"If all you needed to do is to figure out what company is better than others, everyone would make a lot of money. But that is not the case. They keep raising the prices to the point when the odds change."

"I think you'll make more money in the end with good ethics than bad. Even though there are some people who do very well, like Marc Rich-who plainly has never had any decent ethics, or seldom anyway. But in the end, Warren Buffett has done better than Marc Rich-in money-not just in reputation."

"Financial institutions make us nervous when they're trying to do well."

"I'm used to people with very high IQs knowing how to recognize reality, but there's a huge human tendency where it may be instructive to think that whatever you're doing to succeed is all right."

"We have a higher percentage of the intelligentsia engaged in buying and selling pieces of paper and promoting trading activity than in any past era. A lot of what I see now reminds me of Sodomand Gomorrah. You get activity feeding on itself, envy and imitation. It has happened in the past that there came bad consequences."

"Black-Scholes is a know-nothing system. If you know nothing about value - only price - then Black-Scholes is a pretty good guess at what a 90-day option might be worth. But the minute you get into longer periods of time, it's crazy to get into Black-Scholes. For example, at Costco we issued stock options with strike prices of $30 and $60, and Black-Scholes valued the $60 ones higher. This is insane."

"I'm proud to be associated with the value system at Berkshire Hathaway; I think you'll make more money in the end with good ethics than bad."

"If we mix only a moderate minority share of turds with the raisins each year, probably no one will recognize what will ultimately become a very large collection of turds."

"Part of [having uncommon sense] is being able to tune out folly, as opposed to recognizing wisdom. If you bat away many things, you don't clutter yourself."

"I believe Costco does more for civilization than the Rockefeller Foundation. I think it's a better place. You get a bunch of very intelligent people sitting around trying to do good, I immediately get kind of suspicious and squirm in my seat."

"You'll find many markets where bottlers of Pepsi and Coke both make a lot of money and many others where they destroy most of the profitability of the two franchises. That must get down to the peculiarities of individual adjustment to market capitalism. I think you 'd have to know the people involved to fully understand what was happening."

"Black-Scholes works for short-term options, but if it's a long-term option and you think you know something [about the underlying asset], it's insane to use Black-Scholes."

"Gold is a great thing to sew into your garments if you're a Jewish family in Vienna in 1939, but I think civilized people don't buy gold, they invest in productive businesses."

"This is a good life lesson: getting the right people into your system is the most important thing you can do."

"A lot of share-buying, not bargain-seeking, is designed to prop stock prices up. Thirty to 40 years ago, it was very profitable to look at companies that were aggressively buying their own shares. They were motivated simply to buy below what it was worth."

"A banker who is allowed to borrow money at X and loan it out at X plus Y will just go crazy and do too much of it if the civilization doesn't have rules that prevent it."

"Bernie Ebbers and Ken Lay were caricatures - they were easy to spot. They were almost psychopaths. But it's much harder to spot problems at companies like Royal Dutch [Shell]."

"When it gets into these spikes, with shortages and uproar and so forth, people go bananas, but that's capitalism."

"When someone takes their existing business and tries to transform it into something else - they fail. In technology that is often the case. Look at Kodak: it was the dominant imaging company in the world. They did fabulously during the great depression, but then wiped out the shareholders because of technological change."

"Well in the history of the See's Candy Company they always say, I never did it before, and I'm never going to do it again. And we cashier them. It would be evil not to, because terrible behavior spreads."

"I regard it as very unfair, but capitalism without failure is like religion without hell."

"There's more honor in investment management than in investment banking."

"We're guessing at our future opportunity cost. Warrenis guessing that he'll have the opportunity to put capital out at high rates of return, so he's not willing to put it out at less than 10% now. But if we knew interest rates would stay at 1%, we'd change. Our hurdles reflect our estimate of future opportunity costs."

"Capitalism is a pretty brutal place."

"Wall Street has too much wealth and political power."

"It's not the bad ideas that do you in, but the good ones."

"I call myself the assistant cult leader."

"Everyone has the idea of owning good companies. The problem is that they have high prices in relations to assets and earnings, and that takes all of the fun out of the game."

