Most people will point to Warren Buffett’s spectacular track record as a thing that sets him apart. And it’s certainly impressive. His results show what great returns and a long runway can accomplish. Of course, only one of those things is easily copied.
Everyone is drawn to Buffett’s returns but the biggest lesson is the advantage of investing early in life. Buffett made his first investment at the age of 11. That started a 78 year (and counting) long experiment for compounding to work its magic.
No special skills or knowledge are required with compounding. It’s the one thing everyone can take advantage of with a little bit of money and time and patience. Patience is key. It also, likely, causes the most trouble.
Buffett seemed almost destined to build an empire. He had a business mindset at an early age. He hustled gum and Coca-Cola bottles door to door, bought a 40-acre farm, and built a pinball machine business before he went off to college.
Buffett’s investment track record officially began in 1956 with the Buffett Partnership. He ran it until 1968, producing a 32% annual return (25% for his limited partners). But before he closed up shop, he bought shares in a declining textile company known as Berkshire Hathaway. It was trading below its net current asset value.
In 1964, Berksire’s then CEO, agreed (verbally) to buy Buffett’s shares for $11.50. But the tender offer he sent to Buffett was only for $11 3/8. A difference of 13 cents per share. Buffett was livid. So he bought more shares until he seized control of Berkshire in 1965.
It was his biggest mistake. He’s been turning the company around ever since. Thankfully, he’s shared a few insights on that process along the way.
Here’s Buffett:
The tour we’ve taken through the last century proves that market irrationality of an extreme kind periodically erupts — and compellingly suggests that investors wanting to do well had better learn how to deal with the next outbreak. — Source
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We try to get fearful when others are greedy. We try to get greedy when others are fearful. We try to avoid any kind of imitation of other people’s behavior. — Source
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The disadvantage of being in any kind of a market type environment – Wall Street would be the extreme – is that you get over-stimulated. You think you have to do something every day. — Source
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The propensity to gamble is always increased by a large prize versus a small entry fee, no matter how poor the true odds may be. — Source
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We live in an investment world, populated not by those who must be logically persuaded to believe, but by the hopeful, credulous and greedy, grasping for an excuse to believe. — Source
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There is nothing at all conservative, in my opinion, about speculating as to just how high a multiplier a greedy and capricious public will put on earnings. — Source
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A public opinion poll is no substitute for thought. — Source
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I have observed many cases of habit patterns in all activities of life, particularly business, continuing (and becoming accentuated as years pass) long after they ceased making sense. — Source
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People are habitually guided by the rear-view mirror and, for the most part, by the vistas immediately behind them. — Source
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What you really want to do in investments is figure out what’s important and knowable. If it’s unimportant or unknowable, you forget about it. — Source
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My approach to bonds is pretty much like my approach to stocks. If I can’t understand something, I tend to forget it. — Source
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At all times, in all markets, in all parts of the world, the tiniest change in rates changes the value of every financial asset. — Source
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Investment decisions should be made on the basis of the most probable compounding of after-tax net worth with minimum risk. — Source
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Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results. The better sales will be the frosting on the cake. — Source
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You’re not buying a stock, you’re buying part ownership in a business. You will do well if the business does well. And if you didn’t pay a totally silly price. — Source
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The inescapable fact is that the value of an asset, whatever its character, cannot over the long term grow faster than its earnings do. — Source
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The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. — Source
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The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors. — Source
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The best kind of business to be in is something where you sell something that costs a penny and sells for a dollar and is habit forming. — Source
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The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’re got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you’ve got a terrible business. — Source
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When you find a really good business run by first-class people, chances are a price that looks high isn’t high. The combination is rare enough, it’s worth a pretty good price. — Source
Find more Buffett quotes here.
Last Call
- Multibagger Stocks Aren’t Rare, But That Doesn’t Mean It is Easy to Find Them – Klement on Investing
- Why You Should Always Switch: The Monty Hall Problem Explained – S. Pinker
- Nature Shows How This All Works – M. Housel
- There’s More to Investing Than Just Risk and Return – C. Benz
- Where Are All The .400 Investors? – MD&A
- How Does Quality Work? – Verdad
- A Meeting of Great Minds: Bill Miller and William Green (video) – Miller Value Partners
- America Is Running Out of Everything – D. Thompson
- Supply, Demand, and the Saga of the Stucky Bois – K. Scanlon
- What is the Metaverse and Do I Have to Care – Verge
