Saturday, May 24, 2008

Another Buffett Interview

Another Warren Buffett Interview at the Wharton School.

Personally I have a hard time to understand why returns and risks should be correlated. So I found this funny:
Well, we don't think about cost of capital or risk-adjusted. I mean, we don't want to take any risk, and we don't.
And about deciding for projects:
If I say the internal rate of return we demand is 15.83, it'll be 15.84. I mean, you just can bet on it. I've never seen a project that doesn't meet your hurdle rate, you know, if they really want to do it. We don't go through those charades. And it saves my time, saves their time.
Attitude towards drawdown:
Berkshire Hathaway (BRKA, Fortune 500) stock itself has gone down 50% three times since I bought the first stock in at 7 3/8. In 1974 it got cut in half. In 1987 it got cut in half. In 1998, 2000 or so it got cut in half. So that doesn't make any difference. I mean, I just don't worry about it. I worry about permanent loss of capital. I worry about making the right businesses. I worry about keeping the managers happy. Everything else pretty much takes care of itself.

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