STAY WITH SIMPLE AND UNDERSTANDABLE BUSINESSES TO BE RICH

Always look for a business that has competitive barriers, moat, does not need high capital expenditures, and has pricing power (during inflation also).

Some businesses are easier to predict than others. We try to look at businesses that are predictable- Warren Buffett, 1988

The economics of Drinks, Blades, Chocolates and Furniture are much easier to predict than the economics of Software, Internet and likewise.

Warren Buffett suggests that Time and Energy should be put to purchase good businesses at reasonable prices than difficult businesses at cheaper prices.

The importance of a guideline – stay with simple propositions– that we usually apply in investments as well as operations. If only one variable is key to a decision, and the variable has a 90% chance of going your way, the chance for a successful outcome is obviously 90%. But if ten independent variables need to break favorably for a successful result, and each has a 90% probability of success, the likelihood of having a winner is only 35%. But one proved intractable, and that was one too many. Since a chain is no stronger than its weakest link.

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s