Berkshire Hathaway Quotes

If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But, if each of us hires people who are bigger than we are, we shall become a company of giants.

Culture, more than rule books, determines how an organization behaves.

stocks of companies selling commodity-like products should come with a warning label: “Competition may prove hazardous to human wealth.

But then it dawned on me that the opinion of someone who is always wrong has its own special utility to decision-makers.

On the Ideal Business - Buffett: “Something that costs a penny, sells for a dollar and is habit forming.

Many shall be restored that now are fallen and many shall fall that are now in honor.

If investors only had to study the past, the richest people would be librarians.

If your employees, including your CEO, wish to give to their alma maters or other institutions to which they feel a personal attachment, we believe they should use their own money, not yours.

our experience with newly-minted MBAs has not been that great. Their academic records always look terrific and the candidates always know just what to say; but too often they are short on personal commitment to the company and general business savvy. It’s difficult to teach a new dog old tricks.

After you have enough for daily life, all that matters is your health and those you love.

Our favorite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint. Peter Lynch aptly likens such behavior to cutting the flowers and watering the weeds.

Yet the industry asks for more money from investors every year. The idea is to find investments that give you money, not take it.

The right manager can have an absolutely huge impact. Find people with brains, energy and integrity,

People are trying to be smart—all I am trying to do is not to be idiotic, but it’s harder than most people think.

There is no tougher job in corporate America than running an airline: Despite the huge amounts of equity capital that have been injected into it, the industry, in aggregate, has posted a net loss since its birth after Kitty Hawk. Airline managers need brains, guts, and experience—and

Charlie’s dictum: “All I want to know is where I’m going to die so I’ll never go there.

Ben Franklin’s advice: “Keep your eyes wide open before marriage and half shut thereafter.

(Don’t ask the barber whether you need a haircut.)

Value is what a business is worth. Price is what you have to pay to get it.

One of Buffett’s annual themes is the value of learning. He noted that life properly lived is learning, learning, learning all the time. He observed that being wrong is when he learns the most.

Talking to Time Magazine a few years back, Peter Drucker got to the heart of things: “I will tell you a secret: Dealmaking beats working. Dealmaking is exciting and fun, and working is grubby. Running anything is primarily an enormous amount of grubby detail work . . . dealmaking is romantic, sexy. That’s why you have deals that make no sense.

Despite our policy of candor, we will discuss our activities in marketable securities only to the extent legally required. Good investment ideas are rare, valuable and subject to competitive appropriation just as good product or business acquisition ideas are.

We’d buy great businesses with excellent management at a fair to bargain price and leave them alone.

Munger claimed that it is because professors are so enamored by modern portfolio theory. For the man with a hammer, every problem looks like a nail.

Tom Murphy, CEO of Capital Cities/ABC and considered by Buffett to be the best business manager in the country, prays every day to be humble.

Buffett continued, saying that MPT has no utility. It is elaborate with lots of little Greek letters to make you feel you are in the big leagues. The

Munger noted that high profits on capital often rely on information inefficiencies.

Buffett pointed out that when the investment tide goes out, you will see who has been swimming naked.

Buffett gave two criteria for evaluating the performance of management: 1) How well do they run the business? and 2) How well do they treat the owners?

To finish first you have to first finish.

Alas, my “fiddle playing” will not get me to Carnegie Hall — or even to a high school recital. Berkshire, on your behalf and mine, will send the Treasury $3.3 billion for tax on its 2003 income, a sum equaling 2½% of the total income tax paid by all U.S. corporations in fiscal 2003.

There are essentially five things public corporations can do with a dollar earned: reinvest in the business, acquire other businesses or assets, pay down debt, pay dividends, and/or buy in shares. Deciding

Buffett also noted that book value is seldom meaningful in analyzing the value of a business. Book value simply records what was put into the business. The key to calculating value is determining what will come out of the business.

From this irritating reality comes The First Law of Corporate Survival for ambitious CEOs who pile on leverage and run large and unfathomable derivatives books: Modest incompetence simply won’t do; it’s mindboggling screw-ups that are required.

Charlie Munger, vice chairman of Berkshire Hathaway, is a major proponent of this idea. “You’re not entitled to take a view,” he cautions, “unless and until you can argue better against that view than the smartest guy who holds that opposite view.

