A collection of quotes.
This isn’t sports related content, and contains no analysis.
However, I’ve recently been listening to clips of Charlie Munger and Warren Buffett pretty often. Along the way, I pulled out some interesting quotes, many which pertain to decision making or sense-making under uncertainty.
“I think he also asked, ‘How do you forecast these improvements in P/E ratios?’ Around here, I would say, ‘If our predictions have been a little better than other people’s, it’s because we tried to make fewer of them.’”
— Charlie Munger, 1998 Berkshire Hathaway Annual Meeting
“All options have value, and people that get options usually understand that better than people who give options… It is the nature of prices in this world to change and economic conditions to change, and an option is a chance to participate in the change without give up anything other than that original premium you pay.”
— Warren Buffett, 2002 Berkshire Hathaway Annual Meeting
“If you had to double your money by the end of the year or be shot, you know then I would head for the futures market because you need to do it. You have to introduce borrowed money.”
— Warren Buffett, 1997 Berkshire Hathaway Annual Meeting
“The world changed. Before he died… Ben Graham recognized that the exact way he sought under-valued companies wouldn’t necessarily work for all times under all conditions. That’s certainly the way it worked for us. We gradually morphed into trying to buy the better companies when they were underpriced instead of the lousy companies when they were underpriced.”
— Charlie Munger, 2018 Berkshire Hathaway Annual Meeting
“Time is the friend of the wonderful business: you keep compounding, it keeps doing more business, and keeps making more money. Time is the enemy of the lousy business.”
— Warren Buffett
“I think in the last analysis everything we do come back to opportunity cost… To some considerable extent, we are guessing at our future opportunity cost. Warren is basically saying that he’s guessing that [he’ll have opportunities] in due course to put out money at pretty attractive rates of return, and therefore he’s not going to waste a lot of firepower at lower returns. But that’s an opportunity cost calculation.”
— Charlie Munger, 2003 Berkshire Hathaway Annual Meeting
“A business, or any economic asset, is going to be worth what it produces in the way of cash over its lifetime… All investment is is laying out some money now to get more money back in the future. Now there’s two ways to look at the getting money back. One is from what the asset itself will produce: that’s investment. One is from what somebody else will pay you for it later on, irrespective of what the asset produces, and I call that speculation.”
— Warren Buffett, 2002 Berkshire Hathaway Annual Meeting
“As a general matter, there are only two reasons to buy insurance. One is to protect yourself against a loss that you are unable or unwilling to bear yourself… The second reason… is if you think the insurance company is actually selling you a policy that is too cheap… We try to avoid selling the second kind and concentrate on selling the first kind.”
— Warren Buffett, 1995 Berkshire Hathaway Annual Meeting
“There are certain companies that are exposing themselves… to losses that would wipe them out, and they prefer not to be re-insurance because it’s ‘expensive.’ What they are really doing is betting on something that won’t happen very often happening not at all.”
— Warren Buffett, 1995 Berkshire Hathaway Annual Meeting
“You do something, and the market goes up, and you get paid and rewarded and applauded and what have you: you’re getting a lot reinforcement if you make a bet in the market and the market goes with you. Also, there’s social proof… the prices in the market are the ultimate form of social proof, reflecting what other people think. The combination is very powerful. Why would you expect general market levels to always be totally efficient?”
— Charlie Munger, The Psychology of Human Misjudgement
“You’ve got to array facts on theory structures, answering the question, ‘Why?’. If you don’te do that… you cannot handle the world.”
— Charlie Munger, The Psychology of Human Misjudgement
“Clinical training in medical schools… here’s a profoundly correct way of understanding psychology. The standard practice is watch one, do one, teach one. Boy does that pound in what you want pounded in!”
— Charlie Munger, The Psychology of Human Misjudgement
“Someone once said, ‘The chains of habit are too light to be felt until they are too heavy to be broken.’”
— Warren Buffett
“I’d rather buy a wonderful business at a fair price than a fair business at a wonderful price.”
— Warren Buffett
“You have to understand one thing about the Fed: it’s not as powerful as the mystique would make it. It’s brake is better than it’s gas pedal. When the Fed wants to put it’s foot on the brake, we go through the windshield… Stepping on the gas does not necessarily get the same result.”
— Warren Buffett
“It’s a terrible mistake to sleep-walk through life… If you are in a position to make choices, I always tell the kids that come visit me to go to work for an organization that you admire or an individual that you admire. That means that many of them become self-employed, but…”
— Warren Buffett, 2008 Berkshire Hathaway Annual Meeting
“What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact… That is a talent that everyone seems to have mastered.”
— Warren Buffett, 2002 Berkshire Hathaway Annual Meeting
“Black-Scholes is what I would call a ‘know-nothing’ value system. If you don’t know anything at all about value compared with price—in other words, if price is teaching you all that can be known—then Black-Scholes, on a very short-term basis, is a pretty good guess… The minute you get into longer-term options, where you don’t have the ‘know-nothing’ factor so extreme, it’s crazy to use Black-Scholes. People use it because they want some kind of mechanical system.”
— Charlie Munger