The idea of caring is that someone is making money faster [than you are] is one of the deadly sins. Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun. Why would you want to get on that trolley?
I’d say that Berkshire Hathaway’s system is adapting to the nature of the investment problem as it really is. We’ve really made the money out of high quality businesses. In some cases, we bought the whole business. And in some cases, we just bought a big block of stock. But when you analyze what happened, the big money’s been made in the high quality businesses. And most of the other people who’ve made a lot of money have done so in high quality businesses.
The number one idea is to view a stock as an ownership of the business and to judge the staying quality of the business in terms of its competitive advantage. Look for more value in terms of discounted future cash-flow than you are paying for. Move only when you have an advantage.
Over many decades, our usual practice is that if something we like goes down, we buy more and more. Sometimes something happens, you realize you’re wrong, and you get out. But if you develop correct confidence in your judgment, buy more and take advantage of stock prices.
The ethical rule is from Samuel Johnson who believed that maintenance of easily removable ignorance by a responsible office holder was treacherous malfeasance in meeting moral obligation. The prudential rule is that underlying the old Warner & Swasey advertisement for machine tools: "The man who needs a new machine tool, and hasn't bought it, is already paying for it". The Warner & Swasey rule also applies, I believe, to thinking tools. If you don't have the right thinking tools, you, and the people you seek to help, are already suffering from your easily removable ignorance.
Economic systems work better when there's an extreme reliability ethos. And the traditional way to get a reliability ethos, at least in past generations in America, was through religion. The religions instilled guilt. ... And this guilt, derived from religion, has been a huge driver of a reliability ethos, which has been very helpful to economic outcomes for man.
The interesting thing about it to me is the mindset. With all these "helpers" running around, they talk about doing deals. We talk about welcoming partners. The guy doing deals, he wants to do a deal and then unwind it in the near future. It's totally opposite for us. We like to build lasting relationships. I think our system will work better in the long term than flipping deals. I think there are so many of them [helpers] that they'll get in ea h other's way. I don't think they'll make enough money to meet their expectations, by flipping, flipping,... Read more »
And your brain doesn't naturally know how to think the way Zeckhauser knows how to play bridge. "for example," people do not react symmetrically to loss and gain. Well maybe a great bridge player like Zeckhauser does, but that's a trained response. Ordinary people, subconsciously affected by their inborn tendencies...
To us, investing is the equivalent of going out and betting against the pari-mutuel system. We look for a horse with one chance in two of winning, and that pays three to one. In other words, we're looking for a mispriced gamble. That's what investing is, and you have to know enough to know whether the gamble is mispriced.