Warren Buffett on Sex

The Motley Fool is sending a team of analysts to Omaha to deliver real-time coverage of "Woodstock for Capitalists" -- the Berkshire Hathaway annual meeting. Follow along with their insights, notes, and videos at www.berkshire.fool.com. In the meantime, enjoy this classic Berkshire article straight from the Foolish archives!

Besides being the world's greatest investor, Berkshire Hathaway's (NYSE: BRK-A  ) (NYSE: BRK-B  ) Warren Buffett is a Michelangelo when it comes to drawing analogies. He is a master at distilling complex concepts into humorous one-liners that we can understand. And we tend to trust him because he only speaks about, and invests in, what he knows. He develops decades-long relationships with portfolio holdings including Coca-Cola  (NYSE: KO  ) , Wells Fargo  (NYSE: WFC  ) , and American Express  (NYSE: AXP  ) ; while he's been known to sneak a peek at companies outside his circle of competence, you'll never see him stray to Google or Cisco.

What does all this have to do with sex, you ask? Well, we already know that Buffett tends to stick to stuff he understands in and out. We also know that his analogies frequently involve sex. Ahem. You can connect the dots yourself. To help you, here are our favorite Warren Buffett thoughts on sex!

Buffett's advice seems to be to start early -- and we ain't talkin' retirement planning:
On being active: "It's nice to have a lot of money, but you know, you don't want to keep it around forever. I prefer buying things. Otherwise, it's a little like saving sex for your old age."
On career advice: "A few months ago I was talking to another MBA student, a very talented man, about 30 years old from a great school with a great resume. I asked him what he wanted to do for his career, and he replied that he wanted to go into a particular field, but thought he should work for McKinsey for a few years first to add to his resume. To me that's like saving sex for your old age. It makes no sense."
On loving your job: "You want to have a passion for what you are doing. You don't want to wait until 80 to have sex."

All this bedroom talk may have you wondering whether Buffett is straying too far outside his primary circle of competence. Not to worry:
On ninja-like focus: "You know, if I'm playing bridge and a naked woman walks by, I don't ever see her."
On due diligence: "Other guys read Playboy, I read annual reports."
On over-diversification: "If you have a harem of 40 women, you never get to know any of them very well."

Of course, maybe we're underestimating how large his circle is:
On internal yardsticks: "Would you prefer to be the greatest lover in the world and known as the worst, or would you prefer to be the worst lover and known as the greatest?"

Sometimes opportunity knocks. Gather ye rosebuds while ye may:
On investing in 1973: "I feel like an oversexed guy on a desert island. I can't find anything to buy."
On investing in 1974: "I feel like an oversexed man in a harem. This is the time to start investing."

An indecent proposal:
On selling your business to Berkshire vs. private equity: "You can sell it to Berkshire, and we'll put it in the Metropolitan Museum; it'll have a wing all by itself; it'll be there forever. Or you can sell it to some porn shop operator, and he'll take the painting and he'll make the boobs a little bigger and he'll stick it up in the window, and some other guy will come along in a raincoat, and he'll buy it.''

"Buy and hold" ain't dead:
On becoming a true investor: "We believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a 'romantic.'"

Some insights into the current economic situation that make us wonder which of these he's tried:
On the first stimulus package: "[It was like] half a tablet of Viagra and then having also a bunch of candy mixed in -- it doesn't have really quite the wallop."
Solicited to buy Bear Stearns, and asked if he wanted more information (from the Kate Kelly book Street Fighters): "It was sort of like having a woman standing in front of you who had taken half her clothes off and then asked whether she should continue, [Buffett] thought. Just as he'd want the woman to finish the job, he was certainly curious to hear what was happening that weekend with the embattled Bear."
On the speed of economic recovery: "You can't produce a baby in one month by getting nine women pregnant. It just doesn't work that way."

Buffett knew a girl who knew a guy who knew a credit default swap:
On financially transmitted diseases: "Derivatives are like sex. It's not who we're sleeping with, it's who they're sleeping with that's the problem."

We showed you ours -- now show us yours (Buffett quotes in the comments section, that is).

Morgan Housel owns shares of Berkshire Hathaway. Anand Chokkavelu owns shares of Berkshire Hathaway, Cisco, Wells Fargo, and warrants on Wells Fargo. The Motley Fool owns shares of Coca-Cola, Berkshire Hathaway, Cisco Systems, and Google. The Fool owns shares of and has created a covered strangle position in Wells Fargo. Motley Fool newsletter services have recommended buying shares of Coca-Cola, Berkshire Hathaway, Wells Fargo, and Google. Motley Fool newsletter services have recommended creating a write covered strangle position in American Express. The Motley Fool has a disclosure policy.
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Read/Post Comments (7) | Recommend This Article (31)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 01, 2012, at 2:51 PM, DoctorLewis4 wrote:

    "Beware of geeks bearing formulas."

