Warren Buffett on When NOT to Sell a Stock | Terry Leadership Speaker Series 2001

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[00:00:00]Mr. Buffet, good morning. Um, in your comments about making mistakes and errors like that, can you talk a little bit about your cell discipline when you're in a position and you you feel like it's no longer good and what criteria to use to when you just finally abandon it? Yeah. When I started out, the self situation has changed over the years because when I started out, I had way more ideas than money. I mean, I would go through Moody's manual. I went through it page by page and then I went through it again page by page and I found stocks in there that I could understand that were selling at like two times earnings, even one times earnings.

[00:00:34]Well, when you only have 10,000 bucks, that can get a little frustrating. And if you don't like to borrow money, which I never like to borrow money. So, I was always coming up with more ideas than I had money. So, I had to sell whatever I liked least to buy something new that just was compelling to me. And for a long time, I was in that mode. And now our problem is we have more money than ideas. Uh so we're we if you look at our annual report which is on the uh internet under at our homepage berkshireathway.com you'll see something in the back called the economic principles of Bergkshire and you will see which I believe in setting out for my my partners. They are my partners. I don't look at them as shareholders. I look at them as partners and they're going to be my partners for life. So I want to tell them how I think and if they don't disagree with the way I think that's fine but I don't want them to I don't want to be disappointed in me you know. So uh I lay out there and I say in terms of our wholly owned businesses we're not going to sell no matter how much anybody offers is for I mean if somebody offers us three times what something is worth at Seas Candy the Buffalo News Borshimes whatever it may be we're not going to sell it. I may be wrong in having that approach. I know I'm not wrong if I owned 100% of Burgger because that's the way I want to live my life. I've got all the money I could possibly need. You know, it just amounts to a change in the newspaper story on my obituary and the amount of money that the foundation has. And to break off relationships with people I like and people that have joined me because they think it's a permanent home. To do that simply because somebody waves a big check at me would be like selling one of my children because somebody waved a big check. So, I won't do that. and I want to tell my partners I won't do it so that they're not disappointed me more and more with certain stocks. We've got that approach. Now, if we were chronically short of funds and had all kinds of opportunities coming, we might have a somewhat different approach. But our inclination is not to sell things unless we get really discouraged perhaps with the management or we think the economic characteristics of the business change in a big way. I mean, and that happens.

[00:02:41]So, but we're not going to sell simply because it looks too high in in all likelihood. I mean, that you can't make that 100%. But it's it's uh that's that's that's the principle under which we're operating. We we're generating right now 5 billion of cash a year at least. So, it's 100 million bucks every week. And you know, just that we've been talking half an hour and I haven't done a damn thing. Uh so uh [laughter] it's you know the real question is how do you put it out intelligently and and if we were selling things it'd be just that much more. So there may there might there may come a time when that would change but but we want to and I have partners shareholders partners who would say if you can get three times what sees candy's worth why don't you sell it and that's why I want to be sure before they come in they know how I think on that. I mean, they're they're entitled to know that. Uh, you really want think for a minute, you know, if you're going to get married and you want a marriage that's going to last, not necessarily the happiest marriage, you know, or one that that uh Martha Stewart will talk about or anything, but you want a marriage that's going to last. What quality do you look for in a spouse? One quality.

[00:03:53]Do you look for brains? Do you look for humor? Do you look for character? Do you look for beauty? Now you look for low expectations. I mean that is that is the marriage that's going to last. Both have low expectations. I mean it uh uh and I want my partners to be on the low side on expectations coming in because I want the marriage to last. It's a financial marriage when they join me at Bergkshire and I I don't want them to think I'm going to do things that I'm I'm not going to do. So that's uh that's our guiding principle. Uh advice is all free and your terrible advice everything else. Uh next