"...I'm very pleased when the smartest people come [to the U.S.] and almost never pleased when the very bottom of the mental barrel comes in...."

"At Berkshire Hathaway we do not like to compete against Chinese manufacturers."

"People are trying to be smart - all I am trying to do is not to be idiotic, but it's harder than most people think."

"We have never had the will to enforce the immigration laws. What you see is what you'll continue to get."

"As I continued through Cicero's pages, I found much more material celebrating my way of life ..."

"The perfect example of Darwinism is what technology has done to businesses."

"Expect hogs to eat a lot more in the presence of a lot of hog wash."

"Cicero's words also increased my personal satisfaction by supporting my long-standing rejection of a conventional point of view."

"There's danger in just shoveling out money to people who say, 'My life is a little harder than it used to be.' At a certain place you've got to say to the people, 'Suck it in and cope, buddy. Suck it in and cope.'"

"If you want good behavior, don't pay on a commission basis. Our judges aren't paid so much a case. We keep them pretty well isolated with a fixed salary. Judges in this whole thing have come out pretty well - there have been relatively few scandals."

"When I run into a paradox I think either I'm a total horse's ass to have gotten to this point, or I'm fruitfully near the edge of my discipline. It adds excitement to life to wonder which it is."

"I would argue that a majority of the horrors we face would not have happened if the accounting profession developed and enforced better accounting."

"I think there's an awful lot of twaddle and bullshit on EVA. The whole game is to turn retained earnings into more earnings. EVA has ideas about cost of capital that make no sense. Of course, if a company generates high returns on capital and can maintain this over time, it will do well. But the mental system as a whole does not work."

"Another thing I think should be avoided is extremely intense ideology because it cabbages up one's mind. You see it a lot with T.V. preachers (many have minds made of cabbage) but it can also happen with political ideology. When you're young it's easy to drift into loyalties and when you announce that you're a loyal member and you start shouting the orthodox ideology out, what you're doing is pounding it in, pounding it in, and you're gradually ruining your mind. So you want to be very, very careful of this ideology. It's a big danger."

"Accounting is a big subject and there are huge forces in play. The entire momentum of existing thinking and existing custom is in a direction that allows terrible follies to happen, and the terrible follies have terrible consequences."

"...People need to ask, How do I play the hand that has been dealt me? The world is not going to give you extra return just because you want it. You have to be very shrewd and hard working to get a little extra. It's so much easier to reduce your wants. There are a lot of smart people and a lot of them cheat, so it's not easy to win."

"Of course the self-serving bias is something you want to get out of yourself. Thinking that what's good for you is good for the wider civilization and rationalizing all these ridiculous conclusions based on this subconscious tendency to serve one's self is a terribly inaccurate way to think."

"Derivative trading with mark-to-market accounting degenerates into mark-to-model. Two firms make a big derivative trade and the accountants on both sides show a large profit from the same trade."

"One of the smartest things a person can do is dampen investment expectations, especially with Berkshire. That would be mature and responsible. I like our model and we should do nicely"

"Of course you want to drive that out of yourself because you want to be wise, not foolish. You also have to allow for the self-serving bias of everybody else because most people are not going to remove it all that successfully, the human condition being what it is. If you don't allow for self-serving bias in your conduct, again you're a fool."

"The Berkshire-style investors tend to be less diversified than other people. The academics have done a terrible disservice to intelligent investors by glorifying the idea of diversification. Because I just think the whole concept is literally almost insane. It emphasizes feeling good about not having your investment results depart very much from average investment results. But why would you get on the bandwagon like that if somebody didn't make you with a whip and a gun?"

"I've heard that one-half of the students at elite schools want to go into private equity or hedge funds. They want to keep up with their age cohorts at Goldman. This can't possibly end well in terms of meeting these expectations."

"Darwin paid particular attention to disconfirming evidence. Objectivity maintenance routines are totally required in life if you're going to be a great thinker."

"The total amount paid out in dividends is roughly equal to the amount lost in trading and investment advice, so net dividends to shareholders are zero. This is a very peculiar way to run a republic."

"If you're going to be an investor, you're going to make some investments where you don't have all the experience you need. But if you keep trying to get a little better over time, you'll start to make investments that are virtually certain to have a good outcome. The keys are discipline, hard work, and practice. It's like playing golf - you have to work on it."

