Warren Buffett: Overreaching

“The job of the board is to get the right CEO, to prevent that CEO from overreaching. Because sometimes you have some people that are very able, but they still want to take it all for themselves. But if they take nothing and they’re the wrong CEO, they’re still a disaster. So low pay itself is not the criteria. So you want the right CEO. You do not want them overreaching. And then I think the board needs to exercise independent judgment on important acquisitions, because I think CEOs — even smart CEOs — are motivated, frequently, in acquisitions by other than rational reasons.”

—Warren Buffett.

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Warren Buffett: Bars

“There are things in life that you don’t have to make a decision on and that are too hard…. One of the interesting things about investment is that there’s no degree of difficulty factor…. We get paid, not for jumping over 7-foot bars, but for stepping over 1-foot bars. And the biggest thing we have to do is decide which ones are the 1-foot bars and which ones are the 7-foot bars so when we go to step we don’t bump into the bar. And that is something that I think we’re reasonably good at. Now maybe we cast out too many things as being too hard and thereby narrow our universe. But I’d rather have the universe be interpreted as being a little smaller than it really is, than being interpreted as larger than it is.”

—Warren Buffett.

Warren Buffett: Financial institutions

“If you’re analyzing something like WD-40, or See’s Candy, or our brick business, or whatever…they may have good or bad prospects but you’re not likely to be fooling yourself much about what’s going on currently. But with financial institutions, it’s much tougher. Then you throw in derivatives on top of it, and…no one probably knows perfectly — or even within a reasonable range — the exact condition of some of the biggest banks in the world…. I just think you have to accept the fact that insurance, banking, finance companies — we’ve seen all kinds of finance company…frauds and just big mistakes over time — just one after another over the years. It’s just a more dangerous field to analyze. It doesn’t mean you can’t make money in it. We’ve made a lot of money on it. But it’s difficult.” —Warren Buffett.

Warren Buffett: Simplicity itself

“We haven’t succeeded because we had great complicated systems or some magic formulas we apply or anything. We’ve succeeded because we have simplicity itself. We take people that know how to play their game very well, and we let them play the game. And it’s just worked in one field after another. And every now and then we make a mistake. And there’ll be more mistakes made. But overwhelmingly, it works.” –Warren Buffett.

Warren Buffett: Macro forecast of stocks

“Charlie and I spend no time thinking or talking about what the stock market is going to do, because we don’t know. We do know, sometimes, that we’re getting very good value for our money when we buy some stocks or some bonds. But we are not operating on the basis of any kind of macro forecast about stocks. And there’s always a list of reasons…why the country will have problems tomorrow. But there’s always a list of opportunities which don’t get mentioned quite as often.” –Warren Buffett.

Warren Buffett: When they’re scared, they’re scared

“People get smarter but they don’t get wiser. They don’t get more emotionally stable. All the conditions for extreme overvaluation or undervaluation absolutely exist, the way they did 50 years ago. You can teach all you want to the people, you can tell them to read Ben Graham’s book, you can send them to graduate school, but when they’re scared, they’re scared.” —Warren Buffett.