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Wisdom from Warren Buffett

 

Wisdom from Warren Buffett

 

“The arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislature. The inflation tax has a fantastic ability to simply consume capital. It makes no difference to a widow with her savings in a 5 percent passbook account whether she pays 100 percent income tax on her interest income during a period of zero inflation or pays n o income taxes during the years of 5 percent inflation.  Either way, she is ‘taxed’ in a manner that leaves her no real income whatsoever. Any money she spends comes right out of capital.  She would find outrageous a 120 percent income tax but doesn’t seem to notice that 5 percent inflation is the economic equivalent.”

 

“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

 

“You could be somewhere where the mail was delayed three weeks and do just fine investing.”

 

“In any business, there are going to be all kinds of factors that happen next week, next month, next year, and so forth.  But the really important thing is to be in the right business.  The classic case is Coca-Cola, which went public in 1919.  They initially sold stock at $40 a share.  The next year, it went down to $19.  Sugar prices had changed pretty dramatically after World War 1.  So you would have lost half of your money one year later if you’d bought the stock when it first came public; but if you owned that share today – and had reinvested all of your dividends – it would be worth about $1.8 million.  We have had depressions.  We have had wars.  Sugar prices have gone up and down.  A million things have happened.  How much more fruitful is it for us to think about whether the product is likely to sustain itself and its economics than to try to be questioning whether to jump in or out of the stock?”

 

“In the short run the market is a voting machine; in the long run, it’s a weighing machine.”

 

“Most people get interested in stocks when everyone else is.  The time to get interested is when no one else is.  You can’t buy what’s popular and do well.”

 

“Wonderful castles, surrounded by deep, dangerous moats where the leader inside is an honest and decent person.  Preferably, the castle gets its strength from the genius inside; the moat is permanent and acts as a powerful deterrent to those considering an attack; and inside, the leader makes gold but doesn’t keep it all for himself. Roughly translated, we like great companies with dominant positions, whose franchise is hard to duplicate and has tremendous staying power or some permanence to it.”

 

“For some reason, people take their cues from price action rather than from values.  What doesn’t work is when you start doing things that ou don’t understand or because they worked last week for somebody else.  The dumbest reason in the world to buy a stock is because it’s going up.”

 

“The chains of habit are too light if felt until they are too heavy to be broken… you will have the habits 20 years from now that you decide to put into practice today.  So I suggest you look at the behavior that you admire in others and make those your own habits.”

 

“I would say a lot of things in business really have the same effect if you went to a parade and the band started coming down the street and all of a sudden you stood up on tip-toe.  In another 30 seconds everybody else is on tiptoe, and it would be hell on your legs and you still wouldn’t be seeing any better.  The real trick is to stand up on tiptoe and not have anyone notice you.”

 

“My guess is that if Ted Williams was getting the highest salary in baseball and he was hitting .220, he would be un-happy.  And if he was getting the lowest salary in baseball and batting .400, he’d be very happy.  That’s the way I feel about doing this job.  Money is a by-product of doing something I like doing extremely well.”

 

“I don’t have a problem with guilt about money.  The way I see it is that my money represents an enormous number of claim checks on society.  It’s like I have these little pieces of paper that I can turn into consumption.  If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life.  And the GNP would go up.  But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing.  I don’t do that, though.  I don’t use very many of those claim checks.  There’s nothing material I want very much.  And I’m going to give virtually all of those claim checks to charity when my wife and I die.”

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