be wired the way I am ...I happen to fit very well into a big market economy, where allocation of capital is an important and well-paid function ...If the money was in high-jumping, I couldn't be making any money ....If the money was in spelling, I probably wouldn't be making any money. I was lucky. I applied myself to it but it has been a lot of fun, so why shouldn't I? It doesn't make me superior to anybody who is leading a boy scout troop in Omaha in terms of helping the community. I was just in the right place at the right time." (Financial Times, May 17, 1999)

 

"I'm comfortable with myself. I can afford it. I've never been tested. Who knows how I would behave if I had a kid who needed an operation next week and I didn't have any money?" (Financial Times, May 17, 1999)

 

On being a good investor: "I was born at the right time and place, where the ability to allocate capital really counts. I'm adapted to this society. I won the ovarian lottery. I got the ball that said, `capital allocator---United States.' " (Business Week, July 5, 1999)

 

"Success in investing doesn't correlate with I.Q. once you're above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing." (Business Week, July 5, 1999)

 

On identifying good companies: "The best thing that happens to us is when a great company gets into temporary trouble. ..We want to buy them when they're on the operating table." (Business Week, July 5, 1999)

 

On the size of his stock portfolio: "If I was running $1 million today, or $10 million for that matter, I'd be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rate of return I've ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It's a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $ I million. No, I know I could. I guarantee that." (Business Week, July 5, 1999)

 

"Up until a few years ago, we sold things to buy more because I ran out of money. I had more ideas than money. Now I make money than ideas." (Business Week, July 5, 1999)

 

On holding cash: "Today we have $15 billion in cash. Do I like getting 5% on it? No. But I like the $15 billion, and I don't want to put it in something that's not going to give it back and then some. The nature of markets is that at times they offer extraordinary values and at other times you have to have the discipline to wait." (Business Week, July 5, 1999)

 

"If you think about it [i.e., the markets], you get these huge swings in valuations. It's the ideal business arrangement, as long as you don't go crazy. The 1970s were unbelievable. The world wasn't going to end, but businesses were being given away. Human nature has not changed. People will always behave in a manic-depressive way over time. They will offer great values to you." (Business Week, July 5, 1999)

 

On the Internet's impact on business: "The Internet as a phenomenon is just huge. That much I understand. I just don't know how to make money at it ...I don't try to profit from the Internet. But I do want to understand the damage it can do to an established business. Our approach is very much profiting from lack of change rather than from change. With Wrigley chewing gum, it's the lack of change that appeals to me. I don't think it is going to be hurt by the Internet. That's the kind of business I like." (Business Week, July 5, 1999)

 

On Internet stock valuations: "There will be enormous amounts of disappointment. The numbers of people buying these stocks to hold them are very few. I think 98% of them are being bought by people because they are going up. If these stocks stop going up, they'll get out. Very few of these companies will be big winners in the long run. It's the nature of capitalism not to get a lot of winners. You get a few." (Business Week, July 5, 1999)

 

"With Coke I can come up with a very rational figure for the cash it will generate in the future. But with the top 10 Internet companies, how much cash will they produce over the next 25 years? If you say you don't know then you don't know what it is worth and you are speculating, not investing. All I know is that I don't know, and if I don't know, I don't invest." (Business Week, July 5, 1999)

 

On technology stocks: "How do you beat Bobby Fischer? You play him at any game but chess. I try to stay in games where I have an edge, and I never will in technology investing." (Business Week, July 5, 1999)

 

On macro-economic forecasting: "I don't read economic forecasts. I don't read the funny papers." (Business Week, July 5, 1999)

 

On PaineWebber analyst Alice Schroeder's research showing that Berkshire Hathaway is selling at a sizable discount: "I think she did a very thorough job. It seems to me she varied from the standard approach of securities analysts. But I don't comment on the value. I don't want anybody to come into Berkshire based on what I'm saying about the value of the stock. Our goal is to have the stock sell as close to the intrinsic value as possible, so that people come in and go out on the same basis." (Business Week, July 5, 1999)

 

On daytraders and speculators: "We try to communicate in a way that turns people off who have a crazy approach to stocks. It matters as much who you repel as who you attract. If we were sizably owned by daytraders, we'd have crazy valuations in no time---and in both directions." (Business Week, July 5, 1999)

 

On Coca-Cola: "I have a very strong feeling that Coca-Cola will dominate a much larger soft drink business 10 years from now than today. But in terms of the short run, I have no idea what will happen." (Business Week, July 5, 1999)

 

On past mistakes: "My biggest lost opportunity was probably Freddie Mac. We owned a savings and loan, and that entitled us to buy 1% of Freddie Mac stock when it first came out. We should have bought 100 S&Ls and loaded up on Freddie Mac. What was I doing? I was sucking my thumb." (Business Week, July 5, 1999)

 

"The biggest cause of that kind of mistake [here, failing to buy more Citicorp in 1991] is that I stop buying when the stock starts moving up. I got so enamored of how cheap it was when I started buying that I stopped. I have often folded my tent. I believe in loading up on these things. There wasn't anyone who thought Citibank was going to disappear. And there wasn't anyone who thought it wasn't cheap at $9 a share." (Business Week, July 5, 1999)