"Look at those hedge funds - you think they can wait? They don't know how to wait! I have sat for years at a time with $10 to $12 million in treasuries or municipals, just waiting, waiting...As Jesse Livermore said, 'The big money is not in the buying and selling...but in the waiting.'"

"I think it would be a great improvement if there were no D&O insurance . The counter-argument is that no-one with any money would serve on a board. But I think net net you'd be better off."

"... some important factor doesn't lose its share of force just because some expert can better measure other types of force."

"Just keep your head down and do your best."

"It is an unfortunate fact that great and foolish excess can come into prices of common stocks in the aggregate. They are valued partly like bonds, based on roughly rational projections of use value in producing future cash. But they are also valued partly like Rembrandt paintings, purchased mostly because their prices have gone up, so far."

"If it happens every year like clockwork, what's so extraordinary about it?"

"It's a finite and very competitive world. All large aggregations of capital eventually find it hell on earth to grow and thus find a lower rate of return."

"Economists get very uncomfortable when you talk about virtue and vice. It doesn't lend itself to a lot of columns with numbers. But I would argue that there are big virtue effects in economics. I would say that the spreading of double-entry bookkeeping by the Monk, Fra Luce de Pacioli, was a big virtue effect in economics. It made business more controllable, and it made it more honest."

"Avoid evil, particularly if they're attractive members of the opposite sex."

"The beauty of a financial institution is that there are a lot of ways to go to hell in a bucket. You can push credit too far, do a dumb acquisition, leverage yourself excessively - it's not just derivatives [that can bring about your downfall]."

"I think the main figure that matters to all of us, including people in the media, is: How does GDP per capita grow? And those figures have been very good. There is a huge flux both up and down, so it isn't like we're all static in status. What's important is that pie grows."

"Tthe first rule is that you can't really know anything if you just remember isolated facts and try and bang 'em back. If the facts don't hang together on a latticework of theory, you don't have them in a usable form.... You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life."

"Most people will see declining returns [due to inflation]. One of the great defenses if you're worried about inflation is not to have a lot of silly needs in your life - you don't need a lot of material goods."

"I get flack for saying [when I visit a college and give a speech], This is a nice college, but the really great educator is McDonald's. They hate me for saying this and think I'm a slimy creature. But McDonald's hires people with bad work habits, trains them, and teaches them to come to work on time and have good work habits. I think a lot of what goes on there is better than at Harvard."

"If you can get good at destroying your own wrong ideas, that is a great gift."

"How you behave in one place, will help in surprising ways later."

"You could argue that [the decline of public schools] is one of the major disasters in our lifetimes. We took one of the greatest successes in the history of the earth and turned it into one of the greatest disasters in the history of the earth."

"You don't want to be like the motion picture exec who had so many people at his funeral, but they were there just make sure he was dead. Or how about the guy who, at his funeral, the priest said, Won't anyone stand up and say anything nice for the deceased? and finally someone said, Well, his brother was worse."

"If you rise in life, you have to behave in a certain way. You can go to a strip club if you're a beer-swilling sand shoveler, but if you're the Bishop of Boston, you shouldn't go."

"If you, like me, lived through 1973-74 or even the early 1990s... There was a waiting list to get OUT of the country club - that's when you know things are tough. If you live long enough, you'll see it."

"My idea of a good place to shop is Costco - it has these heavily marbled fillet steaks. The idea of eating some wheat thing and washing it down with carrot juice has never appealed to me."

"How should the best parts of psychology and economics interrelate in an enlightened economist's mind?... I think that these behavioral economics...or economists are probably the ones that are bending them in the correct direction. I don't think it's going to be that hard to bend economics a little to accommodate what's right in psychology."

"The theory of modern education is that you need a general education before you specialize. And I think to some extent, before you're going to be a great stock picker, you need some general education."

"It's human nature to extrapolate the recent past into the future, but it's terrible that managements go along with this."

"There is the sheer amount of Franklin's wisdom. And the talent. Franklin played four instruments. He was the nation's leading scientist and inventor, plus a leading author, statesman, and philanthropist. There has never been anyone like him."

