- 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.'
- Berkshire Hathaway 2007 Chairman's Letter
- The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities -- that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future -- will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There's a problem, though: They are dancing in a room in which the clocks have no hands.
- Berkshire Hathaway 2000 Chairman's Letter
- Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.
- Berkshire Hathaway 2004 Chairman's Letter
- Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.
- Berkshire Hathaway 2005 Chairman's Letter
- [The perfect amount of money to leave children is] enough money so that they would feel they could do anything, but not so much that they could do nothing.
- Richard I. Kirkland Jr., "Should You Leave It All to the Children?", Fortune, 29 September 1986.
- 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 rates 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 $1 million. No, I know I could. I guarantee that.
- "Homespun Wisdom from the 'Oracle of Omaha'", BusinessWeek, 5 July 1999.
- If you're in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.
- "Buffett blasts system that lets him pay less tax than secretary", Times Online, 28 June, 2007.
- You only find out who is swimming naked when the tide goes out.
- Berkshire Hathaway 2001 Chairman's Letter
- "I don't have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It's like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don't do that though. I don't use very many of those claim checks. There's nothing material I want very much. And I'm going to give virtually all of those claim checks to charity when my wife and I die."
- Lowe, Janet C.  Warren Buffett Speaks : wit and wisdom from the world's greatest investor, John Wiley & Sons, Inc., pp. 165-166 (ISBN 0-471-16996-X).
- [Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.
- Harvard, 1998
- Someone's sitting in the shade today because someone planted a tree a long time ago.
- As quoted in The Real Warren Buffett : Managing Capital, Leading People (2002) by James O'Loughlin
- Take me as an example. I happen to have a talent for allocating capital. But my ability to use that talent is completely dependent on the society I was born into. If I'd been born into a tribe of hunters, this talent of mine would be pretty worthless. I can't run very fast. I'm not particularly strong. I'd probably end up as some wild animal's dinner.
- To Barack Obama. Quoted in "The Audacity of Hope" - Page 191 - by Barack Obama
- Chains of habit are too light to be felt until they are too heavy to be broken.
- I always knew I was going to be rich. I don't think I ever doubted it for a minute.
- Can you really explain to a fish what it's like to walk on land? One day on land is worth a thousand years of talking about it, and one day running a business has exactly the same kind of value.
On Benjamin Graham:
- A story that was passed down from Ben Graham illustrates the lemminglike behavior of the crowd: "Let me tell you the story of the oil prospector who met St. Peter at the Pearly Gates. When told his occupation, St. Peter said, "Oh, I'm really sorry. You seem to meet all the tests to get into heaven. But we've got a terrible problem. See that pen over there? That's where we keep the oil prospectors waiting to get into heaven. And it's filled—we haven't got room for even one more." The oil prospector thought for a minute and said, "Would you mind if I just said four words to those folks?" "I can't see any harm in that," said St. Pete. So the old-timer cupped his hands and yelled out, "Oil discovered in hell!" Immediately, the oil prospectors wrenched the lock off the door of the pen and out they flew, flapping their wings as hard as they could for the lower regions. "You know, that's a pretty good trick," St. Pete said. "Move in. The place is yours. You've got plenty of room." The old fellow scratched his head and said, "No. If you don't mind, I think I'll go along with the rest of 'em. There may be some truth to that rumor after all."
- Price is what you pay. Value is what you get.
- For some reason, people take their cues from price action rather than from values. What doesn't work is when you start doing things that you don't understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it's going up.
- Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.
- We have tried occasionally to buy toads at bargain prices with results that have been chronicled in past reports. Clearly our kisses fell flat. We have done well with a couple of princes - but they were princes when purchased. At least our kisses didn't turn them into toads. And, finally, we have occasionally been quite successful in purchasing fractional interests in easily-identifiable princes at toad-like prices.
- 1981 Chairman's Letters to Shareholders
- Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.
