Warren Buffett quotes (defining what you don't know)
This is a great example of Peter Bevelin pulling complementary quotes together from different Warren Buffett letters to shareholders in his new book, A Few Lessons for Investors and Managers. The book also includes thoughts from Peter that add to the discussion.
“Though the mathematical calculations required to evaluate equities are not difficult, an analyst - even one who is experienced and intelligent - can easily go wrong in estimating future "coupons." At Berkshire, we attempt to deal with this problem in two ways. (1992)
First, we try to stick to businesses we believe we understand. That means they must be relatively simple and stable in character. If a business is complex or subject to constant change, we're not smart enough to predict future cash flows. Incidentally, that shortcoming doesn't bother us. What counts for most people in investing is not how much they know, but rather how realistically they define what they don't know. (1992)
If we have a strength, it is in recognizing when we are operating well within our circle of competence and when we are approaching the perimeter. (1999)
Intelligent investing is not complex, though 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 its boundaries, however, is vital. (1996)”
- Charlie Munger And Circle Of Competence...
From Charlie Munger: The Complete Investor:Munger has a range of approaches he uses to avoid mistakes. To make this point by analogy, Munger is fond of saying that he wants to know where he will die so he can intentionally never go there. His friend...
- A Few Related Quotes...
As I came across the Russo quote below again, I was reminded of a few others, so I thought I'd group them together. From Tom Russo:…what I have observed about the really great investors is the simple decisions that they end up having to make...
- More From Warren Buffett On Having Good Filters...
Via the notes from the Ivey MBA and HBA student meeting with Warren Buffett: At Berkshire we have certain filters that have been developed. If in the course of a presentation or evaluation part of a proposal[,] an idea hits a filter then there is no way...
- A Few Lessons For Investors And Managers
I had a chance to start reading some of Peter Bevelin’s new book, A Few Lessons for Investors and Managers, last night. Peter has done an excellent job combining Warren Buffett’s words over the years into a simple, easy-to-read structure, and then...
- What's Your Investing Edge?
Patience is bitter, but its fruit is sweet. - RousseauI recently attended the CFA Society of Chicago's annual dinner where a fellow attendee and I discussed how one of the more humbling things about going through the CFA Program, besides the difficulty...