Cost of capital

A phrase like “cost of capital,” which means different things to different people, and often means silly things to people who teach in business schools, we just don’t use it. Warren’s definition of behaving in a corporation, so that every dollar retained tends to create more than a dollar of market value for the shareholders, is probably the best way of describing cost of capital. That is not what they mean in business schools.

Business school training

I would say the business school training, particularly in investments, was a handicap about 20 years ago when they were preaching efficient market theory because essentially they told you it didn’t do any good to try and figure out what a company was worth because the market had a price perfectly already. Imagine paying, you know, 30 or $40,000 a year to hear that.


Independent thinking, emotional stability, and a keen understanding of both human and institutional behaviour is vital to long term investment success. I’ve seen a lot of very smart people who have lacked these virtues.


I would say investment – finance – teaching in this country, in general, is kind of pathetic.

High IQ

The most important thing in investments is not having a high IQ, thank God. I mean, the important thing is realism and discipline. And you don’t need to be extraordinarily bright to do well in investments, if you are realistic and disciplined.