"The laws of thermodynamic s are such that if the water is getting warmer - and I believe it is - the energy of the weather is going to go up."

"We have the same problem as everyone else: It's very hard to predict the future..."

"I'm a bull on Berkshire Hathaway. There may be some considerable waiting, but I think there are some good days ahead."

"People always underestimate the ability of earth to increase its carrying capacity."

"I agree with Peter Drucker that the culture and legal systems of the United Statesare especially favorable to shareholder interests, compared to other interests and compared to most other countries. Indeed, there are many other countries where any good going to public shareholders has a very low priority and almost every other constituency stands higher in line."

"Berkshireis not as good as it was in terms of percentage compounding [going forward], but it's still a hell of a business."

"The secret to happiness is to lower your expectations. ...that is what you compare your experience with. If your expectations and standards are very high and only allow yourself to be happy when things are exquisite, you'll never be happy and grateful. There will always be some flaw. But compare your experience with lower expectations, especially something not as good, and you'll find much in your experience of the world to love, cherish and enjoy, every single moment."

"Our standard prescription for the know-nothing investor with a long-term time horizon is a no-load index fund. I think that works better than relying on your stock broker. The people who are telling you to do something else are all being paid by commissions or fees. The result is that while index fund investing is becoming more and more popular, by and large it's not the individual investors that are doing it. It's the institutions."

"Beta and modern portfolio theory and the like - none of it makes any sense to me."

"I know just enough about thermodynamics to understand that if it takes too much fossil-fuel energy to create ethanol, that's a very stupid way to solve an energy problem."

"Some years ago one oil company bought a fertilizer company, and every other major oil company practically ran out and bought a fertilizer company. And there was no more damned reason for all these oil companies to buy fertilizer companies, but they didn't know exactly what to do, and if Exxon was doing it, it was good enough for Mobil and vice versa."

"I'd rather throw a viper down my shirt front than hire a compensation consultant."

"The possibility that stock value in aggregate can become irrationally high is contrary to the hard-form efficient market theory that many of you once learned as gospel from your mistaken professors of yore. Your mistaken professors were too much influenced by rational man models of human behavior from economics and too little by foolish man models from psychology and real-world experience."

"In my life there are not that many questions I can't properly deal with using my $40 adding machine and dog-eared compound interest table."

"If you can buy the best companies, over time the pricing takes care of itself."

"I have a name for people who went to the extreme efficient market theory-which is bonkers. It was an intellectually consistent theory that enabled them to do pretty mathematics. So I understand its seductiveness to people with large mathematical gifts. It just had a difficulty in that the fundamental assumption did not tie properly to reality."

"So you can get very remarkable investment results if you think more like a winning pari-mutuel player. Just think of it as a heavy odds against game full of craziness with an occasional mispriced something or other. And you're probably not going to be smart enough to find thousands in a lifetime. And when you get a few, you really load up. It's just that simple."

"Ben Franklin and Samuel Johnson, he credits their wisdom for his success. They were both utterly brilliant men. And powerful communicators. Both have helped me all the way through life. Their lessons are easy to assimilate."

"If it is wisdom you're after, you're going to spend a lot of time on your ass reading."

"There's a lot wrong [with American universities]. I'd remove 3/4 of the faculty - everything but the hard sciences. But nobody's going to do that, so we'll have to live with the defects. It's amazing how wrongheaded [the teaching is]. There is fatal disconnectedness. You have these squirrelly people in each department who don't see the big picture."

"We don't have any miraculous way of avoiding taxes at Wesco and Berkshire."

"To finish first you have to first finish. Don't get in a position where you go back to go. What's interesting is that some guy whose grandfather was a lawyer and a judge-hurriedly going to Harvard Law with a wave of veterans-I was willing to go into so many different businesses. I was constantly going right into the other fellow's business and doing better than the other fellow did. The reason it was possible? Self-education- developing mental discipline, big ideas that really work."

"A different set of incentives from rising in an economic establishment where the rewards system, again, the reinforcement, comes from being a truffle hound. That's what Jacob Viner, the great economist called it: the truffle hound - an animal so bred and trained for one narrow purpose that he wasn't much good at anything else, and that is the reward system in a lot of academic departments."