 

"We've lost very little on errors of commission. The errors of omission are the big ones." (Business Week, July 5, 1999)

 

"I close my eyes and think about what a company's going to look like in ten years before I invest." (Disney's Michael Eisner quoting Buffett. Fortune, September 6, 1999)

 

"Now, to get some historical perspective, let's look back at the 34 years before this one---and here we are going to see an almost Biblical kind of symmetry, in the sense of lean years and fat years to observe what happened in the stock market. Take, to begin with, the first 17 years of the period, from the end of 1964 through 1981. Here's what took place in that interval:

Dow Jones Industrial Average

Dec. 31, 1964: 874.12

Dec. 31, 1981: 875.00

Now I'm known as a long-term investor and a patient guy, but that is not my idea of a big move." (Fortune, November 22, 1999)

 

"Every time the risk-free rate moves by one basis point---by 0.01%---the value of every investment in the country changes. People can see this easily in the case of bonds, whose value is normally affected only by interest rates. In the case of equities or real estate or farms or whatever, other very important variables are almost always at work, and that means the effect of interest rate changes is usually obscured. Nonetheless, the effect---like the invisible pull of gravity---is constantly there." (Fortune, November 22, 1999)

 

"The absolute most that the owners of a business, in aggregate, can get out of it in the end---between now and Judgment Day---is what that business earns over time." (Fortune, November 22, 1999)

 

"Well I thought it would be instructive to go back and look at a couple of industries that transformed this country much earlier in this century: automobiles and aviation. Take automobiles first: I have here one page, out of 70 in total, of car and truck manufacturers that have operated in this country. At one time, there was a Berkshire car and an Omaha car. Naturally I noticed those. But there was also a telephone book of others. All told, there appear to have been at least 2,000 car makes, in an industry that had an incredible impact on people's lives. If you had foreseen in the early days of cars how this industry would develop, you would have said, `Here is the road to riches.' So what did we progress to by the 1990s? After corporate carnage that never let up, we came down to three U.S. car companies themselves no lollapaloozas for investors. So, here is an industry that had an enormous impact on America---and also an enormous impact, though not the anticipated one, on investors." (Fortune, November 22, 1999)

 

"Move on to failures of airlines. Here's a list of 129 airlines that in the past 20 years filed for bankruptcy. Continental was smart enough to make that list twice. As of 1992, in fact---though the picture would have improved since then---the money that had been made since the dawn of aviation by all of this country's airline companies was zero. Absolutely zero. Sizing all this up, I like to think that if I'd been at Kitty Hawk in 1903 when Orville Wright took off, I would have been farsighted enough, and public-spirited enough---I owed this to future capitalists---to shoot him down. I mean, Karl Marx couldn't have done as much damage to capitalists as Orville did." (Fortune, November 22, 1999)

 

"The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors." (Fortune, November 22, 1999)

 

"I focus on the absence of change. I don't think the Internet is going to change how people chew gum." (Fortune, December 20, 1999)

 

"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is." (Fortune, December 20, 1999)

 

"I never met a man who could predict the market." (widely quoted)

 

On buying companies: "I look at what their long-term competitive advantage is and that's something that's enduring. I have to understand what they sell, why people buy it, why people might buy something else." (St. Petersburg Times, December 15, 1999)

 

About not talking about Berkshire's problems in 1999: "You don't talk about Father on Mother's Day, and today, GEICO is Mother's Day." (at an appearance in Lakeland Florida to open a new GEICO call center, St Petersbug Times, December 15, 1999)

 

"Once again, I would like to make some comments about accounting, in this case about its application to acquisitions. This is currently a very contentous topic and, before the dust settles, Congress may even intervene (a truly terrible idea)." (1999 Annual Report)

 

On buying companies: "We like to think that we're the Metropolitan Art Museum of business." (Annual Meeting in 2000)

 

"We buy into success stories." (Annual Meeting in 2000)

 

"A casino is a much more exciting place than a church, but the by products are much worse.” (Press conference April 30, 2000)

 

"it would be a nightmare if there was a speculative surge in Berkshire. Then you'd get all kinds of people coming in, and if the stock went up to $200,000, I would say to Charlie, `It's all yours.' " (Press conference April 30, 2000)

 

How to think about investing: "The first investment primer was written by Aesop in 600 B.C. He said, A bird in the hand is worth two in the bush.' Aesop forgot to say when you get the two in the bush and what interest rates are; investing is simply figuring out your cash outlay (the bird in the hand) and comparing it to how many birds are in the bush when you get them." (Annual meeting in 2000)

 

The impact of technology on the Internet: "For society, the Internet is wonderful, but for capitalists, it will be a net negative. It will increase efficiency, but lots of things increase efficiency without increasing profits. It is way more likely to make American business less profitable than more profitable." (Annual meeting in 2000

 

I can give you an argument, but I can’t give you understanding” (Annual Meeting in 2000)     [pg1053-1089]