Quotations from “Buffett:The Making of an American Capitalist”

I have been reading Roger Lowenstein’s “Buffett: The Making of an American Capitalist” and once again he did a remarkable job (after When Genius Failed). I am posting some of my favorite quotation from the book.

When Warren said that he would be a millionaire by age thirty, Mary Falk asked why this drive to make so much money? He replied,

“Its not that I want money. Its the fun of making money and watching it grow.”

Buffett on “Joys of Compounding”,

I have it from unreliable sources that the cost of the voyage Isabella originally underwrote for Columbus was approx. $30,000. This has been considered at least a moderately successful utilization of venture capital. Without attempting to evaluate the psychic income derived from finding a new hemisphere, it must be pointed out that….the whole deal was not exactly another IBM. Figured very roughly, the $30,000 invested at 4% compounded annually would have amounted to something like $2 trillion…

His serious point was that even trifling sums should be invested with the utmost care. To Buffett, blowing $30,000 represented the loss not of $30,000 but of the potential for $2 trillion.

On avoiding taxes in financial planning,

What is one really trying to do in the investment world? Not pay the least taxes, although that may be a factor to be considered in achieving the end. Means and end should not be confused, however, and the end is to come away with the largest after-tax rate of compound.

On Fund Managers owning hundreds of different stocks,

Anyone owning such number of securities….is following what I call the Noah School of Investing -two of everything. Such investors should be piloting arks.

On Momentum investing,

‘Fashion’ investing does not completely satisfy my intellect (or perhaps my prejudices), and most definitely does not fit my temperament. I will not invest my own money based upon such an approach – hence, I will most certainly not do so with your money.

On Public opinion, Buffett illustrated this with an allegory

An Oil prospector who arrived at heaven’s gate only to hear the distressing news that the “compound” reserved for oilmen was full. Given permission by Saint Peter to say a few words, the prospector shouted,” Oil discovered in hell!” – whereupon every oilmen in heaven departed for the nether reaches. Impressed, Saint Peter told him there was now plenty of room. The prospector said, “No. I think I”go along with the rest of the boys. There might be some truth to that rumor after all.”

Ken Chace on Buffett’s questions,

Buffett asked questions like crazy. About the marketing, the machinery, about what I thought should be done, where I thought the company was going, the technical end of it, what kind of products were we selling, who we were selling to. He wanted to know everything.

Buffett on Stock Options,

He opposed it for the reason that most CEOs were enamored of them. Options conferred potential -sometimes vast-rewards, but spared the recipients any risk, thus giving executives a free ride on the shareholders’ capital.

Ben Graham on Investing,

Investing don’t require a genius. What it needs is, first, reasonably good intelligence; second, sound principles of operation; and third and most important, firmness of character.

When Forbes asked Buffett about his take on markets,

“Like an oversexed guy in a whorehouse. This is the time to start investing”.

I call investing the greatest business in the world because you never have to swing. You stand at a plate, the pitcher throws you GM at 47! US Steel at 39! and nobody calls a strike on you. There’s no penalty except oppurtunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it.

On Market direction,

The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long term values.

On takeovers at hefty premiums,

Many managements apparently were overexposed in impressionable childhood years to the story in which the imprisoned handsome prince is released from a toad’s body by a kiss from a beautiful princess. Consequently, they are certain their managerial kiss will do wonders for the profitability of Company Target…We’ve observed many kisses but very few miracles.

On managements dressing up accounts,

In the long run, managements stressing accounting appearence over economic substance usually acieve little of either.

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