May 20, 2005

Buffet's talk at Notre Dame

I recently came across the transcript of a talk which buffet gave at Notre dame. A few gems from the talk (paraphrased )
'You don't want to buy a dollar bill that's sitting for 50 cents, and it demands positive
capital, and its going to be a dollar bill ten years from now. You want a dollar bill that's
going to compound at 12%'

'A couple of fast tests about how good a business is. First question is "how long does the
management have to think before they decide to raise prices?" You're looking at
marvelous business when you look in the mirror and say "mirror mirror on the wall, how
much should I charge for Coke this fall?" That's a great business. When you say, like we
used to in the textile business, when you get down on your knees, you know you call in
all the priests, rabbis, and everyone else, "just another half cent a yard". Then you get up
and they say "We won't pay it". Its just night and day. You KNOW those businesses. I
mean, if you walk into a drugstore, and you say "I'd like a Hershey bar" and the man says
"I don't' have any Hershey bars, but I've got this unmarked chocolate bar, and its a nickel
cheaper than a Hershey bar" you just go across the street and buy a Hershey bar. THAT is
a good business.'

The ability to raise prices; the ability to differentiate yourself in a REAL way, and a REAL way means you can charge a different price, that makes a great business.

I'd like to talk to you for just a few minutes about what I regard as the most important
thing in investments and also in terms of your career. Because in your career what train
you get on makes a lot of difference. Because frequently, perhaps generally, when people
get out of business school, they don't give enough thought to exactly what sort of train
they're going to get on. And it makes a tremendous difference whether you get involved
in a prosperous company; one that's going to really do well. On balance, you want to go
with a company whose stock is going to be a good investment over the years because
there's going to be much more opportunity; there's going to be more money made, you're
going to (garbled). And if you get involved with some of the businesses I've been
involved with like trading stamps

One is a marvelous, absolutely sensational business, the other one is a terrible business. If
you have a choice between going to work for a wonderful business that is not capital
intensive, and one that is capital intensive, I suggest that you look at the one that is not
capital intensive.

I read all kinds of business publications. I read a lot of industry publications. Coming in
today on the plane (garbled). I'll grab whatever comes in the morning. American Banker
comes every day, so I'll read that. I'll read the Wall Street Journal. Obviously. I'll read
Editor and Publisher, I'll read Broadcasting, I'll read Property Casualty Review, I'll read
Jeffrey Meyer's Beverage Digest. I'll read everything. And I own 100 shares of almost
every stock I can think of just so I know I'll get all the reports. And I carry around
prospectuses and proxy material. Don't read broker's reports. You should be very careful
with those.
- In addition buffet goes the economics of various businesses such as coke, gillette, textile and other commodity business
A must read for an investor.

1 comment:

Prasanna said...

Can yoy pls provide the link to the full transcript.