Warren Buffett, the legendary investor and one of the wealthiest men in the world, has used exactly the attributes we’ve explored in this chapter—intellectual persistence, prudent thinking, and the ability to see and act on warning signs—to make billions of dollars for himself and the shareholders in his company, Berkshire Hathaway. Buffett is known for thinking carefully when those around him lose their heads. “Success in investing doesn’t correlate with IQ,” he has said. “Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.

The first $100,000 is a bitch, but you gotta do it. I don't care what you have to do—if it means walking everywhere and not eating anything that wasn't purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.” ​— ​Charlie Munger, Vice Chairman Berkshire Hathaway

students need only two well-taught courses—How to Value a Business, and How to Think About Market Prices. Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now. Over time, you will find only a few companies that meet these standards—so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines: If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value. Though it’s seldom recognized, this is the exact approach

There’s a widespread conviction, spoken and unspoken, that the road to riches is trimmed in Ivy and the reins of power held by those who’ve donned Harvard’s crimson, Yale’s blue and Princeton’s orange, not just on their chests but in their souls. No one told that to the Fortune 500. They’re the American corporations with the highest gross revenues. The list is revised yearly. As I write this paragraph in the summer of 2014, the top ten are, in order, Wal-Mart, Exxon Mobil, Chevron, Berkshire Hathaway, Apple, Phillips 66, General Motors, Ford Motor, General Electric and Valero Energy. And here’s the list, in the same order, of schools where their chief executives got their undergraduate degrees: the University of Arkansas; the University of Texas; the University of California, Davis; the University of Nebraska; Auburn; Texas A&M; the General Motors Institute (now called Kettering University); the University of Kansas; Dartmouth College and the University of Missouri–St. Louis. Just one Ivy League school shows up.

The moat represents a barrier to competition and could be low production costs, a trademark, or an advantage of scale or technology.

Every year Buffett explains that he wants Berkshire to have great long-term shareholders and that splitting the stock would only work against that.

So instead of copying, understand why they made the decisions they did. Then apply those insights to your own decisions and your own position.

good quality corporate bonds yielding 10% or better with great call protection.

In thinking about markets, it is important to remember that markets are there to serve you, not instruct you.

With imports exceeding exports, the world is doing the savings for us. China, with a much higher savings rate, will grow faster than us, and it probably needs to do so.

automatically compound. If you need cash, you can sell stock and pay capital gains tax at a lower rate than a dividend would be taxed.

Buffett noted that he likes to put a lot of money in things he feels strongly about. Diversification makes no sense for someone who knows what they are doing.

one key element of a wonderful business: the cost structure.

For his successor, Buffett emphasized that proven capital allocation abilities would be the key.

Buffett chimed in that running a budget deficit of 10% of GDP is not sustainable.

Both Buffett and Munger are betting on higher, and maybe a lot higher inflation in the years to come.

Yet he knew that stocks would be better than bonds or cash over the long run.

Warren recommended doing what turns you on. Munger agreed, saying he’d never done anything really well that he didn’t like to do.

The key to calculating value is determining what will come out of the business.

The valuation picture is very much affected by our zero-based interest rate structure. Clearly, stocks are worth far more when government bonds yield 1% than when they yield 5%.

Buffett concluded that you can learn a lot about the durability of the economics of a business by observing price behavior.

Diversification is a protection against ignorance, a confession that you do not know the businesses you own.

It is much easier to pick the relative strength of Coca-Cola than it is to pick a winner in software.

Buffett emphasized that the ability to generate cash and reinvest is critical. He noted that it is the ability to generate cash that gives Berkshire its value.

Buffett believes that real risk comes from the nature of certain kinds of businesses, by the simple economics of the business and from not knowing what you’re doing.

The idea of finding talented people to do what they do best is one of Buffett’s driving principles.

What matters most to him are micro factors, as opposed to the macro factors that so often get all the attention. He loves to know all the details of a business.

the single biggest outcome of the Internet has been little understood: buyers are the winners.

I think that one should recognize reality even when one doesn’t like it; indeed, especially when one doesn’t like it.

A line from Bobby Bare’s country song explains what too often happens with acquisitions: “I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.

with others, are likely to experience such a year.