"...If you take sales presentations and brokers of commercial real estate and businesses... I'm 70 years old, I've never seen one I thought was even within hailing distance of objective truth.... 'incentive-caused bias,' causes this terrible abuse. And many of the people who are doing it you would be glad to have married into your family compared to what you're otherwise going to get...."

"A director who gets $150,000 per year from a company and needs the money is not independent."

"I think liberal art faculties at major universities have views that are not very sound, at least on public policy issues - they may know a lot of French however."

"The SEC does way more good than harm - the last thing I would do is get rid of the SEC...if accounting were thoroughly fixed, a lot of other sins would go away. We're paying a huge price for deterioration of accounting."

"If mutual fund directors are independent, then I'm the lead character in the Bolshoi Ballet."

"Proper accounting is like engineering. You need a margin of safety. Thank God we don't design bridges and airplanes the way we do accounting."

"See's candy company was the first high-quality business we ever bought."

"And maybe the cereal makers by and large have learned to be less crazy about fighting for market share-because if you get even one person who's hell-bent on gaining market share.... For example, if I were Kellogg and I decided that I had to have 60% of the market, I think I could take most of the profit out of cereals. I'd ruin Kellogg in the process. But I think I could do it."

"F.A.S.B' ... 'Financial Accounts Still Bogus'."

"We have a passion for keeping things simple."

"Even bright people are going to have limited, really valuable insights in a very competitive world when they're fighting against other very bright, hardworking people. And it makes sense to load up on the very few good insights you have instead of pretending to know everything about everything at all times."

"I talked to one accountant, a very nice fellow who I would have been glad to have his family marry into mine. He said, What these other accounting firms have done is very unethical. The [tax avoidance scheme] works best if it's not found out [by the IRS], so we only give it to our best clients, not the rest, so it's unlikely to be discovered. So my firm is better than the others. [Laughter] I'm not kidding. And he was a perfectly nice man. People just follow the crowd...Their mind just drifts off in a ghastly way..."

"We believe that almost all really good investment records will involve relatively little diversification. The basic idea that it was hard to find good investments and that you wanted to be in good investments, and therefore, you'd just find a few of them that you knew a lot about and concentrate on those seemed to me such an obviously good idea. And indeed, it's proven to be an obviously good idea. Yet 98% of the investing world doesn't follow it. That's been good for us."

"A rough rule in life is that an organization foolish in one way in dealing with a complex system is all too likely to be foolish in another."

"You'll better understand the evil when top audit firms started selling fraudulent tax shelters when I tell you that one told me that they're better [than the others] because they only sold [the schemes] to their top-20 clients, so no-one would notice."

"We're emphasizing the knowable by predicting how certain people and companies will swim against the current. We're not predicting the fluctuation in the current."

"I have a black belt in chutzpah. I was born with it. Some people, like some of the women I know, have a black belt in spending. They were born with that. But what they gave me was a black belt in chutzpah."

"Creative accounting is an absolute curse to a civilization. One could argue that double-entry bookkeeping was one of history's great advances. Using accounting for fraud and folly is a disgrace. In a democracy, it often takes a scandal to trigger reform. Enron was the most obvious example of a business culture gone wrong in a long, long time."

"It's dangerous to short stocks."

"Most people early achieve and later intensify a tendency to process new and disconfirming information so that any original conclusion remains intact. They become people of whom Philip Wylie observed: You couldn't 't squeeze a dime between what they already know and what they will never learn."

"I also want to raise the possibility that there are, in the very long term, virtue effects in economics- for instance that widespread corrupt accounting will eventually create bad long term consequences as a sort of obverse effect from the virtue-based boost double-entry book-keeping gave to the heyday of Venice. I suggest that when the financial scene starts reminding you of Sodomand Gomorrah, you should fear practical consequences even if you like to participate in what is going on."

"Being short and seeing a promoter take the stock up is very irritating. It's not worth it to have that much irritation in your life."

"We have a history when things are really horrible of wading in when no one else will."

