Essays Of Warren Buffett Quotes

A horse that can count to ten is a remarkable horse—not a remarkable mathematician.

calling someone who trades actively in the market an investor “is like calling someone who repeatedly engages in one-night stands a romantic.

So smile when you read a headline that says “Investors lose as market falls.” Edit it 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.”)

When a person with money meets a person with experience, the one with experience ends up with the money and the one with money leaves with experience.

Having firstrate people on the team is more important than designing hierarchies and clarifying who reports to whom

I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful

(Thomas J. Watson Sr. of IBM followed the same rule: “I’m no genius,” he said. “I’m smart in spots—but I stay around those spots.”)

as happens in Wall Street all too often, what the wise do in the beginning, fools do in the end.

It is better to be approximately right than precisely wrong.

If you can't tell whose side someone is on, they are not on yours.

ABCs of business decay, which are arrogance, bureaucracy and complacency.

It is madness to risk losing what you need in pursuing what you simply desire.

If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes.

We are suspicious of those CEOs who regularly claim they do know the future—and we become downright incredulous if they consistently reach their declared targets. Managers that always promise to “make the numbers” will at some point be tempted to make up the numbers.

What counts for most people in investing is not how much they know, but rather how realistically they define what they don't know.

For investors as a whole, returns decrease as motion increases.

For Buffett, managers are stewards of shareholder capital. The best managers think like owners in making business decisions.

A good business is not always a good purchase - although it's a good place to look for one.

thought then that decent, intelligent, and experienced managers would automatically make rational business decisions. But I learned over time that isn’t so. Instead, rationality frequently wilts when the institutional imperative comes into play. For example: (1) As if governed by Newton’s First Law of Motion, an institution will resist any change in its current direction; (2) Just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds; (3) Any business craving of the leader, however foolish, will be quickly supported by detailed rate-of-return and strategic studies prepared by his troops; and (4) The behavior of peer companies, whether they are expanding, acquiring, setting executive compensation or whatever, will be mindlessly imitated.

this holding has proved extraordinarily profitable thanks to a move by your Chairman that combined luck and skill—110% luck, the balance skill.

The requisites for board membership should be business savvy, interest in the job, and owner-orientation.

I would rather be certain of a good result than hopeful of a great one.

A small chance of distress or disgrace cannot, in our view, be offset by a large chance of extra returns.

Essays of Warren Buffett: Lessons for Corporate America. “Growth

Loss of focus is what most worries Charlie and me when we contemplate investing in businesses that in general look outstanding. All too often, we’ve seen value stagnate in the presence of hubris or of boredom that caused the attention of managers to wander.

You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very

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

say, a 2:1 ratio than it is to have far greater coverage provided by a single utility. A catastrophic event can render a single utility insolvent—witness what

If the widget company consistently earned a superior return on capital throughout the period, or if capital employed only doubled during the CEO’s reign, the praise for him may be well deserved. But if return on capital was lackluster and capital employed increased in pace with earnings, applause should be withheld. A savings account in which interest was reinvested would achieve the same year-by-year increase in earnings—and, at only 8% interest, would quadruple its annual earnings in 18 years. The power of this simple math is often ignored by companies to the detriment of their shareholders. Many corporate compensation plans reward managers handsomely for earnings increases produced solely, or in large part, by retained earnings—i.e., earnings withheld from owners. For example, ten-year, fixed-price stock options are granted routinely, often by companies whose dividends are only a small percentage of earnings. An example will illustrate the inequities possible under such circumstances. Let’s suppose that you had a $100,000 savings account earning 8% interest and “managed” by a trustee who could decide each year what portion of the interest you were to be paid in cash. Interest not paid out would be “retained earnings” added to the savings account to compound. And let’s suppose that your trustee, in his superior wisdom, set the “pay-out ratio” at one-quarter of the annual earnings.

Financial staying power requires a company to maintain three strengths under all circumstances: (1) a large and reliable stream of earnings; (2) massive liquid assets; and (3) no significant near-term cash requirements. Ignoring that last necessity is what usually leads companies to experience unexpected problems.