Being able to think and invest very long term and not worry about current earnings or Wall Street analysts can be a major competitive advantage in certain businesses. Acquire

Buffett observed that they do have filters. A key one is whether they have a good idea of how the business is going to do over the next five or 10 years.

the real key is to be able to figure out what the average profitability of the business will be over the long term and how strong the business moat may be. Buffett’s

Buffett’s formula for happiness is simple: “Do what I like with people I like.” He noted that he learned early in life that his favorite employer was himself. It avoids aggravation.

With artificial intelligence, Buffett observed that more change will be coming. Almost certainly it will cause less employment in certain areas while being good for society overall.

Instead, he takes those coupons from his low-return bond and—if inclined to reinvest—looks for the highest return with safety currently available.  Good money is not thrown after bad.

Buffett chimed in that most buybacks are done at any price, which makes no sense. Very rarely do you see metrics to govern the prices paid. Buybacks above intrinsic value destroy value.

At their best, conglomerates enable the tax efficient transfer of cash from businesses that cannot use the money intelligently to those that can. Berkshire is a very rational conglomerate.

Buffett wanted to make sure that Nebraska got their sales tax. He was adamant about making sure that Berkshire paid—not more taxes than it had to, but the taxes that it was responsible for.

Warren Buffett, chairman of Berkshire Hathaway and investor of legendary repute: "Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.

At the same time, he held firm that it doesn’t serve to make decisions in anger. He quoted Berkshire board member Tom Murphy: “You can always tell a man to go to hell tomorrow if it’s such a good idea.

Buffett believed the rating agencies are good businesses: there are few competitors, they affect a large segment of the economy and they don’t require much capital (though they are still very much attackable).

He recommended realism in defining one’s circle of competence and discipline to stay within the circle. He added that it helps to insulate yourself from popular opinions. You’re better off sitting and thinking.6 Coping

In modern portfolio theory, beta is used as a measure of the volatility and, thus, the risk of an investment. However, Buffett sees the use of beta as nonsense, emphatically stating, “Volatility is no measure of risk to us.

Buffett reminded folks that to buy a stock is to buy part ownership of a business. Don’t get hung up on daily price quotes. Instead, think about business performance and what you would pay for the business, just as you would a farm.

Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Slug it out one inch at a time, day by day. At the end of the day—if you live long enough—most people get what they deserve.

As Munger put it, “Basically, we’re a hedgehog that knows one big thing. If you generate float at 3% per annum and buy businesses that earn 13% per annum with the proceeds of that float, we have figured out that’s a pretty good position to be in.

occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable. And the market aberrations produced by them will be equally unpredictable, both as to duration and degree. Therefore, we never try to anticipate the arrival or departure of either disease. Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. As

He said he doesn’t really care whether they’re buying into raw-material-intensive businesses, people-intensive businesses or capital-intensive businesses. The key is to understand a company’s costs and why it’s got a sustainable edge against its competitors.

Buffett believes that real risk comes from the nature of certain kinds of businesses, by the simple economics of the business and from not knowing what you’re doing. If you understand the economics and you know the people, then you’re not taking much risk. For

Buffett also shared some of his classic bits of wisdom about growing wealth. Spend less than what you make. Know and stay within your circle of competence. The only businesses that matter are the ones you put your money in. Keep learning over time. Don’t lose. Insist on a margin of safety.

As a value investor, your ideal situation is to find a company increasing its intrinsic value. Ideally, the company would be one with a declining stock price, thus creating an even better bargain as time unfolds. No one has employed these principles more effectively than Buffett and Munger.

The best protection against inflation, according to Buffett, is your own earning power. If you constantly increase your earning power, you’ll be sure to get your share of the economic pie. The next best thing is to own wonderful businesses, especially those that have low capital requirements.

Buffett explained that buying a business is much like buying a bond with no maturity and with a blank coupon. You must write in the coupon, and the accuracy of that coupon is the essence of intelligent investing. If you cannot guess the coupon with any accuracy, then do not invest in the business.

What Charlie finds interesting when thinking back about all this progress is how few big business decisions were involved in creating billions of dollars out of less than $40 million, fewer than one every three years. "1 think the record shows the advantage of a peculiar mind-set-not seeking action for its own sake, but instead combining extreme patience with extreme decisiveness.