"At most corporations if you make an acquisition and it turns out to be a disaster, all the paperwork and presentations that caused the dumb acquisition to be made are quickly forgotten. You've got denial, you've got everything in the world. You've got Pavlovian association tendency. Nobody even wants to even be associated with the damned thing or even mention it. At Johnson & Johnson, they make everybody revisit their old acquisitions and wade through the presentations. That is a very smart thing to do. And by the way, I do the same thing routinely."

"It would be one of the most irritating experiences in the world to do a lot of work to uncover a fraud and then at have it go from X to 3X and at h the crooks happily partying with your money while you're meeting margin calls. Why would you want to go within hailing distance of that?"

"We don't have an isolated group [of senior managers] surrounded by servants. Berkshire's headquarters is a tiny little suite. We just came back from Berkshire's board meeting; it had moved up to the board room of the Kiewit company and [it was so large and luxurious that] I felt uncomfortable."

"We tend to buy things - a lot of things - where we don't know exactly what will happen, but the outcome will be decent."

"Size will hurt returns. Look at Berkshire Hathaway - the last five things Warren has done have generated returns that are splendid by historical standards, but now give him $100 billion in assets and measure outcomes across all of it, it doesn't look so good. We can only buy big positions, and the only time we can get big positions is during a horrible period of decline or stasis. That really doesn't happen very often."

"Obviously, consideration of costs is key, including opportunity costs. Of course capital isn't free. It's easy to figure out your cost of borrowing, but theorists went bonkers on the cost of equity capital. They say that if you're generating a 100% return on capital, then you shouldn't invest in something that generates an 80% return on capital. It's crazy."

"I'd say 3/4 of advertising works on pure Pavlov. Think how association, pure association, works. Take Coca-Cola company (we're the biggest share-holder). They want to be associated with every wonderful image: heroics in the Olympics, wonderful music, you name it. They don't want to be associated with presidents' funerals and so-forth."

"It took us months of buying all the Coke stock we could to accumulate $1 billion worth - equal to 7% of the company. It's very hard to accumulate major positions."

"Crowd folly', the tendency of humans, under some circumstances, to resemble lemmings, explains much foolish thinking of brilliant men and much foolish behavior - like investment management practices of many foundations represented here today. It is sad that today each institutional investor apparently fears most of all that its investment practices will be different from practices of the rest of the crowd."

"Just avoid things like racing trains to the crossing, doing cocaine, etc. Develop good mental habits."

"If the same family were always on the bottom, then you'd have big resentments. But if DuPonts go down and Pampered Chef up, [that's good]. That much churn makes people think the system is fairer. Buffett: We don't like churn now, but we liked it more 30-40 years ago."

"For many of our shareholders, our stock is all they own, and we're acutely aware of that. Our culture [of conservatism] runs pretty deep."

"If you have only a little capital and are young today, there are fewer opportunities than when I was young. Back then, we had just come out of a depression. Capitalism was a bad word. There had been abuses in the 1920s. A joke going around then was the guy who said, 'I bought stock for my old age and it worked - in six months, I feel like an old man!' It's tougher for you, but that doesn't mean you won't do well - it just may take more time. But what the heck, you may live longer."

"I think we have lost our way when people like the [board of] governors and the CEO of the NYSE fail to realize they have a duty to the rest of us to act as exemplars. You do not want your first-grade school teacher to be fornicating on the floor or drinking alcohol in the closet and, similarly, you do not want your stock exchange to be setting the wrong moral example."

"I think the foundation at Berkshire [Buffett's stake in Berkshirewill pass to the Buffett Foundation upon his death] will be a plus because there will be a continuation of the culture. We'd still take in fine businesses run by people who love them."

"You can hire your advisor and then just apply a windage factor, like I used to do when I was a rifle shooter. I'd just adjust for so many miles an hour wind. Or you can learn the basic elements of your advisor's trade. You don't have to learn very much, by the way, because if you learn just a little then you can make him explain why he's right."

"The number one idea is to view a stock as an ownership of the business and to judge the staying quality of the business in terms of its competitive advantage. Look for more value in terms of discounted future cash-flow than you are paying for. Move only when you have an advantage."

