Monday, December 26, 2005

Focus on the important and knownable

"We think [new technology] is very beneficial from a societal standpoint. Our own emphasis is on trying to find businesses that are predictable in a general way as to where they'll be in 10 or 15 or 20 years. That means we look for businesses that in general aren't going to be susceptible to very much change. We view change as more of a threat investment-wise than an opportunity. That's quite contrary to the way most people are looking at equities right now. With a few exceptions, we do not get enthused about change as a way to make a lot of money. We're looking for the absence of change to protect ways that are already making a lot of money and allow them to make even more in the future.

"When we look at a business and see lots of change coming, 9 times out of 10, we're going to pass -- whereas when we see something that is very likely to look the same 10-20 years from now, we feel much more confident about predicting it. Take Coca-Cola. It's still selling a product very, very similar to one that was sold 110+ years ago. The fundamentals of distribution, talking to the consumer and all that sort of thing haven't changed at all. Your analysis of Coca-Cola 50 years ago could pretty well serve as an analysis today.

"We're more comfortable in that kind of business. It means we miss a lot of very big winners. But we wouldn't know how to pick them out anyway. It also means we have very few big losers -- and that's quite helpful over time. We're perfectly willing to trade away a big payoff for a certain payoff."


Excerpt from Berkshire Hathaway's 1999 annual meeting

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