Warren Buffett on Businesses

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

"The key to investing is determining the competitive advantage of any given company and, above all, the durability of that advantage."

"Managers of high quality are essential. We look for trust, energy, and intelligence — in that order."

"When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact."

"Our conclusion is that excellent management can only slightly improve a mediocre business."

"The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines."

"GEICO is a wonderful business because it has a low-cost advantage that competitors cannot replicate."

"Banks are more asset-sensitive than most businesses — leverage can be lethal. A bank that makes a foolish loan can create a zero."

"What saved Berkshire was insurance. The 1967 acquisition of National Indemnity gave us access to float which we could invest."

"We prefer to buy 100% of wonderful businesses, but we're also happy to buy small pieces of them in the stock market."

"Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

"Float is wonderful if it comes to us at low cost. It is the collection of premiums before claims are paid."

"A good business has pricing power — the ability to raise prices without losing customers to competitors."

"A sound insurance operation requires four disciplines: understand all exposures, evaluate conservatively, set proper premiums, and walk away if necessary."

"Investment banks are a commodity business. The sustainable advantage is rare."

"The investment management business is a giant scam. People pay fees to have others manage their money, and on average, they get less than if they had simply bought an index fund."

"Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway."

"Clayton Homes is a great business because it serves a real need with responsible lending practices."

"The newspaper business was once a great franchise. The internet has destroyed the economic moat."

"Property-casualty insurance is a commodity business that will always tend toward poor returns."

"Reinsurance looks like an easy business. It's not. The losses can be huge and unpredictable."

"The internet has changed retailing in ways we couldn't have predicted. The geographic moat is gone."

"Retroactive insurance pays for losses that have already occurred. It's a niche business."

"The shoe business was a disaster for us. We bought Dexter Shoe with Berkshire stock and it turned out to be a terrible mistake."

"Super-cat insurance is the ultimate test of discipline. You must be willing to walk away when the premium doesn't compensate for the risk."

"I am a complete technological idiot. In many industries, we can't determine whether we are dealing with a pet rock or a Barbie."

"The television business is a good business because of the franchise value. But the economics have changed with the rise of streaming."

"I should have closed the textile operations much sooner. When a business faces structural economic headwinds, managerial excellence can delay decline but cannot prevent it."

"BNSF Railway is a wonderful business. It has a durable competitive advantage and requires significant capital, but earns appropriate returns."

"Utilities are regulated, which caps returns, but they also provide predictable earnings. We like the stability."