A Few Lessons for Investors and Managers from Warren E. Buffett by Peter Bevelin

★★★★★

워렌 버핏, 찰리 멍거, 나심 탈레브는 그냥 읽는다. 너무 좋다. 이런 책이 번역이 되어야 되는데.

Two. Valuation

“Fancy computers don’t help. We believe the precision they project is a chimera. In fact, such models can lull decision-makers into a false sense of security and thereby increase their chances of making a really huge mistake.”

Three. The Value of Business

“I say “estimate” because calculations of intrinsic value, though all-important, are necessarily imprecise and often seriously wrong. The more uncertain the future of a business, the more possibility there is that the calculation will be wildly off-base.”

Five. Business Chracteristics: The Great, the Good, and the Gruesome

“A. THE REALLY GREAT BUSINESS: High returns, a sustainable competitive advantage and obstacles that make it tough for new companies to enter.”

“Customer goodwill creates economic goodwill. See’s has a one-of-a-kind product “personality” produces by a combination of its candy’s delicious taste and moderate price, the company’s total control of the distribution process, and the exceptional service provided by store employees.”

“In many industries, differentiation can’t be made meaningful. Hence the constant struggle of every vendor to establish and emphasize special qualities of product or service. This works with candy bars but doesn’t work with sugar.”

“An important truth. In a business selling a commodity-type product, it’s impossible to a lot smarter than your dumbest competitor.”

“Time is the friend of the wonderful business, the enemy of the mediocre.”

“A great investment opportunity occurs when a marvelous business encounters a one-time huge, but solvable, problem as was the case many years back at both American Express and GEICO. Overall, however, we’ve done better by avoiding dragons than by slaying them.”

“In contrast to this have-to-be-smart-every-day business, there is what I call the have-to-be-smart-once business. For example, if you were smart enough to but a network TV station very early in the game, you could put in a shiftless and backward nephew to run things, and the business would still do well for decades.”

• What to focus to be a ‘have-to-be-smart-once business’

“Let’s translate the analysis into simple question: Does the business have something people need or want now and in the future (demand), that no one else has (competitive advantage) or can copy, take away or get now and in the future (sustainable) and can these advantages be translated into business value?”

Six. Past Results as a Guide: Sometimes Useful and Sometimes Dangerous

“What worked before may not work in the future. (…) When change is slow, constant rethinking is actually undesirable; it achieves little and slows response time. But when change is great, yesterday’s assumptions can be retained only a great cost.”

“What would happen if my key assumption disappeared from the equation?”

“Good times, booms or temporary tailwinds (or lousy competition) can fool me that business or management performance is better than it really is (or vice versa during the opposite).”

“How do the business and management perform during turbulent or bad times? I can only evaluate real management performance, their character and business characteristics when “the tide goes out””

Fourteen. How to Reduce Risk: Prevention is Better than Cure

“One of the best ways to avoid trouble is to keep it simple. The most elusive of human goals — keeping things simple and remembering what you se out to do.”

“Stay with simple propositions. We usually apply in investments as well as operations. If only one variable is key to a decision, and the variable has a 90% chance of going your way, the chance for a successful outcome is obviously 90%. But if ten independent variables need to break favorably for a successful result, and each has a 90% probability of success, the likelihood of having a winner is only 35%. In our zinc venture, we solved most of the problems. But one proved intractable, and that was one too many. Since a chain is no stronger that its weakest link, it makes sense to look for — if you’ll excuse an oxymoron — mono-linked chains.”

“It is better to just try to avoid the really dumb things — what really can hurt me — than try to be very smart.”

“Make it easy for myself — don’t swim against the tide. After 25 years of buying and supervising a great variety of businesses, Charlie and I have not learned how to solve difficult business problems. What we have learned is to avoid them. To extent we have been successful, it is because we concentrated on identifying one-foot hurdles that we could step over rather than because we acquired any ability to clear seven-footers.”

“Am I smart enough to know what I don’t know? Intelligent investing is not complex, thought that is far from saying that it is easy. 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 it boundaries, however, is vital.”

“How can I lose here? How hurt can I be? First focus on what I can lose before looking at what I can make — and if I can’t judge what can go wrong — stay away!”

“Is the gain/loss ratio favorable and consequential? Do I gain a lot if I’m right and lose little if I’m wrong?”

“Every generation has to get his own head copped off in its own way — throughout history there have always been bubbles and busts — yet they take us by surprise every time.”

“Patience is a virtue and it helps keep me out of trouble. If we are to hit the bull’s-eye, we will need markets that allow the purchase of businesses and securities on sensible terms. Right now, markets are difficult, but they can — and will — change in unexpected ways and at unexpected times. In the meantime, we’ll try to resist the temptation to do something marginal simply because we are long on cash. There’s no use running if you’re on the wrong road.”

“Unquestionably, some people have become very rich through the use of borrowed money. However, that’s also been a way to get very poor. When leverage works, it magnifies your gains. Your spouse thinks you’re clever, and your neighbors get envious. But leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices.”

“The roads of business are riddled with potholes; a plan that requires dodging them all is a plan for disaster.”

“Smart managers don’t always make rational decisions. For example: (1) As if governed by Newton’s First Law of Motion, an institution will resist any change in its current direction; (2) Just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds; (3) Any business craving of the leader, however foolish, will be quickly supported by detailed rate-or-return and strategic studies prepared by his troops; and (4) the behavior of peer companies, whether they are expanding, acquiring, setting executive compensation or whatever, will be mindlessly imitated.”

“We try to price, rather than time, purchases. In our view, it is folly to forego buying shares in an outstanding business whose long-term future is predictable, because of short-term worries about an economy or a stock market that we know to be unpredictable. Why scrap an informed decision because of an uninformed guess?”

Fifteen. Sometimes Mistakes Are Made

“I violated the Noah rule: Predicting rain doesn’t count; building arks does.”