Despite our policy of candor, we will discuss our activities in marketable securities only to the extent legally required. Good investment ideas are rare, valuable and subject to competitive appropriation just as good product or business acquisition ideas are.
In the long run managements stressing accounting appearance over economic substance usually achieve little of either.
When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
I won’t close down a business of subnormal profitability merely to add a fraction of a point to our corporate returns. I also feel it inappropriate for even an exceptionally profitable company to fund an operation once it appears to have unending losses in prospect. Adam Smith would disagree with my first proposition and Karl Marx would disagree with my second; the middle ground is the only position that leaves me comfortable.
The best business returns
The best business returns are usually achieved by companies that are doing something quite similar today to what they were doing five or ten years ago.
You have no ability, if you’re a financial institution and you’re threatened with criminal prosecution, you have no ability to negotiate.
I bought a company in the mid-’90s called Dexter Shoe and paid $400 million for it. And I gave about $400 million worth of Berkshire stock, which is probably now worth $400 billion. But I’ve made lots of dumb decisions. That’s part of the game.
Getting fired can produce a particularly bountiful payday for a CEO. Indeed he can “earn” more in that single day, while cleaning out his desk, than an American worker earns in a lifetime of cleaning toilets. Forget the old maxim about nothing succeeding like success : today, in the executive suite, the all-too-prevalent rule is that nothing succeeds like failure.
We want our managers to think about what counts, not how it will be counted.
Managements that say or imply during a public offering that their stock is undervalued are usually being economical with the truth or uneconomical with their existing shareholders’ money.