- 1974 Letter to Shareholders
- Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.
- Berkshire Hathaway 1998 Annual Meeting
- If you're an investor, you're looking on what the asset is going to do, if you're a speculator, you're commonly focusing on what the price of the object is going to do, and that's not our game.
- 1997 Berkshire Hathaway Annual Meeting
- Despite three years of falling prices, which have significantly improved the attractiveness of common stocks, we still find very few that even mildly interest us. That dismal fact is testimony to the insanity of valuations reached during The Great Bubble. Unfortunately, the hangover may prove to be proportional to the binge.
- March 2003
- On acquiring bad companies for cheap prices: "In my early days as a manager I, too, dated a few toads. They were cheap dates - I've never been much of a sport - but my results matched those of acquirers who courted higher-price toads. I kissed and they croaked."
- I like to go for cinches. I like to shoot fish in a barrel. But I like to do it after the water has run out.
- October 2003 talking with Wharton MBA students
- The important thing is to keep playing, to play against weak opponents and to play for big stakes.
- November 2002 talking with students at Gaston Hall
Circle of Competency
- Sometimes you're outside your core competency. Level 3 is one of those times but I've made a bet on the people and I feel I understand the people. There was a time when people made a bet on me.
- Oct. 2002 when questioned about his investment in Level 3
- See also wikipedia on Level 3 Communications.
- There are all kinds of businesses that Charlie and I don't understand, but that doesn't cause us to stay up at night. It just means we go on to the next one, and that's what the individual investor should do.
- Morningstar Interview
Sense of Humour
- Berkshire's arbitrage activities differ from those of many arbitrageurs. First, we participate in only a few, and usually very large, transactions each year. Most practitioners buy into a great many deals perhaps 50 or more per year. With that many irons in the fire, they must spend most of their time monitoring both the progress of deals and the market movements of the related stocks. This is not how Charlie nor I wish to spend our lives. (What's the sense in getting rich just to stare at a ticker tape all day?)
- When they open that envelope, the first instruction is to take my pulse again.
- 2001 Annual Meeting after mentioning that the instructions of his succession are sealed in an envelope at headquarters.
- It is only when the tide goes out, that you know who was swimming naked.
- Those who attended (the annual meeting) last year saw your Chairman pitch to Ernie Banks. This encounter proved to be the titanic duel that the sports world had long awaited. After the first few pitches...I fired a brushback at Ernie just to let him know who was in command. Ernie charged the mound, and I charged the plate. But a clash was avoided because we became exhausted before reaching each other.
- 1999 Letter to Shareholders
- We've long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.
- At the bottom of the bear market in October 1974 a Forbes article interviewed Buffett. Buffett, for the first time in his life, made public prediction about the stock market.
- "How do you feel? Forbes asked.
- "Like an oversexed guy in a whorehouse. Now is the time to invest and get rich."
- "How do you feel? Forbes asked.
- In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.
- Letter to Berkshire Hathaway shareholders, 1997
Intelligent Decision Making
- Charlie and I decided long ago that in an investment lifetime it's too hard to make hundreds of smart decisions. That judgement became ever more compelling as Berkshire's capital mushroomed and the universe of investments that could significantly affect our results shrank dramatically. Therefore, we adopted a strategy that required our being smart - and not too smart at that - only a very few times. Indeed, we'll now settle for one good idea a year. (Charlie says it's my turn.)
- The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable.
- Financial Review, 1985
- I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.
- Lecturing to a group of students at Columbia U. He was 21 years old.
- We're more comfortable in that kind of business. It means we miss a lot of very big winners. But we wouldn't know how to pick them out anyway. It also means we have very few big losers - and that's quite helpful over time. We're perfectly willing to trade away a big payoff for a certain payoff.
- 1999 Berkshire Hathaway Annual Meeting
- 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.
- July 1999 at Herb Allen's Sun Valley, Idaho Retreat
- The most common cause of low prices is pessimism - some times pervasive, some times 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.
