This is Part 4 of a Series. Go to Part 3: Handicapping, Compounding, and the Margin of Safety—Alice Schroeder’s Take on Buffett’s Approach
The following is an edited partial transcript of Alice Schroeder’s speech/lecture during the Value Investing Conference 2008 held at the Darden School of Business, University of Virginia.
So Wayne Eaves and John Cleary, two friends of Warren, saw that IBM was going to have to divest in this business and they thought they’re going to buy a Carroll press which was the press that makes these cards. They’re going to compete with IBM because they’re based in the Midwest; they can ship faster, and provide better service. They went to Warren and said: should we invest in this company and would you come in with us? And Warren said no.
Well, why did he say no? He didn’t say no because it was a technology company. He said no because he went to the first step in his investing process. And this is where I think, what he does is very automatic and isn’t well understood. He acted like a horse handicapper. And the first step in his investing process is always to say: what are the odds that this business can be subject to any catastrophe risk that could make it just fail? And if there’s any chance that a significant amount of his capital could be subject to catastrophe risk, he just stops thinking. No. And he won’t go there. And it’s backwards the way most people invest. Most people find an interesting idea, they figure out the math, the financials, the projections, and then in the end, they ask themselves: okay what could go wrong? Warren starts with what could go wrong. And here, he said: a startup business competing with IBM could fail. No, sorry. And he didn’t think another thing about it.
But Wayne Eaves and John Cleary went ahead anyway. They started up this business, and within a year, they were printing 35 million tab cards a month. So at that point they knew they had to buy more Carroll presses. They came back to Warren and they said: We need money, would you like to come in? Continue to Part 5: Handicapping—The One or Two Factors that Could Make the Horse Succeed or Fail
Investire nei Titoli Azionari Americani. Come fare?
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Non c’è trader che non sogni di giocare in borsa investendo in titoli ed
azioni quotati a Wall Street. Anche se negli ultimi anni il mercato ha
visto entra...
5 years ago
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