Decisions

“Our ideas and policies are all structured with one goal in mind: to cultivate a culture that encourages rational decision making that ultimately leads to solid risk-adjusted returns”

“Difficult decisions require intellectual honesty, being able to see things as they are, not as you want them to be, and then facing up to problems and doing something about them.”

“Indecision has probably cost investors more than bad judgment.”

“Many investors get “nickeled and dimed” into penury by failing to appreciate that the first loss is not only the best, but usually the smallest. They must learn to avoid defensive rationalization of their past bad judgments.”

“There are no perfect one-decision answers to investment success.”

“All investment decision-making systems are a compromise.”

“My own opinion is that the selection of individual securities is a matter partly of a special kind of judgment and insight, and partly of a good deal of security analysis training.”

“Knowledge is only one ingredient on arriving at a stock’s proper price. The other ingredient, fully as important as information is sound judgment.”

“One could say that my whole career in Wall Street proved one long process of education in human nature.”

“The stock market registers the judgments of multitudes of buyers and sellers about the many factors which affect business — what business is like today; what it will be like in the future.”

“Process and outcome are two different things.”

“My view is that it is different every time, and that the relevant analytical exercise is to figure out what the differences are, what the similarities with past periods are, and what it all means, so that one can make sensible investment decisions.”

“If I had to name one factor that dominates human bad decisions, it would be what I call denial.”

“I’m a big fan of knowing the big ideas in pretty much all the disciplines — the ones that are pretty easy to assimilate — and then using those routinely in your judgments. That’s just my system.”

“I have made bad business decisions. You can’t live a successful life without doing some difficult things that go wrong. That’s just the nature of the game.”

“If a money manager cannot explain in plain English what their investment principles are, they probably don’t have any. And if they cannot explain their process for finding and researching an investment idea, they probably don’t have that either.”

“People, it turns out, are not that averse to risk. For many reasons, they are not opposed to risk, but they are opposed to losing and the possibility of loss plays a very significant part in their decision.”

“It turns out that when people have to sell a stock from their portfolio, they are not rational between winners and losers. People tend to sell winners and hang on to their losers. The psychology of that is quite straightforward.”

“Individual investors tend to churn their accounts, they tend to trade too much, and that they trade too much seems to be due to over-confidence. They believe they know something that they do not know and this is one essential characteristic of human beings, which makes them different from rational beings.”

“I don’t say people are irrational. I speak of reasonableness.”

“The underlying driving force behind market timing decisions seems to be emotional — fear, greed, chasing performance — buying something after it has gone up, disappointment, and sales after something has declined.”

“Hoaxes, frauds, manias, and other large-scale financial irrationalities have been with us from the beginnings of the markets in the seventeenth century, long before the Internet.”

“By owning great companies, you can just forget about all the noise and the irrational market fluctuations. And slowly get rich.”

“A boom/bust process occurs only when market prices find a way to influence the so-called fundamentals that are supposed to be reflected in market prices.”

“Our attitude toward cash generation and asset management came out of our own thought process. It is not copied. After we acquired a number of businesses we reflected on aspects of business. Our own conclusion was that the key was cash flow.”

“Selling an asset is a decision that absolutely must not be considered in isolation.”

“There’s no such thing as superior investing without superior judgment.”

“Buying outstanding businesses eliminates the need for constant decisions.”

“Investing success comes from a few great decisions, not many average ones.”

“The fact is that our theories of rationality in economic behavior rest upon introspection. We are as apt to deceive ourselves about the prudence and rationality of our plans as about their moral worth.”

“Charlie taught me to think in terms of mental models, not formulas”

“Good judgment comes from experience, and experience often comes from bad judgment.”

“One lesson I have learned is to make fewer decisions. Sometimes the best thing to do is to do nothing. The hardest thing to do is to sit with cash. It is very boring.”

“The more decisions you make, the higher the chances are that you will make a poor decision.”

“Consistency of process matters more than precision of forecasts.”

“Shorting is difficult. If you short, you are not only making an investment decision, you are making a market decision.”

“Outcomes are an unreliable guide to process.”

“The best decisions can lead to bad outcomes.”

“Ignoring base rates is one of the most common decision errors.”

“Economic development or growth occurs in three different processes: in the increase of population, in the accumulation of capital, and in the technological progress which enables us to produce more things, better things, different things, or the same things more cheaply.”

