Top highlights from The Snowball
The importance of long-term thinking: "The stock market is designed to transfer money from the Active to the Patient."
Show this quote
Value investing: "Price is what you pay. Value is what you get."
Show this quote
The power of compound interest: "My wealth has come from a combination of living in America, some lucky genes, and compound interest."
Show this quote
Learning from mistakes: "It's good to learn from your mistakes. It's better to learn from other people's mistakes."
Show this quote
Staying within your circle of competence: "The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd."
Show this quote
Patience and discipline: "The stock market is designed to transfer money from the Impatient to the Patient."
Show this quote
Diversification: "Wide diversification is only required when investors do not understand what they are doing."
Show this quote
The importance of reading: "Read 500 pages like this every day. That's how knowledge works. It builds up, like compound interest."
Show this quote
Economic moats: "In business, I look for economic castles protected by unbreachable 'moats.'"
Show this quote
Risk management: "The most important thing to do if you find yourself in a hole is to stop digging."
Show this quote
Simplicity in investing: "Our approach is very much profiting from lack of change rather than from change. With Wrigley chewing gum, it's the lack of change that appeals to me. I don't think it is going to be hurt by the Internet."
Show this quote
Quality over quantity: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
Show this quote
The importance of ethics: "We can afford to lose money—even a lot of money. But we can't afford to lose reputation—even a shred of reputation."
Show this quote
Long-term focus on businesses: "Our favorite holding period is forever."
Show this quote
Investing in what you understand: "Never invest in a business you cannot understand."
Show this quote
Patience in the face of market fluctuations: "The stock market is designed to transfer money from the Impatient to the Patient."
Show this quote
Buying when others are fearful: "Be fearful when others are greedy, and be greedy when others are fearful."
Show this quote
Avoiding unnecessary risks: "The first rule of investment is don't lose money; the second rule is don't forget the first rule."
Show this quote
The importance of a strong work ethic: "The key to success is to keep learning, growing, and working all the time."
Show this quote
The value of a good reputation: "It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently."
Show this quote
On me personally what has been the most important was to understand the value of time -- and this is something that has come from observing him, learning his story and that time compounds. What you do when you are young (and as you use time over your life) can have an exponential effect so that if you are thoughtful about it, you can really have powerful results later, if you want to.Also, that is a reason to be hopeful, because compounding is something that happens pretty quickly. If you are 50 or 60, it is not too late. He said to me one time, if there is something you really want to do, don't put it off until you are 70 years old. ... Do it now. Don't worry about how much it costs or things like that, because you are going to enjoy it now. You don't even know what your health will be like then.On the other hand, if you are investing in your education and you are learning, you should do that as early as you possibly can, because then it will have time to compound over the longest period. And that the things you do learn and invest in should be knowledge that is cumulative, so that the knowledge builds on itself. So instead of learning something that might become obsolete tomorrow, like some particular type of software [that no one even uses two years later], choose things that will make you smarter in 10 or 20 years. That lesson is something I use all the time now.
Show this quote
Everybody wants attention and admiration. Nobody wants to be criticized. The sweetest sound in the English language is the sound of a persons own name. The only way to get the best of an argument is to avoid it. If you are wrong, admit it quickly and emphatically. Ask questions instead of giving direct orders. Give the other person a fine reputation to live up to. Call attention to peoples mistakes indirectly. Let the other person save face.
Show this quote
Time is the friend of the wonderful business, the enemy of the mediocre.
Show this quote
The big question about how people behave is whether theyve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard. I always pose it this way. I say: Lookit. Would you rather be the worlds greatest lover, but have everyone think youre the worlds worst lover? Or would you rather be the worlds worst lover but have everyone think youre the worlds greatest lover? Now, thats an interesting question.
Show this quote
Intensity is the price of excellence.
Show this quote
Whos my most valuable client? And he decided it was himself. So he decided to sell himself an hour each day. He did it early in the morning, working on these construction projects and real estate deals. Everybody should do this, be the client, and then work for other people, too, and sell yourself an hour a day.
