Warren Buffett Speaks: Wit and Wisdom from the World’s Greatest Investor

Chapter . About Investing

Warren Buffett employs investment principles that he describes as “simple, old, and few.”^[1] Many of Buffett’s methods evolve from his personality and character. Others he has learned from teachers and experience. Like all good students, he uses his training as a foundation. In time, he stacked the bricks far higher than his best teachers.

Have a Philosophy

“Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.”^[2]

“Over the years, a number of very smart people have learned the hard way that a long stream of impressive numbers multiplied by a single zero always equals zero.”^[3]

Buffett returns again and again to Ben Graham:

“I consider there to be three basic ideas, ideas that if they are really ground into your intellectual framework, I don’t see how you could help but do reasonably well in stocks. None of them are complicated. None of them take mathematical talent or anything of the sort. [Graham] said you should look at stocks as small pieces of the business. Look at [market] fluctuations as your friend rather than your enemy—profit from folly rather than participate in it. And in [the last chapter of The Intelligent Investor], he said the three most important words of investing: ‘margin of safety.’ I think those ideas, 100 years from now, will still be regarded as the three cornerstones of sound investing.”^[4]

Buffett summarizes Graham this way:

“When proper temperament joins with proper intellectual framework, then you get rational behavior.” ...