Warren E. Buffett. The most important thing - the history of

Warren E. Buffett. The most important thing - the history of

I have always believed that you can learn more from business failures than business successes. In my company we look at what stage people go astray, and why efforts are not working. We try to avoid mistakes. If my task is to choose the stocks of 10 companies included in the Dow Jones Industrial Average, which would have surpassed the index itself, I probably would not start with the selection of the top 10. Instead, try to choose a 10or 15 worst performance, expelled them from the companies under consideration and would work with the rest. This process of inversion. Albert Einstein said: "Change the order, always change the order in mathematics and physics." This idea is perfect for business. Start with a failure, then arrange for its removal.

Unfortunately ... in business and investing, people with more reliable information when they hear a rumor - especially when they hear it from a senior person - they can not npocmo overcome the desire to follow him.

The annual report "Berkshaer hetevey" for 1989, I wrote about what he called "institutional imperative". I have not studied it at university, but he seems to have a strong effect on how business is actually managed. One of its basic principles - the mechanism of imitation - means any leader feeble effort, no matter how stupid it is, quick to support detailed data rates of return and strategic studies prepared by his staff.

For example, every time when it becomes fashionable to engage in some new direction in business, some companies throw their efforts there. Then, after about five years, they come out of the NZ business, licking wounds. This is a very human, people are doing the same thing with their shares.

To illustrate this, let me tell the story of a spy Oil, who met with St. Peter at the gates of paradise. When he reported on his activities like that, St. Peter replied, "Oh, I'm sorry. By all accounts you seem to be suitable for the garden. But we had the terrible problem. Do you see that hut? This is where we keep the oil scouts waiting for their turn to heaven. And it is filled - we have no room for another "oil scout thought a moment and said," you will not mind if I just say four words to these guys? " - "I do not see anything wrong," - replied St. Peter. Thus, the veteran voice folded his hands and shouted: "In hell, found oil!" Scouts oil immediately pulled out of the door lock and took off outside, struggling flapping wings, trying to get into an underlying terrain. "You know, it's a great trick," - said St. Peter. "Come on. The place is yours. You have complete free space." The old man scratched his head and said: "No. If you do not mind, I'll go along with the rest. In the end, this rumor may be something to and from the truth."

Unfortunately, this is what happens in business and investing ~ ~ People with more accurate information when they hear a rumor - especially when they hear it from a senior person - simply can not overcome the desire to follow him.

On Wall Street, it happens periodically, you can see what is really a mania. Looking back, no one can fully understand how all were involved in some action. The group, lemmings looks like a collection of individualists compared with Wall Street when it is worn on any idea.
Graduate student at Columbia University, I received advice from Ben Graham, the founding father of securities analysis, who never forget: your rightness or wrong is not determined by agreement with you other people. You are right because your facts are valid and correct your argument - and the only thing that proves your case.

And if your facts are true and your reasoning is correct, Neg need to worry because of someone else. Look at the history of activity. The best estimate we can give the competence of personnel and management, does not depend on what people are saying, but only on the fact that history shows. In "Berkshaer hetevey" when we buy some company, usually leaving the one who managed it. Thus, we already have a medium level. Take, for example, the case of Mrs. B., who led our furniture shopping center "Ferniche March." For more than 50-year period we observed: taking $ 500, she transformed it into a business that brought $ 18 million pre-tax profit. So we knew that she was a competent person. She was 97 years old. Strictly speaking, it now competes with us, she started a new business two years ago. Who would have thought that we should enter into an agreement not to compete with the 95-year-old chelovekom7 Obviously, this tutorial says, only the best guide - it's historical experience.

Then you face the problem of 14 year-old horse. Let's say you buy a "Daily Racing Forms", which states that the age of four, this horse won the Kentucky Derby. Based on past performance, you know, it was a great horse. But now she is 14 and she hardly moves his feet. Therefore, you should ask yourself: "What is there in the data of the past, which makes them a poor predictor of the future?"

It is possible that the skin is clear evidence of the past are not available. For example, when you graduated from college, you provide a small bonus: pick any of his fellow student and receive 10 percent of his or her future income. Suddenly you start to look at the entire course in a different way. You've seen them in the classroom, you know their ability and leadership skills. Taking these factors into consideration, you ask yourself, "Whom should I choose?" But how do you think of how good is your choice? It would be much easier if you could make that decision on your ten-year reunion, after you would have seen their real business activities, is not it?

The imposition of such assessments on governance and engaged all the time "Berkshaer hetevey." We try to find the company that we truly believe it would be nice to own. And as the company's shares are sold today, tomorrow, next week or next year, it does not matter. It is important to the state of affairs of the company for a five-or 10-year period. It has nothing to do with tables or figures. We are talking about companies and their management.

Another truth is, I have assimilated the faculty of business: it does not matter if you're even smarter than his own foolish competitor. The trick is to not have competitors. This means a product is really different from others,

For example, a customer walks into a pharmacy and asks the bar of chocolate "Hershey". Seller says: "We have no such, but why do not you get another bar of chocolate, she penny cheaper." A customer says: "I'd rather go to a store front." When a customer goes in front, so you really have a great business.