Gems From Warren Buffett Quotes

Over the years, a number of very smart people have learned the hard way that a long string of impressive numbers multiplied by a single zero always equals zero.

Lester Maddox, when Governor of Georgia, was criticized regarding the state’s abysmal prison system. ‘The solution’, he said, ‘is simple. All we need is a better class of prisoners.

Over the years, Charlie and I have observed many accounting-based frauds of staggering size. Few of the perpetrators have been punished; many have not even been censured. It has been far safer to steal large sums with a pen than small sums with a gun.” -1988 letter

Berkshire’s operating CEOs are masters of their crafts and run their businesses as if they were their own. My job is to stay out of their way and allocate whatever excess capital their businesses generate. It’s easy work.

Ben Graham taught me 45 years ago that in investing it is not necessary to do extraordinary things to get extraordinary results. In later life, I have been surprised to find that this statement holds true in business management as well. What a manager must do is handle the basics well and not get diverted.

I’ve reluctantly discarded the notion of my continuing to manage the portfolio after my death – abandoning my hope to give new meaning to the term ‘thinking outside the box.’ ” -2007 letter

The reaction of weak managements to weak operations is often weak accounting. (‘It’s difficult for an empty sack to stand upright.’)

After all, what are we paying the accountants for if it is not to deliver us the "truth" about our business. But the accountants' job is to record, not to evaluate. The evaluation job falls to investors and managers.

It has been far safer to steal large sums with a pen than small sums with a gun.

Bad terminology is the enemy of good thinking. When companies or investment professionals use terms such as "EBITDA" and "pro forma," they want you to unthinkingly accept concepts that are dangerously flawed.

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

One of the lessons your management has learned - and, unfortunately, sometimes re-learned - is the importance of being in businesses where tailwinds prevail rather than headwinds.

An iron law of business is that growth eventually dampens exceptional economics.” -1985

If something’s not worth doing at all, it’s not worth doing well.’)

This devastating outcome for the shareholders indicates what can happen when much brain power and energy are applied to a faulty premise. The situation is suggestive of Samuel Johnson’s horse: ‘A horse that can count to ten is a remarkable horse - not a remarkable mathematician.

Time is the friend of the wonderful business.

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.

Bull markets can obscure mathematical laws, but they cannot repeal them.

long periods of substantial undervaluation and/or overvaluation will cause the gains of the business to be inequitably distributed among various owners, with the investment result of any given owner largely depending upon how lucky, shrewd, or foolish he happens to be.

A promise is no better than the person or institution making it.

the most elusive of human goals - keeping things simple and remembering what you set out to do.

As one investor said in 2009 (regarding the effects of the Financial Crisis): ‘This is worse than divorce. I’ve lost half my net worth – and I still have my wife.

Forecasts’, said Sam Goldwyn, ‘are dangerous, particularly those about the future.

America’s Funniest Home Videos,” the TV series that began in 1990, also served as inspiration. Its entertaining content was constantly interrupted by the hosts’ annoying commentary. Here, my annoying commentary is kept to a minimum.

You learn a great deal about a person when you purchase a business from him and he then stays on to run it as an employee rather than as an owner. Before the purchase the seller knows the business intimately, whereas you start from scratch. The seller has dozens of opportunities to mislead the buyer - through omissions, ambiguities, and misdirection. After the check has changed hands, subtle (and not so subtle) changes of attitude can occur and implicit understandings can evaporate. As in the courtship-marriage sequence, disappointments are not infrequent.” -1980 letter

Accounting numbers, of course, are the language of business and as such are of enormous help to anyone evaluating the worth of a business and tracking its progress. ... Managers and owners need to remember, however, that accounting is but an aid to business thinking, never a substitute for it.

Over the years, Charlie and I have observed many accounting-based frauds of staggering size. Few of the perpetrators have been punished; many have not even been censured. It has been far safer to steal large sums with a pen than small sums with a gun.

We purchased several companies whose earnings will almost certainly decline this year from peaks they reached in 1999 or 2000. The declines make no difference to us, given that we expect all of our businesses to now and then have ups and downs. (Only in the sales presentations of investment banks do earnings move forever upward.)” -2000 letter

On synergy: “… a term widely used in business to explain an acquisition that otherwise makes no sense.

