It pays to listen closely to anything and everything Warren Buffett has to say on business and investing. Continuing from part one, I've gathered more prudent words of investment wisdom from the Oracle of Omaha.
"You should invest like a Catholic marries -- for life."
When investing, you should look for businesses strong enough to endure for decades. And just as with marriage, you should be sure that this particular investment is better than any other alternative. If you invest with this lifelong approach, you will begin to focus on the important attributes of the business, rather than concerning yourself with insignificant hiccups. Buffett never concerns himself with a business's temporary setbacks, as long the important factors -- good management, low capital requirements, and durable economic advantages -- remain intact.
"You should invest in businesses that a fool can run, because someday, a fool will."
We're talking about small-f fools here, of course. A really good business will be able to withstand the poor decision-making of incompetent management. Every business life cycle will undoubtedly contain periods of superior and inferior management alike. Coca-Cola
"My idea of group decision-making is to look in the mirror."
Long-term success in investing requires the ability to go against the herd. Buffett's best investments have come at some of the direst moments in a company's history. If Buffett had relied on public opinion, he would have never invested in Berkshire Hathaway
"You pay a very high price in the stock market for a cheery consensus."
If you let Mr. Market guide you, you'll pay a costly price indeed. The market will usually overcharge you for the investment du jour, but what goes up must come down, and vice versa. Right now, everyone is high on Google
"If you lose money, I will be understanding. If you lose our reputation, I will be ruthless."
That's what Buffett told the staff of Salomon Brothers during the Treasury securities scandal in 1991. It's also what Buffett tells his managers: Berkshire can afford to lose money, but not an ounce of reputation. In business and life, your reputation is the most important attribute. Buffett's reputation for integrity is so unquestionable that he's often sought out as the buyer of choice for companies seeking a good home. Buffett has earned his reputation over the past 50 years, and he's acutely aware that it would only take seconds of poor judgment to destroy that reputation.
Lessons for corporate America
Lawrence Cunningham assembled a wonderful book, The Essays of Warren Buffett: Lessons for Corporate America. Buffett himself has stated that it's one of his favorites, since the book is a compilation of Buffett's direct words. Even the Fool has a quote on the back, praising the book as "one of the top investment books of all time." I couldn't agree more. Cunningham does a masterful job of collating some of Buffett's best philosophies, making his book -- and Buffett's words -- an excellent tool for any serious investor.
Fool contributor Sham Gad runs the Gad Partners Funds, a newly launched private investment partnership modeled after the 1950s Buffett Partnerships. He has no positions in the companies mentioned. He can be reached at firstname.lastname@example.org. The Fool's disclosure policy has a fondness for steaks and cherry Coke.