Buffett Value Approach

Everyone has nothing but praise for Warren Buffett. He even manages to be self-confessed best-friends with his rival for Planet’s Richest Person, Bill Gates, in a world where surely Hollywood would dictate they are bitter sworn enemies. As judged by the S&P 500, which has grown by a factor of merely 65 during his forty-year operation, his stellar performance is a ginormous 3,623.

In an eleven-minute segment with the always watchable Evan Davis, the near-octogenarian was quizzed on how he’s made so much money, in a maintained respected manner and through such turbulence (find the video and more Beeb content here). Three philosophies immediately strike me.

Investment Bucking

He elaborated on his creed to “be greedy when others are fearful and fearful when others are greedy”. He appears to feel that you should always be doing the opposite of what everyone else is doing.

Asset Incomes

His long-term view was startling. Most people look only at realisation values, when the ‘right’ way is to look at “the stream of income that the asset will produce over time”. So many solution sales campaigns fall when the buyers do not share this outlook. You can but also only admire his remarks about how everyone ought to think of what business they run as being theirs and their family’s for the next hundred years, and make decisions accordingly.

Remove Complication

And to quote from the Beeb, “He believes that if a deal needs complicated calculations before you can decide if it is right, then it probably is not. He always leaves a “margin of safety”, he says, so that if things don’t work out as he’d hoped, he does not lose money.” That first sentence is a must for any solution seller to get their head around.