More investment sins are probably committed by otherwise quite intelligent people because of "tax considerations" than from any other cause. One of my friends-a noted West Coast philosopher-maintains that a majority of life's errors are caused by forgetting what one is really trying to do. This is certainly the case when an emotionally supercharged element like taxes enters the picture (I have another friend-a noted East Coast philosopher who says it isn't the lack of representation he minds-it's the taxation).
So some guy may know how to make money in cocoa beans, but I don't so I just let him have that. But it's got to be something I understand. It's got to be a business with fundamentally good economics. It's got to be a management that I like and trust and admire. And it's got to be a price that makes sense.
The smarter the journalists are, the better off society is. For to a degree, people read the press to inform themselves - and the better the teacher, the better the student body.
If I got any good ideas out of that or I think they're good ideas, I'll be glad to contribute them but the system will probably overdo some other things.
In our view, though, investment students need only two well-taught courses-How to Value a Business, and How to Think about Market Prices. Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business who's earnings are virtually certain to be materially higher five, ten and twenty years from now.
Success in investing doesn’t correlate with I.Q. Once you are above the level of 25; once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.
The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.
The best business returns are usually achieved by companies that are doing something quite similar today to what they were doing five or ten years ago.