A letter a day!
Letter 15# 1966
- lesser efforts can sometimes produce good opportunities. Always focus on quality and not on quantity.
“In the last three years, we have come up with only two or three new ideas a year that has had such an expectancy of superior performance. Fortunately, in some cases, we have made the most of them.”
“It is obvious that a business based upon only a trickle of fine ideas has poorer prospects than one based upon a steady flow of such ideas. To date, the trickle has provided as much financial nourishment as the flow. This is true because there is only so much one can digest (million-dollar ideas are of no great benefit to thousand-dollar bank accounts – this was impressed on me in my early days) and because a limited number of ideas causes one to utilize those available more intensively.”
2)The new ideas should be continually measured against present ideas and there should be no shifts if the effect is to downgrade the expectable performance.
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The frequent reporting to clients is sometimes foolish and even misleading if you are aiming for long-term performance.
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Buffett on concentration VS Diversification:
“Personally, within the limits expressed in last year’s letter on diversification, I am willing to trade the pains (forget about the pleasures) of substantial short-term variance in exchange for maximization of long-term performance. However, I am not willing to incur the risk of substantial permanent capital loss in seeking to better long-term performance. To be perfectly clear – under our policy of concentration of holdings, partners should be completely prepared for periods of substantial underperformance (far more likely in sharply rising markets) to offset the occasional overperformance such as we experienced in 1965 and 1966, and as a price, we pay for hoped-for good long term performance.”
- What is the definition of long-term?
“Even five minutes is a long time if one’s
the head is being held underwater.”
( Decide your own long-term)
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