Nevertheless, their dishonesty upset Buffett. They were trying to chisel him out of 12.5 cents per share. So Buffett went the other way and started buying increasingly more shares of Berkshire until he took control. He then booted out the guy who had tried to chisel him out. In 1964, Warren Buffett took control of that small New England textile firm, and it became his new base for making investments.

While reading, you may wonder, If Berkshire got out of the market, shouldn’t I do the same? or If Berkshire bought it, should I buy it too? Buffett and Munger are clear in their advice—people should learn from them and model their advice rather than copy their behavior. The main reason is this: Unless you find yourself in the enviable position that Berkshire operates in, you would do well not to copy its moves.

I do wish, however, that Ms. Olson would give me some credit for the progress I’ve already made. In 1944, I filed my first 1040, reporting my income as a thirteen-year-old newspaper carrier. The return covered three pages. After I claimed the appropriate business deductions, such as $35 for a bicycle, my tax bill was $7. I sent my check to the Treasury and it — without comment — promptly cashed it. We lived in peace.

In a fascinating digression, Buffett noted that “the fact that you are being obsoleted does not mean you should go into the successor business.” As an example, he explained that if you were a person of vision in the passenger train business in 1930, you might have seen the coming of the airplane. But the answer was not to get into the airline business, which is a terrible business. The answer was to get out of the passenger business altogether.

If you've thought that investment advisors were hired to invest, you may be bewildered by this technique. After buying a farm, would a rational owner next order his real estate agent to start selling off pieces of it whenever a neighboring property was sold at a lower price? Or would you sell your house to whatever bidder was available at 9:31 on some morning merely because at 9:30 a similar house sold for less than it would have brought on the previous day? p213

In a revealing aside, Buffett admitted that years ago he was terrified of public speaking. He got physically ill at the thought. He said he even signed up for a $100 Dale Carnegie course but cancelled the check when he got home. Later, he did a communication course in Omaha. Doing it with others in the same boat helped him to “get outside of himself.” He’s very glad he did it, noting that effective communication is under taught, and recommended that many could benefit by forcing themselves to learn public speaking at an early age.

financial markets will become divorced from reality — you can count on that. More Jimmy Lings will appear. They will look and sound authoritative. The press will hang on their every word. Bankers will fight for their business. What they are saying will recently have “worked.” Their early followers will be feeling very clever. Our suggestion: Whatever their line, never forget that 2+2 will always equal 4. And when someone tells you how old-fashioned that math is ---zip up your wallet, take a vacation and come back in a few years to buy stocks at cheap prices.

Basically, Graham breaks the art of investing down into two simple variables – price and value. Value is what a business is worth. Price is what you have to pay to get it. Given the stock market’s manic-depressive behavior, numerous occasions arise where a business’ market price is distinctly out of line with its true business value. In such instances, an investor may be able to purchase a dollar of value for just 50 cents. Note that there is no mention here of interest rates, economic forecasts, technical charts, market cycles, etc. The only issues are price and value. I should also note that Graham emphasizes a large margin of safety. The strategy is not to buy a dollar of value for 97 cents. Rather, the gap should be dramatic so as to absorb the effects of miscalculation and worse-than-average luck.

Buffett declared the best inflation hedge is a company with a wonderful product that requires little capital to grow. As a test, he invited each of us to look at our own earning ability. In inflation, your compensation can go up without any additional investment. As a business example, Buffett noted that when See’s Candy was purchased in 1971, it had the revenues of $25 million and sold 16 million pounds of candy annually with $9 million in tangible assets. Today, See’s sells $300 million of candy with $40 million of tangible assets. Berkshire needed to invest only $31 million to generate a more than 10-fold increase in revenues. In aggregate, Buffett noted that Berkshire has earned $1.5 billion in profits at See’s over the years. See’s inventory turns fast, has no receivables and has little fixed investment – a perfect inflation hedge. Buffett allowed that if you have tons of receivables and inventory, that’s a lousy business in inflation. The railroad and MidAmerican Energy both have these undesirable characteristics, but that is offset by their utility to the economy and subsequent allowable returns. Buffett rued that there simply aren’t enough “See’s Candys” to buy. Buffett added that being an investor has made him a better businessman and that being a businessman has made him a better investor.(125) Munger noted that they didn’t always know this inflation-business element, which shows how continuous learning is so important.