Show this quote
Basically, when you get to my age, you'll really measure your success in life by how many of the people you want to have love you actually do love you.I know people who have a lot of money, and they get testimonial dinners and they get hospital wings named after them. But the truth is that nobody in the world loves them. If you get to my age in life and nobody thinks well of you, I don't care how big your bank account is, your life is a disaster.That's the ultimate test of how you have lived your life. The trouble with love it that you can't buy it. You can buy sex. You can buy testimonial dinners. You can buy pamphlets that say how wonderful you are. But the only way to get love is to be lovable. It's very irritating if you have a lot of money. You'd like to think you could write a check: I'll buy a million dollars' worth of love. But it doesn't work that way. The more you give love away, the more you get." Warren Buffett
Show this quote
Stocks are the things to own over time. Productivity will increase and stocks will increase with it. There are only a few things you can do wrong. One is to buy or sell at the wrong time. Paying high fees is the other way to get killed. The best way to avoid both of these is to buy a low-cost index fund, and buy it over time. Be greedy when others are fearful, and fearful when others are greedy, but dont think you can outsmart the market. If a cross-section of American industry is going to do well over time, then why try to pick the little beauties and think you can do better? Very few people should be active investors.
Show this quote
Be fearful when others are greedy, and greedy when others are fearful. This was the time to be greedy.33
Show this quote
gold standard, which the United States had dropped in 1933. Ever since, the Treasury had been printing money freely to finance first the New Deal and now the war. Howard feared that someday the United States might wind up like Germany in the 1920s, when people had to cart wheelbarrows of money down the street to buy a head of cabbagethe direct result of Germany being forced to deplete its gold stock to pay reparations after World War I.1 The economic chaos that resulted was one of the major factors that had led to Hitler.
Show this quote
I feel like Im on my back, and theres the Sistine Chapel, and Im painting away. I like it when people say, Gee, thats a pretty good-looking painting. But its my painting, and when somebody says, Why dont you use more red instead of blue? Good-bye. Its my painting. And I dont care what they sell it for. The painting itself will never be finished. Thats one of the great things about it.
Show this quote
As Buffett liked to put it, Intensity is the price of excellence.
Show this quote
The Keoughs were wonderful neighbors, he said. Its true that occasionally Don would mention that, unlike me, he had a job, but the relationship was terrific. One time my wife, Susie, went over and did the proverbial Midwestern bit of asking to borrow a cup of sugar, and Dons wife, Mickie, gave her a whole sack. When I heard about that, I decided to go over to the Keoughs that night myself. I said to Don, Why dont you give me twenty-five thousand dollars for the partnership to invest? And the Keough family stiffened a little bit at that point, and I was rejected. I came back sometime later and asked for the ten thousand dollars Clarke referred to and got a similar result. But I wasnt proud. So I returned at a later time and asked for five thousand dollars. And at that point, I got rejected again. So one night, in the summer of 1962, I started heading over to the Keough house. I dont know whether I would have dropped it to twenty-five hundred dollars or not, but by the time I got to the Keough household, the whole place was dark, silent. There wasnt a thing to see. But I knew what was going on. I knew that Don and Mickie were hiding upstairs, so I didnt leave. I rang that doorbell. I knocked. Nothing happened. But Don and Mickie were upstairs, and it was pitch-black. Too dark to read, and too early to go to sleep. And I remember that day as if it were yesterday. That was June twenty-first, 1962. Clarke, when were you born? March twenty-first, 1963. Its little things like that that history turns on. So you should be glad they didnt give me the ten thousand dollars.
Show this quote
The big question about how people behave is whether theyve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard.
Show this quote
he worked with a passion for the future he saw ahead of him, right there in sight. He wanted money. It could make me independent. Then I could do what I wanted to do with my life. And the biggest thing I wanted to do was work for myself. I didnt want other people directing me. The idea of doing what I wanted to do every day was important to me.
Show this quote
The big question about how people behave is whether theyve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard. I always pose it this way. I say: Lookit. Would you rather be the worlds greatest lover, but have everyone think youre the worlds worst lover? Or would you rather be the worlds worst lover but have everyone think youre the worlds greatest lover? Now, thats an interesting question. Heres another one. If the world couldnt see your results, would you rather be thought of as the worlds greatest investor but in reality have the worlds worst record? Or be thought of as the worlds worst investor when you were actually the best? In teaching your kids, I think the lesson theyre learning at a very, very early age is what their parents put the emphasis on. If all the emphasis is on what the worlds going to think about you, forgetting about how you really behave, youll wind up with an Outer Scorecard. Now, my dad: He was a hundred percent Inner Scorecard guy. He was really a maverick. But he wasnt a maverick for the sake of being a maverick. He just didnt care what other people thought. My dad taught me how life should be lived. Ive never seen anybody quite like him.