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?

The year 2015 marks the fiftieth anniversary of Berkshire Hathaway under Warren Buffett's leadership, a milestone worth commemorating. The tenure sets a record

Cash, though, is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent.

Loss of focus is what most worries Charlie and me when we contemplate investing in businesses that in general look outstanding.

[I]magine that a 25-year-old first-year MBA student is considering merging his future economic interests with those of a 25-year-old day laborer. The MBA student, a non-earner, would find that a “share-for-share” merger of his equity interest in himself with that of the day laborer would enhance his near-term earnings (in a big way!). But what could be sillier for the student than a deal of this kind?

Our goal will be to acquire either part or all of businesses that we believe we understand, that have good, sustainable underlying economics, and that are run by managers whom we like, admire and trust.

History teaches us that a crisis often causes problems to correlate in a manner undreamed of in more tranquil times.

Leaving the question of price aside, the best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return.

Managers who want to expand their domain at the expense of owners might better consider a career in government.

At Berkshire, full reporting means giving you the information that we would wish you to give to us if our positions were reversed.

I've never believed in risking what my family and friends have and need in order to pursue what they don't have and don't need.

Trumpeting EBITDA (earnings before interest, taxes, depreciation and amortization) is a particularly pernicious practice. Doing so implies that depreciation is not truly an expense, given that it is a “non-cash” charge. Imagine, if you will, that at the beginning of this year a company paid all of its employees for the next ten years of their service (in the way they would lay out cash for a fixed asset to be useful for ten years). In the following nine years, compensation would be a “non-cash” expense—a reduction of a prepaid compensation asset established this year. Would anyone care to argue that the recording of the expense in years two through ten would be simply a bookkeeping formality?

Our managers are totally in charge of their personal schedules. Second, we give each a simple mission: Just run your business as if: (1) you own 100% of it; (2) it is the only asset in the world that you and your family have or will ever have; and (3) you can't sell or merge it for at least a century.

Ironically, the rhetoric about options frequently describes them as desirable because they put managers and owners in the same financial boat. In reality, the boats are far different. No owner has ever escaped the burden of capital costs, whereas a holder of a fixed-price option bears no capital costs at all. An owner must weigh upside potential against downside risk; an option holder has no downside. In fact, the business project in which you would wish to have an option frequently is a project in which you would reject ownership.

In our book, alignment means being a partner in both directions, not just on the upside. Many “alignment” plans flunk this basic test, being artful forms of “heads I win, tails you lose.

Of Wall Street maxims the most foolish may be “You can't go broke taking a profit.

When “dumb” money acknowledges its limitations, it ceases to be dumb.

Furthermore, we do not think so-called EBITDA (earnings before interest, taxes, depreciation and amortization) is a meaningful measure of performance. Managements that dismiss the importance of depreciation - and emphasize "cash flow" or EBITDA - are apt to make faulty decisions, and you should keep that in mind as you make your own investment decisions,

Regardless of the impact upon immediately reportable earnings, we would rather buy 10% of Wonderful Business T at X per share than 100% of T at 2x per share. Most corporate managers prefer just the reverse.

David Ogilvy: “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.

The seemingly random events of Brexit, Trump, and a rise in populism and hate in our world are not haphazard or isolated at all. They are all connected to a loss in hope for a better future for large portions of the population. Underlying this loss of hope is a new economic reality where it’s not just the poor who are missing out on economic gains. Much of the middle class is also feeling squeezed. Instead of technology allowing for a fifteen-hour work week, as Keynes predicted when he penned his 1930s essay “Economic Possibilities for Our Grandchildren,” vast numbers of people are working longer, in jobs they rightly fear will soon be gone. Trapped—wondering how they will provide for their families and basic needs when the other shoe drops. At the same time, we are seeing a massive rise in inequality: in the United States, the top 5 percent of the population now holds more than two-thirds of the wealth, while the remaining 95 percent of the population fights for their share of the other third.1 Just three people—Jeff Bezos, Bill Gates, and Warren Buffett—account for more wealth than 50 percent of the population.