Warren Buffett on moats & great businesses
Buffett wants a valuable castle with a wide, durable moat, such as low cost or a brand held in customers' minds, run by an honest and able manager, because time compounds a wonderful business and erodes a lousy one. A good business earns high returns on tangible assets, can survive years of management error, and beats a great manager facing bad economics. His test is how much damage a well-funded competitor could do. He still says the strongest brands can't be dented, but by 2019-2020 he acknowledged that big retailers have gained ground against brands.
10 points · 5 appearances · 1998–2026
How the view evolved
Test a moat: how much could a billion hurt it? → Retailers have gained ground; brands still matter
In 1998 he treated top brands like Wrigley's and Coca-Cola as nearly unassailable, since no amount of capital could hurt them. By 2020 he still said $10 billion couldn't dent Coke, but conceded that retailers had gained ground against brands.
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1998–2020
“So, what we really want to do is buy businesses that we would be happy to own forever. It's the same way I feel about people buy Berkshire. I want people to buy Berkshire to plan to hold it forever. They may not for one reason or another, but I want them at the time they buy it to think they are buying a business that they're going to own forever. And I don't say that's the only way to buy things. It's just that that's the group I want to have join me because I don't want to have a changing group over time. I measure Berkshire by how little activity there is in it. If I had a church and I was the preacher and half the congregation left every Sunday, I wouldn't say, 'Oh, this is marvelous to have all this liquidity among my members, you know.' This terrific turnover, you know. I would rather get a church where all the seats are filled, you know, every Sunday by the same people. Well, that's the way we look at the businesses we buy. We want to buy something that we're really happy to own virtually forever. And we can't find a lot of those.”
1998–2026
“People behave very peculiarly and in terms of the reactions because they, they're human beings and they get excited when others get excited, they get greedy when others get greedy, they get fearful one other get fearful, and they'll continue to do so. And you will see, you know, if, you will see things you won't believe in your lifetime and securities markets, and the country will do very well over time, but you will see these huge waves. And then, and if you can stay objective throughout that, you can detach yourself temperamentally from the crowd, you get very rich and you won't have to be very bright. I mean, it, I'm sure you are, but that one, you know, it just, it doesn't take brains, it takes temperament.”
1998–2020
“I've never been pessimistic about the United States. I bought my first stock in the spring of 1942. I was 11. And if you remember, you would, you don't remember, no one watching this will remember, but we were losing the war at that time and we were getting totally creamed in the South Pacific, and the Philippines fell and the death march at Bataan and all that sort of thing. It was not until the Battle of Midway, which was a little later, the things started turning around, but I was optimistic on the country then and I've been optimistic on the country ever since”
1998–2026
“Think for a moment that I granted you the right to buy 10% of one of your classmates for the rest of his or her lifetime. Now, you can't pick one with a rich father, that doesn't count. I mean, you've got to pick them, pick somebody who's going to do it on their own merit. And I gave you an hour to think about it. Which one are you going to pick among all your classmates as the one you want to own 10% of for the rest of their lifetime? And are you going to give them an IQ test? Pick the one with the highest IQ? I doubt it. Are you going to pick the one with the best grades? I doubt it. You're not even going to pick the most energetic one necessarily or the one who displays the most initiative. But you're going to start looking for qualitative factors in addition to, cuz everybody's got enough brain and enough energy. And I would say that if you thought about it for an hour, decided who you're going to place that bet on, you'd probably pick the one who you responded the best to because the one that was going to have the leadership qualities, the ones who are going to be able to get other people to carry out their interests. And that would be the person who was generous and honest and gave credit to other people even if for their own ideas, all kinds of qualities like that.”