Buffett’s 2014 letter: Corporate cancers, preachers of pessimism and lessons of history

In his annual letter to Berkshire Hathaway shareholders, Chairman and Chief Executive Warren Buffett continues his tradition of delivering all sorts of cleverly worded musings on the markets. Here are 13 of the choicest quotes.


Warren Buffett’s best zingers aren’t always just one line

In his annual letter to Berkshire Hathaway shareholders, Chairman and Chief Executive Warren Buffett continues his tradition of delivering all sorts of cleverly worded musings on the markets, on the state of American business and on his own quirks and peculiarities (and how they affect his relationship with longtime Berkshire vice-chair, Charlie Munger.)

If you have the time, it’s always worth reading the whole epistle. If not, we’ve settled on 13 of the choicest quotes.

“At Berkshire, we much prefer owning a non-controlling but substantial portion of a wonderful company to owning 100% of a so-so business. It’s better to have a partial interest in the Hope Diamond than to own all of a rhinestone. “

“My successor will need one other particular strength: the ability to fight off the ABCs of business decay, which are arrogance, bureaucracy and complacency. When these corporate cancers metastasize, even the strongest of companies can falter.”

“In the world of business, bad news often surfaces serially: You see a cockroach in your kitchen; as the days go by, you meet his relatives.” (Read more about that one here.)

“Who has ever benefited during the past 238 years by betting against America? If you compare our country’s present condition to that existing in 1776, you have to rub your eyes in wonder. In my lifetime alone, real per-capita U.S. output has sextupled. My parents could not have dreamed in 1930 of the world their son would see. Though the preachers of pessimism prattle endlessly about America’s problems, I’ve never seen one who wishes to emigrate (though I can think of a few for whom I would happily buy a one-way ticket).”

“The unconventional, but inescapable, conclusion to be drawn from the past fifty years is that it has been far safer to invest in a diversified collection of American businesses than to invest in securities — Treasuries, for example — whose values have been tied to American currency. That was also true in the preceding half-century, a period including the Great Depression and two world wars. Investors should heed this history. To one degree or another it is almost certain to be repeated during the next century.”

“Market forecasters will fill your ear but will never fill your wallet.”

“If you’ve attended our annual meetings, you know Charlie has a wide-ranging brilliance, a prodigious memory, and some firm opinions. I’m not exactly wishy-washy myself, and we sometimes don’t agree. In 56 years, however, we’ve never had an argument. When we differ, Charlie usually ends the conversation by saying: ‘Warren, think it over and you’ll agree with me because you’re smart and I’m right.’”

“We will never play financial Russian roulette with the funds you’ve entrusted to us, even if the metaphorical gun has 100 chambers and only one bullet. In our view, it is madness to risk losing what you need in pursuing what you simply desire.”

“Business models based on the serial issuances of overpriced shares — just like chain-letter models — most assuredly redistribute wealth, but in no way create it. Both phenomena, nevertheless, periodically blossom in our country — they are every promoter’s dream — though often they appear in a carefully-crafted disguise. The ending is always the same: Money flows from the gullible to the fraudster. And with stocks, unlike chain letters, the sums hijacked can be staggering.”

“At a healthy business, cash is sometimes thought of as something to be minimized — as an unproductive asset that acts as a drag on such markers as return on equity. Cash, though, is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent.”

“(We) frequently get approached about acquisitions that don’t come close to meeting our tests: We’ve found that if you advertise an interest in buying collies, a lot of people will call hoping to sell you their cocker spaniels.”

“Berkshire’s yearend employees — including those at Heinz — totaled a record 340,499, up 9,754 from last year. The increase, I am proud to say, included no gain at headquarters (where 25 people work). No sense going crazy.”

“Though practically all days are relatively uneventful, tomorrow is always uncertain. (I felt no special apprehension on December 6, 1941 or September 10, 2001.)”.

Read more here

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