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.
The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values.
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 - 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.
Part of making good decisions in business is recognizing the poor decisions you've made and why they were poor. I've made lots of mistakes. I'm going to make more. It's the name of the game. You don't want to expect perfection in yourself. You want to strive to do your best. It's too demanding to expect perfection in yourself.
Charlie and I decided long ago that in an investment lifetime, it's too hard to make hundreds of smart decisions. That judgment 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 now settle for one good idea a year.
We try to exert a Ted Williams kind of discipline. In his book The Science of Hitting, Ted explains that he carved the strike zone into 77 cells, each the size of a baseball. Swinging only at balls in his "best" cell, he knew, would allow him to bat .400; reaching for balls in his "worst" spot, the low outside corner of the strike zone, would reduce him to .230. In other words, waiting for the fat pitch would mean a trip to the Hall of Fame; swinging indiscriminately would mean a ticket to the minors.
As of 1992, in fact-though the picture would have improved since then-the money that had been made since the dawn of aviation by all of this country's airline companies was zero. Absolutely zero.
What could be more advantageous in an intellectual contest - whether it be chess, bridge, or stock selection - than to have opponents who have been taught that thinking is a waste of energy?