Warren Buffett Quotes

volume — as long as you anticipated, as we did in 1972, a world of continuous inflation.

We do not follow the common practice of talking one-on-one with large institutional investors or analysts, treating them instead as we do all other shareholders. There is no one more important to us than the shareholder of limited means who trusts us with a substantial portion of his or her savings. As I run the company day-to-day — and as I write this letter — that is the shareholder whose image is in my mind.

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.

Over-all, we probably would have retained better prospects for the next five years if profits had not risen so dramatically this year.

If our noneconomic values were to be lost, much of Berkshire’s economic value would collapse as well. “Tone at the top” will be key to maintaining Berkshire’s special culture.

Cash combined with courage in a time of crisis is priceless.” -Warren Buffett

The best investment you can make is in yourself.

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.

My direct experience (limited, thankfully) with CEOs who have played with a company’s numbers indicates that they were more often prompted by ego than by a desire for financial gain.

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.

The primary test of managerial economic performance is the achievement of a high earnings rate on equity capital employed (without undue leverage, accounting gimmickry, etc.) and not the achievement of consistent gains in earnings per share. In our view, many businesses would be better understood by their shareholder owners, as well as the general public, if managements and financial analysts modified the primary emphasis they place upon earnings per share, and upon yearly changes in that figure.

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.

In addition to being independent, directors should have business savvy, a shareholder orientation and a genuine interest in the company. The rarest of these qualities is business savvy — and if it is lacking, the other two are of little help. Many people who are smart, articulate and admired have no real understanding of business. That’s no sin; they may shine elsewhere. But they don’t belong on corporate boards.

Our basic principle is that if you want to shoot rare, fast-moving elephants, you should always carry a loaded gun. p217

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