Quotes from Warren Buffett

While investors and managers must place their feet in the future, their memories and nervous systems often remain plugged into the past. 

Some time ago Ken Galbraith, in his witty and insightful The Great Crash, coined a new economic term: "the bezzle," defined as the current amount of undiscovered embezzlement. This financial creature has a magical quality: The embezzlers are richer by the amount of the bezzle, while the embezzlees do not yet feel poorer.

When Walter and Edwin were asked in 1989 by Outstanding Investors Digest, "How would you summarize your approach?" Edwin replied, "We try to buy stocks cheap." So much for Modern Portfolio Theory, technical analysis, macroeconomic thoughts and complex algorithms.

Our goal will be to acquire either part or all of businesses that we believe we understand, that have good, sustainable underlying economics, and that are run by managers whom we like, admire and trust.

If options aren't a form of compensation, what are they? If compensation isn't an expense, what is it? And, if expenses shouldn't go into the calculation of earnings, where in the world should they go?

We select such investments on a long-term basis, weighing the same factors as would be involved in the purchase of 100% of an operating business: (1) favorable long-term economic characteristics; (2) competent and honest management; (3) purchase price attractive when measured against the yardstick of value to a private owner; and (4) an industry with which we are familiar and whose long-term business characteristics we feel competent to judge.

Predicting the long-term economics of companies that operate in fast-changing industries is simply far beyond our perimeter.

Despite the overriding importance of inflation in the investment equation, we will not punish you further with another full recital of our views; inflation itself will be punishment enough. (Copies of previous discussions are available for masochists.) But, because of the unrelenting destruction of currency values, our corporate efforts will continue to do a much better job of filling your wallet than of filling your stomach.

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

wishing makes dreams come true only in Disney movies; it's poison in business.

In insurance, as elsewhere, the reaction of weak managements to weak operations is often weak accounting. ("It's difficult for an empty sack to stand upright.")

You only have to do a few things right in your life so long as you don't do too many things wrong.

Our basic principle is that if you want to shoot rare, fast-moving elephants, you should always carry a loaded gun. p217

As we look at the major acquisitions that others made during 1982, our reaction is not envy, but relief that we were non-participants. For in many of these acquisitions, managerial intellect wilted in competition with managerial adrenaline. The thrill of the chase blinded the pursuers to the consequences of the catch. Pascal's observation seems apt: "It has struck me that all men's

Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don't need. We held this view 50 years ago when we each ran an investment partnership, funded by a few friends and relatives who trusted us. We also hold it today after a million or so "partners" have joined us at Berkshire.

The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.

We set no volume goals in our insurance business generally—and certainly not in reinsurance—as virtually any volume can be achieved if profitability standards are ignored.

Productive assets such as farms, real estate and, yes, business ownership produce wealth — lots of it. Most owners of such properties will be rewarded. All that's required is the passage of time, an inner calm, ample diversification and a minimization of transactions and fees.

I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing.

What's out of sight, however, should not be out of mind: Those unrecorded retained earnings are usually building value — lots of value — for Berkshire.

Leaving the question of price aside, the best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return.

When Charlie and I finish reading the long footnotes detailing the derivatives activities of major banks, the only thing we understand is that we don't understand how much risk the institution is running.

Of course, a business with terrific economics can be a bad investment if the purchase price is excessive.

if we aren't happy owning a piece of that business with the Exchange closed, we're not happy owning it with the Exchange open.