“It is not the market that is rising or falling at any moment, even if we commonly speak as though it were. In truth, prices move in response to the buying and selling decisions of countless investors, who are constantly considering the likely decisions of countless others”

“Risk management means protecting oneself from the adverse and unexpected decisions others may make and, in the process, making better decisions than they do.”

“The more irreversible the decisions, the more expensive the consequences of being wrong.”

“All stocks are “two-decision” stocks; and no such thing as a “one-decision” stock exists.”

“History shows us, over and over, that bull markets can go well beyond rational valuation levels as long as the outlook for future earnings is positive.”

“Rational investors will part with their cash only when they believe they are properly compensated for the loss of liquidity and the pain of disquietude.”

“Unless you are that rarest of birds, someone who is cool under the rapid-fire, high-pressure decision making required to maximize your returns, let others take such risks, and allow your portfolio to plug along at a slower speed. In investing, tortoises tend to win far more often than hares over the turns of the market cycle.”

“Few decisions in life motivated by greed ever have happy outcomes.”

“Faith in the long run is the most powerful force that drives investment decisions.”

“Consequences, not probabilities, determine the decisions that matter.”

“Risk in our world is nothing more than uncertainty about the decisions that other human beings are going to make and how we can best respond to those decisions.”

“Risk is about how we make decisions, and only incidentally about the math that we employ to reach those decisions.”

“There is evidence that the stock market is more efficient in processing information about what other investors are doing than it is in processing fundamental information about the underlying assets, which is why stock prices so often turn out with hindsight to have been crazy rather than rational.”

“The best way to solve problems is to use multiple mental models.”

“This is the way the capitalist ecology works. Industries decline, old companies wither away, and young companies rise up to replace them. This process is hard on many, but ultimately, it is healthy.”

“A lot of great companies have made a lot of decisions you haven’t heard about because they decided not to do something. Some of the best decisions they did do was to not do something.”

“The companies that do well, look out five, six, seven years, and some decisions they make may not be the right thing for the next year.”

“When you have a family, and a house, and the market is going down, and you’re on margin, it’s probably too much pressure for you to do the right research and the right kind of thinking to make good decisions.”

“I want a company that’s simple. They don’t have to make seven brilliant decisions every six months to keep going.”

“To lose money is the conventional penalty for bad judgment in speculation.”

“Believability-weighted decision making improves outcomes”

“Institutional investing, as it is structured today, simply makes it more difficult to make a high-conviction, long-term decision than to make a low-conviction, short-term decision. The rewards of short-term results substantially superior to the market, and the penalties of short-term results well below the market, are awesome.”

“The investment counsel business, as it is traditionally practiced, and probably as it should be practiced, is a simple process of making sure that clients never have so much risk exposure that their capital or standard of living can be impaired by some specific negative surprise.”

“Real estate investment decisions do not lend themselves to macroeconomic issues. Real estate is a local market, by definition. lt is not possible to focus on national trends; one must focus on local issues and characteristics.”

“Rather than focus on numerical indexes in investment decisions, the investor should focus on unique characteristics that protect the investment from competition. Thus bar to access is a critical element in the evaluation.”

“A cheap stock can stay cheap forever, but if you own a bankrupt bond, the process of emerging from bankruptcy and distributing new securities offers a practical catalyst to realize the value.”

“All investors need to learn how to be at peace with their decisions.”

“The way to maximize outcome is to concentrate on process.”

“Just because we think a stock is undervalued doesn’t mean we’re right. We may be wrong in our judgment.”

“If you don’t like to lose money and it affects your judgment, don’t buy things that can go down a great deal.”

“Investment decisions should be made on the basis of the most probable compounding of after-tax net worth with minimum risk.”

“I believe the investor operates at a distinct advantage when he is aware of what path his thought process is following.”

“The availability of a quotation for your business interest (stock) should always be an asset to be utilized if desired. If it gets silly enough in either direction, you take advantage of it. Its availability should never be turned into a liability whereby its periodic aberrations, in turn, formulate your judgments.”

“The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’re got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you’ve got a terrible business.”

“The tour we’ve taken through the last century proves that market irrationality of an extreme kind periodically erupts — and compellingly suggests that investors wanting to do well had better learn how to deal with the next outbreak.”

“When the price of a stock can be influenced by a “herd” on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical.”

“In the stock market, you don’t base your decisions on what the markets are doing, but on what you think is rational.”

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