Show this quote
He flaunted obnoxious feats of memory by quoting page numbers and passages back in class and correcting his teachers on their text citations.14 You forgot the comma, he said to one.15
Show this quote
You should never, when facing some unbelievable tragedy, let one tragedy increase into two or three through your failure of will, he would later say.14
Show this quote
He added one catch: She must sign a noncompete agreement, a contract designed so that she could never again compete with him. This was something he wished hed done before. The absurdity of imposing a noncompete agreement on a ninety-nine-year-old woman was far from lost on him. Nevertheless, Buffett was taking no chances.
Show this quote
I learned that it pays to hang around with people better than you are, because you will float upward a little bit. And if you hang around with people that behave worse than you, pretty soon youll start sliding down the pole. It just works that way.
Show this quote
if you thought of yourself as having a card with only twenty punches in a lifetime, and every financial decision used up one punch. Youd resist the temptation to dabble. Youd make more good decisions and youd make more big decisions.
Show this quote
There are certain things that cannot be adequately explained to a virgin either by words or pictures.
Show this quote
Buffett rocks back in his chair, long legs crossed at the knee behind his father
Show this quote
I was in this Charlie Mungerinfluenced type transitionsort of back and forth. It was kind of like during the Protestant Reformation. And I would listen to Martin Luther one day and the Pope the next. Ben Graham, of course, being the Pope.
Show this quote
He was prone to deluging his friends with mountains of clippings and reading material that he thought would interest them.
Show this quote
He thought of partners as people who had come together out of a complex set of shared values and interests, not out of short-term economic convenience.
Show this quote
Along with his Company A and Company B teaching method, Graham used to talk about Class 1 and Class 2 truths. Class 1 truths were absolutes. Class 2 truths became truths by conviction. If enough people thought a companys stock was worth X, it became worth X until enough people thought otherwise. Yet that did not affect the stocks intrinsic valuewhich was a Class 1 truth.
Show this quote
The modern Berkshire Hathaway that he had created churned out new beads for the rosary almost like a clockwork. Buffetts hunt for things to buy had become more ambitious, free of the cigar butts and lawsuits of the decades before. The great engine of compounding worked as a servant on his behalf, at exponential speed and under the gathering approval of a public gaze. The method was the same: estimate an investments intrinsic value, handicap its risk, buy using margin of safety, concentrate, stay in the circle of competence, let it roll as compounding did the work. Anyone could understand these simple ideas, but few could execute them. Even though Buffett made the process look effortless, the technique and discipline underlying it actually did involve an enormous amount of work for him and his employees. As
Show this quote
themselves. It is very biblical and very true that everyone who exalts themselves will be humbled and he who humbles himself will be exalted. That is a text for all of us. It was lived by Katharine Graham.
Show this quote
to catch his rhythm. People ask me where they should go to work, and
Show this quote
At age forty-seven, Warren had already accomplished everything he had ever imagined he could want. He was worth $72 million. He ran a company that was worth $135 million.41 His newspaper had won the two highest prizes in journalism. He was one of the most important men in Omaha and increasingly prominent at a national level. He was serving on the boards of the largest local bank, the Washington Post, and a number of other companies. He had been CEO of three companies and had bought and sold successfully more stocks than most people could name in a lifetime. Most of his original partners were now enormously rich. All he wanted was to keep on making money for the thrill of it without changing anything else about his life. He
Show this quote
at Berkshire Hathaway headquarters are dressed. His predictable white shirt sits low on the neck, its undersize collar bulging away from his tie, looking left over from his days as a young businessman, as if he had forgotten to check
Show this quote
In five years, $1,000 became more than $1,600. In ten years, it became almost $2,600. In twenty-five years, it became more than $10,800. The way that numbers exploded as they grew at a constant rate over time was how a small sum could turn into a fortune. He could picture the numbers compounding as vividly as the way a snowball grew when he rolled it across the lawn. Warren began to think about time in a different way. Compounding married the present to the future. If a dollar today was going to be worth ten some years from now, then in his mind the two were the same.
Show this quote
When I was sixteen, I had just two things on my mindgirls and cars, Buffett would say, taking a little poetic license here by leaving out the part about the money. I wasnt very good with girls. So I thought about cars. I thought about girls, too, but I had more luck with cars. Lets say that when I turned sixteen, a genie had appeared to me. And that genie said, Warren, Im going to give you the car of your choice. Itll be here tomorrow morning with a big bow tied on it. Brand-new. And its all yours. Having heard all the genie stories, I would say, Whats the catch? And the genie would answer, Theres only one catch. This is the last car youre ever going to get in your life. So its got to last a lifetime.
Show this quote
allies are essential; that commitments are so sacred that by nature they should be rare; and that grandstanding rarely gets anything done.