- 1990 Chairman's Letter to Shareholders
- 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.
- BusinessWeek Interview June 25 1999
- 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).
- 1998 Chairman's Letter to Shareholders
- Time is the enemy of the poor business and the friend of the great business. If you have a business that's earning 20%-25% on equity, time is your friend. But time is your enemy if your money is in a low return business.
- 1998 Berkshire Annual Meeting
- Ben's Mr. Market allegory may seem out-of-date in today's investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising 'Take two aspirins'?
- 1987 Chairman's Letter to Shareholders
- We will reject interesting opportunities rather than over-leverage our balance sheet.
- Berkshire Hathaway Owners Manual
- "If you expect to be a net saver during the next 5 years, should you hope for a higher or lower stock market during that period?"Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall."This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.
- 1997 Chairman's Letter to Shareholders
Inactivity as Intelligent
- We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely.
- 1998 Berkshire Hathaway Annual Meeting
- I call investing the greatest business in the world because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There's no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it.
- The stock market is a no-called-strike game. You don't have to swing at everything--you can wait for your pitch. The problem when you're a money manager is that your fans keep yelling, 'Swing, you bum!'
- 1999 Berkshire Hathaway Annual Meeting
- 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.
- 1993 Chairman's Letter to Shareholders
- Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing.
On Margin of Safety
- If you understood a business perfectly and the future of the business, you would need very little in the way of a margin of safety. So, the more vulnerable the business is, assuming you still want to invest in it, the larger margin of safety you'd need. If you're driving a truck across a bridge that says it holds 10,000 pounds and you've got a 9,800 pound vehicle, if the bridge is 6 inches above the crevice it covers, you may feel okay, but if it's over the Grand Canyon, you may feel you want a little larger margin of safety...
- 1997 Berkshire Hathaway Annual Meeting
- You leave yourself an enormous margin of safety. You build a bridge that 30,000-pound trucks can go across and then you drive 10,000-pound trucks across it. That is the way I like to go across bridges.
- Financial World, June 13, 1984.
Efficient Market Hypothesis
- I'd be a bum on the street with a tin cup if the markets were always efficient.
- Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
- It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
- You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right—and that's the only thing that makes you right. And if your facts and reasoning are right, you don't have to worry about anybody else.
- Our favourite holding period is forever.
- Letter to Berkshire Hathaway shareholders, 1988
- When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.
- Risk comes from not knowing what you're doing.
- If you don't know jewellery, know the jeweller.
- If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes.
- There seems to be some perverse human characteristic that likes to make easy things difficult.
- One's objective should be to get it right, get it quick, get it out, and get it over... your problem won't improve with age.
- A public-opinion poll is no substitute for thought.
- In the insurance business, there is no statute of limitation on stupidity.
- If a business does well, the stock eventually follows.
- The most important quality for an investor is temperament, not intellect... You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.
- The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values.
- We will only do with your money what we would do with our own.
- Occasionally, a man must rise above principles.
- It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
- Of one thing be certain: 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.
- When asked how he became so successful in investing, Buffett answered: we read hundreds and hundreds of annual reports every year.
- "I never buy anything unless I can fill out on a piece of paper my reasons. I may be wrong, but I would know the answer to that. "I'm paying $32 billion today for the Coca Cola Company because..." If you can't answer that question, you shouldn't buy it. If you can answer that question, and you do it a few times, you'll make a lot of money."
- You ought to be able to explain why you're taking the job you're taking, why you're making the investment you're making, or whatever it may be. And if it can't stand applying pencil to paper, you'd better think it through some more. And if you can't write an intelligent answer to those questions, don't do it.
- I really like my life. I've arranged my life so that I can do what I want.
- If you gave me the choice of being CEO of General Electric or IBM or General Motors, you name it, or delivering papers, I would deliver papers. I would. I enjoyed doing that. I can think about what I want to think. I don't have to do anything I don't want to do.
