Tap Dancing to Work

Buffett is at heart a disciple of Benjamin Graham, under whom he studied at Columbia, and as such he believes in seeking out an undervalued company and investing in it heavily. Buffett, in fact, carries the Graham philosophy even further than Graham himself, for Graham was willing to sell out when the price of the stock rose to what he considered its true value. Buffett prefers to buy stocks that he will want to hold indefinitely.

Berkshire Hathaway owns 12 percent of the Washington Post Co.

He offered $12.9 million for station WLWD-TV 2, an NBC affiliate, a price that represented about two-and-one-half times the station’s gross revenues—not overly generous in view of the fact that stations often sell for at least three times revenues. But Avco accepted.

(“A compact organization lets all of us spend our time managing the business rather than managing each other.

“the Yanomamö Indians employ only three numbers: one, two, and more than two.

Buffett’s only articulated rules of investment: “The first rule is not to lose. The second rule is not to forget the first rule.

“With few exceptions, when a manager with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact.

Buffett had an unwritten rule at the time that he would not put more than 25% of the partnership’s money into one security. He broke the rule for American Express, committing 40%, which was $13 million. Some two years later he sold out at a $20 million profit.

“Whenever I read about some company undertaking a cost-cutting program, I know it’s not a company that really knows what costs are all about. Spurts don’t work in this area. The really good manager does not wake up in the morning and say, ‘This is the day I’m going to cut costs,’ any more than he wakes up and decides to practice breathing.