"If people tell you what you really don't want to hear what's unpleasant-there's an almost automatic reaction of antipathy. You have to train yourself out of it."

"...being an effective teacher is a high calling."

"Quoting Demosthenes, 'For what each man wishes, that he also believes to be true.' I would rather make money playing a piano in a whorehouse than arguing that no cost is incurred when employees are paid in stock options instead of cash. I am not kidding."

"If you turn on the television, you'll find the mothers of the most obvious criminals that man could ever diagnose, and they all think their sons are innocent. That's simple psychological denial. The reality is too painful to bear, so you just distort it until it's bearable. We all do that to some extent, and it's a common psychological misjudgment that causes terrible problems."

"If you always tell people why, they'll understand it better, they'll consider it more important, and they'll be more likely to comply."

"I feel that by getting rich in the way I did, I think my own example has hurt my own country."

"Everyone caved, adopted loose [accounting] standards, and created exotic derivatives linked to theoretical models. As a result, all kinds of earnings, blessed by accountants, are not really being earned. When you reach for the money, it melts away. It was never there. It [accounting for derivatives] is just disgusting. It is a sewer, and if I'm right, there will be hell to pay in due course. All of you will have to prepare to deal with a blow-up of derivative books."

"For some odd reason, I had an early and extreme multidisciplinary cast of mind. I couldn't stand reaching for a small idea in my own discipline when there was a big idea right over the fence in somebody else's discipline. So I just grabbed in all directions for the big ideas that would really work."

"Early Charlie Munger is a horrible career model for the young because not enough was delivered to civilization in return for what was wrested from capitalism. And other similar career models are even worse."

"No CEO examining books today understands what the hell is going on."

"Choose clients as you would friends."

"This is an amazingly sound place. We are more disaster-resistant than most other places. We haven't pushed it as hard as other people would have pushed it. I don't want to go back to Go. I've been to Go. A lot of our shareholders have a majority of their net worth in Berkshire, and they don't want to go back to Go either."

"The stupid and dishonest accountants allowed the genie of totally inappropriate accounting to descend on derivatives books. And once this has happened - people get status, etc. - it's impossible to get it back into the bottle."

"Berkshire was built on the eternal verities: basic mathematics, basic horse sense, basic fear, and basic diagnosis of human nature to make predictions regarding human behavior. We stuck to the basics with a certain amount of discipline and it has worked out quite well."

"The investment game always involves considering both quality and price, and the trick is to get more quality than you pay for in price. It's just that simple."

"To say accounting for derivatives is Americais a sewer is an insult to sewage."

"The only intelligence investing is value investing...to acquire more than one is paying for."

"Trying to prioritize among things we're unlikely to do is pretty fruitless."

"We may well have a competitive advantage buying decent businesses at decent prices. But they won't be fabulous businesses and fabulous prices. There's too much competition and money out there, with many buyout specialists."

"And, partly, I had found that theory-structure was a superpower in helping one get what one wanted. As I had early discovered in school wherein I had excelled without labor, guided by theory, while many others, without mastery of theory failed despite monstrous effort. Better theory I thought had always worked for me and, if now available could make me acquire capital and independence faster and better assist everything I loved."

"Berkshireis in the business of making easy predictions If a deal looks too hard, the partners simply shelve it."

"...Missing out on some opportunity never bothers us. What's wrong with someone getting a little richer than you? It's crazy to worry about this...."

"I think I've been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I've underestimated it."

"We both (Charlie Munger and Warren Buffett) insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think."

"When you mix raisins and turds, you've still got turds."

"Intelligent people make decisions based on opportunity costs."

"Opportunity comes to the prepared mind."

"There are worse situations than drowning in cash and sitting, sitting, sitting. I remember when I wasn’t awash in cash — and I don’t want to go back."

"Intense interest in any subject is indispensable if you're really going to excel in it."

"Assume life will be really tough, and then ask if you can handle it. If the answer is yes, you've won."

"I knew a guy who had $5 million and owned his house free and clear. But he wanted to make a bit more money to support his spending, so at the peak of the internet bubble he was selling puts on internet stocks. He lost all of his money and his house and now works in a restaurant. It's not a smart thing for the country to legalize gambling [in the stock market] and make it very accessible."

