Warren Buffett’s Quotes On Arbitrage; Bubbles; Business And More by Symphony Research
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Warren Buffett on Accounting:
“Accounting consequences do not influence our operating or capital-allocation decisions. When acquisition costs are similar, we much prefer to purchase $2 of earnings that is not reportable by us under standard accounting principles than to purchase $1 of earnings that is reportable.”
“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’.”
Arbitrage:
“Berkshire Hathaway’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?)”
Billionaires:
“Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.”
Brand:
“Your premium brand had better be delivering something special, or it’s not going to get the business.”
Bridge
“It’s got to be the best intellectual exercise out there. You’re seeing through new situations every ten minutes8In the stock market you don’t base your decisions on what the market is doing, but on what you think is rational8.Bridge is about weighing gain/loss ratios. You’re doing calculations all the time.” Forbes. June 2, 1997.
http://www.buffettcup.com/Default.aspx?tabid=69
“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.” Warren Buffett on Bridge
“I wouldn’t mind going to jail if I had three cellmates who played bridge”
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“I spend twelve hours a week – a little over 10% of my waking hours – playing the game. Now I am trying to figure out how to get by on less sleep in order to fit in a few more hands.”
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Investing is not as tough as being a top-notch bridge player. All it takes is the ability to see things as they really are.
Bubbles:
“Unfortunately, the hangover may prove to be proportional to the binge.”- March 2003
“Like most trends, at the beginning it’s driven by fundamentals, at some point speculation takes over. What the wise man does in the beginning, the fool does in the end.” 2006 Berkshire Hathaway annual meeting “The world went mad. What we learn from history is that people don’t learn from history.”
Bull Markets
“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
Business:
“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.”
If a business does well, the stock eventually follows.”
Business School:
“The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.”
Circle of Competence
“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.”
Compensation:
“The .350 hitter expects, and also deserves, a big payoff for his performance – even if he plays for a cellardwelling team. And a .150 hitter should get no reward – even if he plays for a pennant winner.”
“Too often, executive compensation in the U.S. is ridiculously out of line with performance. That won’t change, moreover, because the deck is stacked against investors when it comes to the CEO’s pay.”
– Warren Buffett; 2005 Letter to Shareholders
Complexity:
“There seems to be some perverse human characteristic that likes to make easy things difficult.”
See full PDF below.