I’ve reluctantly discarded the notion of my continuing to manage the portfolio after my death – abandoning my hope to give new meaning to the term ‘thinking outside the box.

investment

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Our entire corporate overhead is less than half the size of our charitable contributions. (Charlie, however, insists that I tell you that $1.4 million of our $4.9 million overhead is attributable to our corporate jet, The Indefensible.)” -1993 letter

We possess a cadre of truly skilled managers who have an unusual commitment to their own operations and to Berkshire. Many of our CEOs are independently wealthy and work only because they love what they do. They are volunteers, not mercenaries. Because no one can offer them a job they would enjoy more, they can’t be lured away.” -2010 letter

Berkshire’s operating CEOs are masters of their crafts and run their businesses as if they were their own. My job is to stay out of their way and allocate whatever excess capital their businesses generate. It’s easy work.” -2002 letter

Ben Graham taught me 45 years ago that in investing it is not necessary to do extraordinary things to get extraordinary results. In later life, I have been surprised to find that this statement holds true in business management as well. What a manager must do is handle the basics

Berkshire is my first love and one that will never fade: At the Harvard Business School last year, a student asked me when I planned to retire and I replied, ‘About five to ten years after I die.’ ” -1991 letter   * * *

It should be no surprise to anyone that those airline employees who contractually receive above-market salaries will resist any reduction in these as long as their checks continue to clear

As we look at the major acquisitions that others made during 1982, our reaction is not envy, but relief that we were non-participants. For in many of these acquisitions, managerial intellect wilted in competition with managerial adrenaline. The thrill of the chase blinded the pursuers to the consequences of the catch. Pascal’s observation seems apt: “It has struck me that all men’s misfortunes spring from the single cause that they are unable to stay quietly in one room.

Managers with bright, but adrenaline-soaked minds scramble after foolish acquisitions...

In 1994, Coca-Cola sold about 280 billion 8-ounce servings and earned a little less than a penny on each. But pennies add up.

No matter how attractive the prospects of their business. We've never succeeded in making a good deal with a bad person.

When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact.’ Nothing has since changed my point of view on that matter. Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.

collection of 240 or so of his wittiest and most insightful thoughts (“gems”), culled from 34 years of his letters to Berkshire Hathaway shareholders.   These gems lighten spirits with their humor, enlighten minds with their wisdom, and provide an interesting view into one of America’s most successful and

Money will always flow toward opportunity, and there is an abundance of that in America. Commentators today often talk of ‘great uncertainty.’ But think back, for example, to December 6,

You do not adequately protect yourself by being half awake while others are sleeping.

To purchase or learn more, visit the website:

Managers that always promise to ‘make the numbers’ will at some point be tempted to make up the numbers.

...earnings can be as pliable as putty when a charlatan heads the company reporting them. Eventually truth will surface, but in the meantime a lot of money can change hands. Indeed, some important American fortunes have been created by the monetization of accounting mirages.

Could we really improve our shareholder group by trading some of our present clear-thinking members for impressionable new ones who, preferring paper to value, feel wealthier with nine $10 bills than with one $100 bill?

According the name "investors" to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a romantic.

If a CEO is enthused about a particularly foolish acquisition, both his internal staff and his outside advisors will come up with whatever projections are needed to justify his stance. Only in fairy tales are emperors told that they are naked.

speculation is most dangerous when it looks easiest.

An old Wall Street joke gets close to our experience: Customer: Thanks for putting me in XYZ stock at 5. I hear it’s up to 18. Broker: Yes, and that’s just the beginning. In fact, the company is doing so well now, that it’s an even better buy at 18 than it was when you made your purchase. Customer: Damn, I knew I should have waited.

Our future rates of gain will fall far short of those achieved in the past. Berkshire's capital base is now simply too large to allow us to earn truly outsized returns. If you believe otherwise, you should consider a career in sales but avoid one in mathematics (bearing in mind that there are really only three kinds of people in the world: those who can count and those who can't).

Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often, though, investors forget to examine the assumptions behind the symbols. Our advice: Beware of geeks bearing formulas.

You can be highly successful as an investor without having the slightest ability to value an option. What students should be learning is how to value a business. That’s what investing is all about.

Managers that always promise to ‘make the numbers’ will at some point be tempted to make up the numbers.” -2002 letter

on a pro forma basis: I have firm plans to "restructure" my putting stroke and therefore only count

something happened to you, think how helpful it would be for your loved ones left behind to have a copy of the key

key below

Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.

Often, much of the pressure (to execute a transaction) comes from brokers whose compensation is contingent upon consummation of a sale, regardless of its consequences for both buyer and seller.

R.C. Willey is an amazing story. Bill took over the business from his father-in-law in 1954 when sales were about $250,000. From this tiny base, Bill employed Mae West's philosophy: ‘It's not what you've got - it's what you do with what you've got.