"Clever derivatives broke dozens of companies. It killed them. Bankrupt. We don't need these kinds of innovation in finance. It's OK to be boring in finance. What we want is innovation in widgets."

"I think that one should recognize reality even when one doesn't like it; indeed, especially when one doesn't like it."

"If you have the opportunities of Berkshire, an investment in gold is dumb."

"I bet Richard Fuld doesn't have an ounce of contrition. It's just megalomania. When it's like that, you need rules to prevent catastrophe. When banks are borrowing the government's credit rating, you need rules to prevent stupid things."

"I remember the $0.05 hamburger and a $0.40-per-hour minimum wage, so I've seen a tremendous amount of inflation in my lifetime. Did it ruin the investment climate? I think not."

"Spend less than you make; always be saving something. Put it into a tax-deferred account. Over time, it will begin to amount to something. This is such a no-brainer."

"I don't want to sell credit to people who are going to hurt themselves with it. You should only sell products that are good for the people who use them. Some disagree with this, but I know I'm right. That is to say, you're talking to a Republican who admires Elizabeth Warren."

"Almost all good businesses engage in 'pain today, gain tomorrow' activities."

"Economic systems work better when there's an extreme reliability ethos. And the traditional way to get a reliability ethos, at least in past generations in America, was through religion. The religions instilled guilt. ... And this guilt, derived from religion, has been a huge driver of a reliability ethos, which has been very helpful to economic outcomes for man."

"Fancy computers are engaging in legalized front-running. The profits are clearly coming from the rest of us - our college endowments and our pensions. Why is this legal? What the hell is the government thinking? It's like letting rats into a restaurant."

"The liabilities are always 100 percent good. It's the assets you have to worry about."

"I think that if you have a single payer system and an opt-out for people who want to pay more [for better service, etc.], I think it would be better - and I think we'll eventually get there. It wouldn't be better at the top - [our current system] is the best in the world at the top. But the waste in the present system is awesome and we do get some very perverse incentives."

"The best armor of old age is a well-spent life preceding it."

"I constantly see people rise in life who are not the smartest -- sometimes not even the most diligent. But they are learning machines; they go to bed every night a little wiser than when they got up. And, boy, does that habit help, particularly when you have a long run ahead of you."

"The quality of the medical care delivered, including the pharmaceutical industry, has improved a lot. I don't think it's crazy for a rich country like the USto spend 15% of GDP on healthcare, and if it rose to 16-17%, it's not a big worry."

"When you borrow a man's car, always return it with a tank of gas."

"I think that, every time you saw the word EBITDA, you should substitute the word bullshit earnings."

"The Internet bubble circa 2000 is the most extreme in modern capitalism. In the 1930s, we had the worst depression in 600 years. Today is almost as extreme in the opposite way."

"If only I had the influence with my wife and children that I have in some other quarters!"

"I think it is undeniably true that the human brain must work in models. The trick is to have your brain work better than the other person's brain because it understands the most fundamental models- ones that will do most work per unit."

"One of the first big bubbles, of course, was the huge and horrible South Sea Bubble in England. And the aftermath was interesting. Many of you probably don't remember what happened after the South Sea Bubble, which caused an enormous financial contraction, and a lot of pain. They banned publicly traded stock in England for decades."

"Don't do cocaine. Don't race trains. And avoid AIDS situations."

"It's hard to predict what will happen with two brands in a market. Sometimes they will behave in a gentlemanly way, and sometimes they'll pound each other. I know of no way to predict whether they'll compete moderately or to the death. If you could figure it out, you could make a lot of money."

"Sears had layers and layers of people it didn't need. It was very bureaucratic. It was slow to think. And there was an established way of thinking. If you poked your head up with a new thought, the system kind of turned against you. It was everything in the way of a dysfunctional big bureaucracy that you would expect."

"We look for a horse with one chance in two of winning and which pays you three to one."

"And your brain doesn't naturally know how to think the way Zeckhauser knows how to play bridge. for example, people do not react symmetrically to loss and gain. Well maybe a great bridge player like Zeckhauser does, but that's a trained response. Ordinary people, subconsciously affected by their inborn tendencies..."