Show this quote
When Warren was a little boy fingerprinting nuns and collecting bottle caps, he had no knowledge of what he would someday become. Yet as he rode his bike through Spring Valley, flinging papers day after day, and raced through the halls of The Westchester, pulse pounding, trying to make his deliveries on time, if you had asked him if he wanted to be the richest man on earthwith his whole heart, he would have said, Yes.That passion had led him to study a universe of thousands of stocks. It made him burrow into libraries and basements for records nobody else troubled to get. He sat up nights studying hundreds of thousands of numbers that would glaze anyone elses eyes. He read every word of several newspapers each morning and sucked down the Wall Street Journal like his morning Pepsi, then Coke. He dropped in on companies, spending hours talking about barrels with the woman who ran an outpost of Greif Bros. Cooperage or auto insurance with Lorimer Davidson. He read magazines like the Progressive Grocer to learn how to stock a meat department. He stuffed the backseat of his car with Moodys Manuals and ledgers on his honeymoon. He spent months reading old newspapers dating back a century to learn the cycles of business, the history of Wall Street, the history of capitalism, the history of the modern corporation. He followed the world of politics intensely and recognized how it affected business. He analyzed economic statistics until he had a deep understanding of what they signified. Since childhood, he had read every biography he could find of people he admired, looking for the lessons he could learn from their lives. He attached himself to everyone who could help him and coattailed anyone he could find who was smart. He ruled out paying attention to almost anything but businessart, literature, science, travel, architectureso that he could focus on his passion. He defined a circle of competence to avoid making mistakes. To limit risk he never used any significant amount of debt. He never stopped thinking about business: what made a good business, what made a bad business, how they competed, what made customers loyal to one versus another. He had an unusual way of turning problems around in his head, which gave him insights nobody else had. He developed a network of people whofor the sake of his friendship as well as his sagacitynot only helped him but also stayed out of his way when he wanted them to. In hard times or easy, he never stopped thinking about ways to make money. And all of this energy and intensity became the motor that powered his innate intelligence, temperament, and skills.
Show this quote
The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine, Buffett said. So if you had your choice, if you could put a hundred million dollars into a business that earns twenty percent on that capitaltwenty millionideally, it would be able to earn twenty percent on a hundred twenty million the following year and on a hundred forty-four million the following year and so on. You could keep redeploying capital at [those] same returns over time. But there are very, very, very few businesses like that...we can move that money around from those businesses to buy more businesses.
Show this quote
There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it.
Show this quote
Be fearful when others are greedy, and greedy when others are fearful.
Show this quote
Remember one thing, Warren: Money isnt making that much difference in how you and I live. Were both going down to the cafeteria for lunch and working every day and having a good time. So dont worry too much about money, because it wont make much difference in how you live.
Show this quote
Balzac said that behind every great fortune lies a crime.1 Thats not true at Berkshire.
Show this quote
I had these Whitman coin boards with slots for the coins. I said to Don, It looks to me like we could take these coin boards and use them as molds for casting slugs. Danly was the brains of the operation. And so, sure enough, he learned how to pour these molds for casting slugs, and I supplied the coin boards. We would try to use the slugs for vending machines for soda pop and things like that. Our basic formula was to have our income in currency and our outgo in slugs.
Show this quote
Lose money for the firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless.
Show this quote
The Buffetts followed the trail blazed by earlier SUVs a few miles onward from the airport to the tiny town of Ketchum, near the turnoff to the Elkhorn Pass. A few miles later, they rounded Dollar Mountain, where a green oasis appeared, nestled among the brown slopes. Here amid the lacy pines and shimmering aspens lay Sun Valley, the mountains most fabled resort.
Show this quote
Praise by name, criticize by category.
Show this quote
he argued with Susie that she had been conned into spending too much money on Howard's coffin.
Show this quote
It is unclear how many people at the table understood focus as Buffett lived that word. This kind of innate focus couldnt be emulated. It meant the intensity that is the price of excellence. It meant the discipline and passionate perfectionism that made Thomas Edison the quintessential American inventor, Walt Disney the king of family entertainment, and James Brown the Godfather of Soul. It meant single-minded obsession with an ideal.
Show this quote
As longtime friends observed, Howie was a hell-raiser. The inexhaustible Buffett energy poured from him in such a whirlwind that he was nicknamed the Tornado, a cousin to Warrens childhood nickname, Fireboltbut with a very different connotation.
Show this quote
By the late 1960s, however, the rising market had made investing in stocks less viable. The advantage of celebrity when trying to buy entire businesses began to outweigh the benefit of secrecy in buying stocks.
Show this quote
