Warren Buffett on Knowledge

"Upon leaving , our feelings about the business mirrored a line in a country song: "I liked you better before I got to know you so well."

"Risk comes from not knowing what you’re doing. "The Three Essential Warren Buffett Quotes To Live By" forbes.com"

"There's a whole bunch of things I don't know a thing about — I just stay away from those. So, I stay within what I call my circle of competence."

"It’s simply to say that managers and investors alike must understand that accounting numbers is the beginning, not the end, of business valuation."

"What counts for most people in investing is not how much they know, but rather how realistically they define what they don't know. "The genius of Warren Buffett in 23 quotes" MarketWatch"

"We're going to move a lot of crude in this country, and we have to learn how to do it very safely. "Buffett: Moving Oil By Rail Safely Is A Major Industry Concern" Investing.com"

"If you don't know jewelry, know the jeweler."

"You... have to have the knowledge to... make a very general estimate about the value of the underlying businesses. But you do not cut it close. That is what Ben Graham meant by having a margin of safety."

"The common intellectual theme of the investors from Graham-Doddsville is this: they search for discrepencies between the value of a business and the price of small pieces of that business in the market... through the medium of marketable stocks..."

"I like to study failure, actually. My partner says, "I want to know where I'll die so I'll never go there." We want to see what has caused businesses to go bad. The biggest thing that kills them is complacency. ... The danger would always be that you rest on your laurels."

"We're more comfortable in that kind of business. It means we miss a lot of very big winners. But we wouldn't know how to pick them out anyway. It also means we have very few big losers - and that's quite helpful over time. We're perfectly willing to trade away a big payoff for a certain payoff."

"But a pin lies in wait for every bubble. And when the two eventually meet, a new wave of investors learns some very old lessons: First, many in Wall Street — a community in which quality control is not prized — will sell investors anything they will buy. Second, speculation is most dangerous when it looks easiest."

"It’s a game of a million inferences. There are a lot of things to draw inferences from — cards played and not played. These inferences tell you something about the probabilities. It's got to be the best intellectual exercise out there. You're seeing through new situations every ten minutes. Bridge is about weighing gain/loss ratios. You're doing calculations all the time."

"Walter never went to college, but took a course from Ben Graham at night at the. Walter left Graham-Newman in 1955... He knows how to identify securities that sell at considerably less than their value to a private owner. And that's all he does. ...He simply says, if a business is worth a dollar and I can buy it for 40 cents, something good may happen to me. And he does it over and over again."

"Ben's Mr. Market allegory may seem out-of-date in today's investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising "Take two aspirins"?"

"Those who attended last year saw your Chairman pitch to Ernie Banks. This encounter proved to be the titanic duel that the sports world had long awaited. After the first few pitches — which were not my best, but when have I ever thrown my best? — I fired a brushback at Ernie just to let him know who was in command. Ernie charged the mound, and I charged the plate. But a clash was avoided because we became exhausted before reaching each other."

"It's not like I am reciting... the names of a bunch of lottery winners. ...I knew what they had been taught and ...had some personal knowledge of their intellect, character and temperament. ...his group has assumed far less risk than average; note their record in years when the general market is weak. While they differ greatly in style, these investors are, mentally, always buying the business, not buying the stock. ...ll exploit the difference between the market price of a business and its intrinsic value."

"The approach and strategies are very similar in that you gather all the information you can and then keep adding to that base of information as things develop. You do whatever the probabilities indicated based on the knowledge that you have at that time, but you are always willing to modify your behaviour or your approach as you get new information. In bridge, you behave in a way that gets the best from your partner. And in business, you behave in the way that gets the best from your managers and your employees."

"The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities—that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future—will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There's a problem, though: They are dancing in a room in which the clocks have no hands."

"You know, if I'm playing bridge and a naked woman walks by, I don't ever see her — don't test me on that! … You know, I wouldn't mind going to jail if I had the right three cell mates, so we could play bridge all the time. … It takes some investment to play it … I mean, you cannot sit down and learn how to play it like most games. … There's a lotta lessons in it … you have to look at all the facts. You have to draw inferences from what you've seen, what you've heard. You have to discard improper theories about what the hand had as more evidence comes in sometimes. You have to be open to a possible change of course if you get new information. You have to work with a partner, particularly on defense."