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Collection: Warren Buffett - #318 'Focus On The Business'



I just had an opportunity a couple of weeks ago, I was talking to one of the former managers of the Fidelity Magellan Fund, managed huge amounts of money, and he never really met you. And I was saying, I may have a chance to ask Warren Buffett and Charlie Munger a question. What would that question be? I wanted to have some idea of something intelligent I could ask business-wise.

And he thought if he had the opportunity to talk to you, the best thing is to give you what would sound like a softball question, because you could maybe bring more profoundness to this than we hear, usually. What —

In view of the Iraq war, consumer debt that’s increasing, declining job growth, declining pay in the jobs that are growing, prospects of increased interest rates, he has this view that the next 5 to 10 years are going to be very difficult.

What would your view be about this — the investment future — for the next 5 to 10 years, in view of all these negative factors going on?


That’s too soft for me. I think Warren should take that. (Laughter)


Well, I would say that at any given point in history, including when stocks were their cheapest, you could find an equally impressive number of negative factors.

I mean, you can — you could’ve sat down in 1974 when stocks were screaming bargains, and you could’ve written down all kinds of things that would’ve caused you to say, you know, the future is just going to be terrible.

And similarly, at the top, you know, or anytime, you can write down a large list of things that would be quite on the bullish side.

We don’t pay — we really don’t pay any attention to that sort of thing. I mean, we have —

You might say that our underlying premise — and I think it’s a pretty sound underlying premise — is that this country will do very well, and in particularly, it will do well for business. Business has done very well.

You know, the Dow went from 66 to 10,000-plus in the hundred years of the 20th century. And we had two world wars, and nuclear bombs, and flu epidemics, and you name it, Cold War.

There’s always — there are always — there’s always problems in the future, there are always opportunities in the future. And in this country the opportunities have won out over the problems over time.

And I think they will continue to do so, absent weapons of mass destruction, which is another question. And business won’t make much difference if anything really drastic happens along that line.

So we don’t — I don’t — I can’t remember any discussions Charlie and I have had, ever, going back to 1959, that where we would’ve come to the conclusion at the end of them that we would’ve passed on a great business opportunity — a business to buy — because of external conditions.

Nor did we ever buy anything that we thought was mediocre simply because we thought the world was going to be wonderful. The —

It won’t be the American economy, in my view, that does in investors over a 5, or 10, or 20-year period. It will be the investors themselves.

If you look at the record of the 20th century, you’d say how can anybody have missed, you know, in owning equities during that time? And yet, you know, we had all kinds of people wiped out, you know, in the ’29-’32 period. We had all kinds of things that were bad.

But if you had just owned stocks right straight through, didn’t leverage them, you know, you would — you’d have gotten a perfectly decent return.

So we are unaffected, in essence, by the variables you mentioned. Just show us a good business tomorrow, and we’ll jump at the hook.



Yeah, I think, but it’s also true that both of us have said at various times over the last three years that we wouldn’t be at all surprised if professionally invested money in America had a pretty modest result over a fairly extended period in the future, compared to the very dramatically high returns that it had achieved up to about three years ago.

And so far that’s been proved out to be pretty much right.


Yeah, our —


Certain stretches are easier than other stretches.


Yeah, our expectations were more modest than most people’s a few years ago. We didn’t say the world was coming to an end or anything. We just said that people have gone crazy in certain sectors.

And that anybody that thought that you could, you know, sit at home and day trade, and make double-digit returns over time, or do anything, or that you were entitled to that, you know, by just sticking a little money in your 401(k) or something, was really living in a fool’s paradise.

But that was never accompanied by any predictions of disaster for the American economy as a whole, or for American business as a whole. It’s —

People get crazy notions from time to time in financial markets. I commented on this earlier, but they just believe things that there’s — it’s hard to understand how they can believe.

Now, to some extent they get sold that by other people. But American business, really, has never let investors down as a group, but investors have done themselves in quite frequently.

Number 10.


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