At age 19, I read a book [The Intelligent Investor] and what I'm doing today, at age 76, is running things through the same thought process I learned from the book I read at 19.
I mean, we'll be pounding on the guy's chest, you know, on the floor, and you know, he's not going to just jump up all of a sudden. So it makes it tough. I mean, it's tough to be in the legislature, you know, and vote for something and then people say, well, you voted all this money and you know, it's all getting spent. It isn't getting spent. It's getting invested. But it's all getting spent. Nothing's happening.
After 25 years of buying and supervising a great variety of businesses, Charlie [Munger] and I have not learned how to solve difficult business problems. What we have learned is to avoid them. To the extent we have been successful, it is because we have concentrated on identifying one-foot hurdles that we could step over rather than because we acquired any ability to clear seven-footers.
Market prices for stocks fluctuate at great amplitudes around intrinsic value but, over the long term, intrinsic value is virtually always reflected at some point in market price.
We say we are trying to buy into businesses with excellent economics, run by honest and able people at a decent price. We buy very few securities, so we look at it as "focused" investing.
AIG would be doing fine today. It was one of the ten largest companies in the United States in terms of market value, over 200 billion, the most respected insurer and everything in the world.
The range of derivatives contracts is limited only by the imagination of man (or sometimes, so it seems, madmen). Say you want to write a contract speculating on the number of twins to be born in Nebraska in 2020. No problem-at a price, you will easily find an obliging counterparty.
We try to buy businesses with good-to-superb underlying economics run by honest and able people and buy them at sensible prices. That's all I'm trying to do.
You should be unconcerned about short-term price action when you own the securities directly, just as you were unconcerned when you owned them indirectly through BPL. I think about them as businesses, not "stocks", and if the business does all right over the long term, so will the stock.
I’ve worked in an economy that rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions.
More investment sins are probably committed by otherwise quite intelligent people because of "tax considerations" than from any other cause. One of my friends-a noted West Coast philosopher-maintains that a majority of life's errors are caused by forgetting what one is really trying to do. This is certainly the case when an emotionally supercharged element like taxes enters the picture (I have another friend-a noted East Coast philosopher who says it isn't the lack of representation he minds-it's the taxation).
In the financial markets I find it easy to predict what will happen and very difficult to predict when it will happen. I think that things were clear during the bubble as to what would happen eventually.