We continue, however, to need "elephants" in order for us to use Berkshire’s flood of incoming cash. Charlie and I must therefore ignore the pursuit of mice and focus our acquisition efforts on much bigger game. Our exemplar is the older man who crashed his grocery cart into that of a much younger fellow while both were shopping. The elderly man explained apologetically that he had lost track of his wife and was preoccupied searching for her. His new acquaintance said that by coincidence his wife had also wandered off and suggested that it might be more efficient if they jointly looked for the two women. Agreeing, the older man asked his new companion what his wife looked like. ‘She’s a gorgeous blonde,’ the fellow answered, ‘with a body that would cause a bishop to go through a stained glass window, and she’s wearing tight white shorts. How about yours?’ The senior citizen wasted no words: ‘Forget her, we’ll look for yours.

Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

Government has been exceptionally able in printing money and creating promises, but is unable to print gold or create oil.

So far, most politicians in both parties have followed Charlie Brown’s advice: ‘No problem is so big that it can’t be run away from.

No matter how great the talent or effort, some things just take time: you can’t produce a baby in one month by getting nine women pregnant.

The most important thing to do when you find yourself in a hole is to stop digging.

It's only when the tide goes out that you learn who's been swimming naked.

We’ve always found a telephone call to be more productive than a half-day committee meeting.

Stocks cannot forever overperform their underlying businesses, as they have so dramatically done for some time.

harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.” -2010 letter

Our preaching was better than our performance. (We neglected the Noah principle: predicting rain doesn’t count, building arks does.)

Could we really improve our shareholder group by trading some of our present clear-thinking members for impressionable new ones who, preferring paper to value, feel wealthier with nine $10 bills than with one $100 bill?” -1983 letter

Ben Graham taught me 45 years ago that in investing it is not necessary to do extraordinary things to get extraordinary results. In later life, I have been surprised to find that this statement holds true in business management as well. What a manager must do is handle the basics well and not get diverted.” -1994 letter

Candor benefits us as managers: the CEO who misleads others in public may eventually mislead himself in private.

In large part, companies obtain the shareholder constituency that they seek and deserve. If they focus their thinking and communications on short-term results or short-term stock market consequences they will, in large part, attract shareholders who focus on the same factors

Our preaching was better than our performance. (We neglected the Noah principle: predicting rain doesn’t count, building arks does.)” -1981 letter

The five people who work here with me ... outproduce corporate groups many times their number. A compact organization lets all of us spend our time managing the business rather than managing each other.” -1982 letter   * * * “In a characteristically rash move, we have expanded World Headquarters by 252 square feet (17%)” -1982 letter

Our job is merely to identify talented managers and provide an environment in which they can do their stuff.” -1990 letter

Investors should pay more for a business that is lodged in the hands of a manager with demonstrated pro-shareholder leanings than for one in the hands of a self-interested manager marching to a different drummer.” -1984 letter

super-catastrophic’ insurance

We enjoy the process far more than the proceeds

The reaction of weak managements to weak operations is often weak accounting. (‘It’s difficult for an empty sack to stand upright.’)” -1982 letter

the accountants' job is to record, not to evaluate.

Charlie and I enjoy issuing Berkshire stock (for acquisitions) about as much as we relish prepping for a colonoscopy.” -2009 letter

It's only when the tide goes out that you learn who's been swimming naked.” -1992 letter

As one investor said in 2009 (regarding the effects of the Financial Crisis): ‘This is worse than divorce. I’ve lost half my net worth – and I still have my wife.’ ” -2010 letter

Comte’s advice - ‘the intellect should be the servant of the heart, but not its slave’ -

Our gain in net worth during the year was $613.6 million, or 48.2%. It is fitting that the visit of Halley’s Comet coincided with this percentage gain: neither will be seen again in my lifetime.” -1985 letter

Price and value can differ; price is what you give, value is what you get.

the CEO who misleads others in public may eventually mislead himself in private.” -1983 letter

You can live a full and rewarding life without ever thinking about Goodwill and its amortization. But students of investment and management should understand the nuances of the subject.” -1983 letter

It has been far safer to steal large sums with a pen than small sums with a gun.” -1988 letter

But facts do not cease to exist, either because they are unpleasant or because they are ignored.” -1981 letter

We feel noble intentions should be checked periodically against results.” -1983 letter

Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.

Managers and owners need to remember, however, that accounting is but an aid to business thinking, never a substitute for it.” -1986 letter