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.
The best thing is to learn from other guy’s mistakes. Patton used to say, “It’s an honor to die for your country ; make sure the other guy gets the honor.” There are a lot of mistakes that I’ve repeated. The biggest one, the biggest category over time, is being reluctant to pay up a little for a business that I knew was really outstanding.
In the 54 years (Charlie Munger and I) have worked together, we have never forgone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.
By the age of 10, I’d read every book in the Omaha public library about investing, some twice. You need to fill your mind with various competing thoughts and decide which make sense. Then you have to jump in the water – take a small amount of money and do it yourself. Investing on paper is like reading a romance novel vs. doing something else. You’ll soon find out whether you like it. The earlier you start, the better.
For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.
Stocks of companies selling commodity-like products should come with a warning label : Competition may prove hazardous to human wealth.
We make no attempt to pick the few winners that will emerge from an ocean of unproven enterprises. We’re not smart enough to do that, and we know it. Instead, we try to apply Aesop’s 2,600-year-old equation to opportunities in which we have reasonable confidence as to how many birds are in the bush and when they will emerge.
What an investor needs is the ability to correctly evaluate selected businesses. Note that word “selected” : You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important ; knowing its boundaries, however, is vital.
I call investing the greatest business in the world … because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47$ U.S. Steel at 39$ and nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like ; then when the fielders are asleep, you step up and hit it.
Charlie and I would follow a buy-and-hold policy even if we ran a tax-exempt institution.