  • Report this Comment On May 01, 2012, at 10:35 PM, skypilot2005 wrote:

    A Contrarian view for the benefit of younger Fools:

    http://blogs.wsj.com/marketbeat/2012/03/05/gold-fund-manager...

    State Street Strategist: Buffett Missed Apple Too!

    By Matt Phillips

    3/5/12

    "Warren Buffett has been pooh-poohing the prospects of owning the yellow metal publicly for about as long as we can remember. But he’s been pounding the drum against gold quite a bit lately, basically arguing that it’s an example of an asset “that will never produce anything, but that are purchased in the buyer’s hope that someone else—who also knows that the assets will be forever unproductive—will pay more for them in the future.”

    Today a gold lover fired back. Bloomberg reports that Christopher Goolgasian, a portfolio manager at State Street Global Advisors Inc., Head of U.S. Portfolio Management-Investment Solutions Group at State Street Global Advisors Inc., which markets the SPDR Gold Trust. Goolgasian invoked the Oracle’s name in a regulatory filing. Here’s Bloomie:

    “While he won’t own gold, he also never owned Apple (up around 1,500% since January of 2000) or Google (up 530% since August of 2004),” Goolgasian said of Buffett in a March 2 regulatory filing for SPDR Gold Trust, an exchange-traded fund managed marketed by Boston-based State Street Corp. (STT)

    In the filing, Goolgasian wrote that while Buffett’s Berkshire Hathaway Inc (BRK\A). has risen 105 percent since January of 2000, gold has climbed nearly fivefold during the same period."

    I have great respect for Mr. Buffet and wish him well.

    All the best.

    Sky

  • Report this Comment On May 02, 2012, at 12:57 AM, tshk1221 wrote:

    Buffett tries to avoid looking like a math geek by always acting like a cool gambler, when in fact, he was the true math geek who understood and applied present/future value analysis, their relationship to acquisition costs, stock values and intrinsic values..Literally, Buffett has been the best math-driven business appraiser in the US stock market for the last five decades. All of his analysis is based on math and can be mathematically formulated. This is his hidden face of "Math rules."

  • Report this Comment On May 02, 2012, at 1:26 AM, mikenpdx wrote:

    Funny!

  • Report this Comment On May 02, 2012, at 1:33 AM, tshk1221 wrote:

    Stock market is a huge interwoven texture of capital composed of each company's balance sheet (A=E+L) and income statement (Revenues = Earnings + Expenses). Math, right? All of their income statements and balance sheets are inter-connected to each other, mathematically functioning with each other's. Stock market itself draws money from investors with the power of money gravity.

    Be a conservative and long-term driven math geek than an aggressive and short-term driven gambler to make an ultimate winner in the end.

  • Report this Comment On May 02, 2012, at 11:00 AM, maazzoo69 wrote:

    "Derivatives are like sex. It's not who we're sleeping with, it's who they're sleeping with that's the problem."

    Well said, Derivatives is gambling and gambling is not investing.

    Warren said it himself: Derivative are financial weapons of mass destruction.

    Fool on!

  • Report this Comment On May 07, 2012, at 10:16 PM, aleax wrote:

    @maazzoo69, Berkshire has several derivatives positions, as he pointed out at this year's meeting -- they're just simple and straightforward ones with no "who they're sleeping with" problems.

    Some operating companies (he specifically mentioned Mid-American and BNSF as the biggies) use derivatives (mostly futures on the relevant commodities, I'd guess) to hedge against price swings on commodities they need to consume regularly to stay in business (e.g, diesel fuel for BNSF running many diesel locomotives). No counterparty risk as they're exchange-traded.

    The holding company has "sold puts" of extremely long duration for many billion dollars on various stock market indices -- European-style options (no risk of premature exercise), cash-settled at expiration many years in the future, paid fully in advance (so, no counterparty risk), and no collateral required (the counterparty clearly trusted Berkshire's solvency).

    WB did say they wouldn't write these puts today, because current law makes collateral mandatory, and that would "freeze" billions (possibly spiking in crises) for far too long to make the almost-certain profits worthwhile.

    Simple, clean, no-counterparty-risk futures in commodities you need to produce or consume as part of your business, and equally simple and clean long-term options on broad stock market indices, are good counter-examples to the "weapons of mass destructions" analogy -- and Berkshire (and its operating companies) uses such "good" derivatives, correctly, and as warranted.

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