Views of Government and Wall Street
- This time Congress should listen to the slim accountants. The logic behind their thinking is simple:
- 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?
- First, many in Wall Street - a community in which quality control is not prized - will sell investors anything they will buy.
- 2000 Letter to Shareholders
- An irresistable footnote: in 1971, pension fund managers invested a record 122% of net funds available in equities - at full prices they couldn't buy enough of them. In 1974, after the bottom had fallen out, they committed a then record low of 21% to stocks.
- 1978 Chairman's Letter to Shareholders
- When returns on capital are ordinary, an earn-more-by-putting-up-more record is no great managerial achievement. You can get the same result personally while operating from your rocking chair. just quadruple the capital you commit to a savings account and you will quadruple your earnings. You would hardly expect hosannas for that particular accomplishment. Yet, retirement announcements regularly sing the praises of CEOs who have, say, quadrupled earnings of their widget company during their reign - with no one examining whether this gain was attributable simply to many years of retained earnings and the workings of compound interest.
- 1985 Chairman's Letter to Shareholders
- Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway.
- The Stock Market is designed to transfer money from the Active to the Patient.
- Managers thinking about accounting issues should never forget one of Abraham Lincoln's favorite riddles: `How many legs does a dog have if you call his tail a leg?' The answer: `Four, because calling a tail a leg does not make it a leg'.
- Just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds... any business craving of the leader, however foolish, will be quickly supported by detailed rate-of-return and strategic studies prepared by his troops
- Working with people who cause your stomach to churn seems much like marrying for money - probably a bad idea under any circumstances, but absolute madness if you are already rich.
- One of the ironies of the stock market is the emphasis on activity. Brokers, using terms such as "marketability" and "liquidity," sing the praises of companies with high share turnover... but investors should understand that what is good for the croupier is not good for the customer. A hyperactive stock market is the pick pocket of enterprise.
- The speed at which a business success is recognized, furthermore, is not that important as long as the company's intrinsic value is increasing at a satisfactory rate. In fact, delayed recognition can be an advantage: It may give us the chance to buy more of a good thing at a bargain price.
- The managers at fault periodically report on the lesson they have learned from the latest disappointment. They then usually seek out future lessons.
- I am out of step with present conditions. When the game is no longer played your way, it is only human to say the new approach is all wrong, bound to lead to trouble, and so on. On one point, however, I am clear. I will not abandon a previous approach whose logic I understand ( although I find it difficult to apply ) even though it may mean foregoing large, and apparently easy, profits to embrace an approach which I don't fully understand, have not practiced successfully, and which possibly could lead to substantial permanent loss of capital.
- in a letter to his partners in the stock market frenzy of 1969.
- I just don't see anything available that gives any reasonable hope of delivering such a good year and I have no desire to grope around, hoping to 'get lucky' with other people's money. I am not attuned to this market environment, and I don't want to spoil a decent record by trying to play a game I don't understand just so I can go out a hero.
- It's class warfare, my class is winning, but they shouldn't be.
- CNN Interview, May 25 2005, in arguing the need to raise taxes on the rich.
- There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning.
- New York Times, November 26, 2006.
- It's got to be the best intellectual exercise out there. You're seeing through new situations every ten minutes…In the stock market you don't base your decisions on what the market is doing, but on what you think is rational….Bridge is about weighing gain/loss ratios. You're doing calculations all the time.
- Forbes. June 2, 1997.
- The approach and strategies are very similar in that you gather all the information you can and then keep adding to that base of information as things develop. You do whatever the probabilities indicated based on the knowledge that you have at that time, but you are always willing to modify your behaviour or your approach as you get new information. In bridge, you behave in a way that gets the best from your partner. And in business, you behave in the way that gets the best from your managers and your employees.
- I wouldn't mind going to jail if I had three cellmates who played bridge.
- I'll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty.