I.O.U.S.A - Addison Wiggin [91]
Now, what you need is you need a castle that has some durable competitive advantage — a castle that has a moat around it. One of the best moats in many respects is to be a low - cost producer.
But sometimes the moat is just having more talent. If you ’ re the heavyweight champion of the world and you keep knocking out people, or if you ’ re Steven Spielberg and can turn out great motion pictures, you ’ ve got a competitive advantage as long as you can keep doing it. It has enormous economic value.
We ’ re looking for that institutionalized. We ’ re not looking for the best brain surgeon in town. We ’ re looking for the Mayo Clinic. We want an institution that, regardless of the person in charge, will maintain that competitive advantage over the decades. We hope we fi nd that in some businesses, and then we try to get the best person that we can to run them. Usually, it ’ s the person who ’ s been running them.
Q: Are you always right, or do you make mistakes?
Warren Buffett: No, we make mistakes. It wouldn ’ t be any fun if we didn ’ t make mistakes. If I played golf and on every one of the 18 holes I hit a hole in one, I wouldn ’ t be playing golf for very long. You have to go into the rough occasionally to make the game interesting. Not too often, though.
Q: Your father was a politician. Can you talk about the role of leadership in our country?
Warren Buffett: When you have 300 million people in a country, and you act through representative government, and that government controls 20 percent - plus of the resources of c14.indd 185
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this enormously rich country, it ’ s very important who you have in positions of leadership. It ’ s important who you have in the legislative body and it ’ s very important who you have as the head administrator of the country. You want someone who can see beyond the next mountain, and who can get people to follow him to the next mountain, because the populace wants to be led but they have to believe in the leader. That was dramatically illustrated when Roosevelt came in early 1933. We had a country with enormous horsepower, but the motor wasn ’ t working. And it was turning out a very small fraction of the horsepower it was capable of. I don ’ t know what the population was then, but it was well over 100 million people, and we had the plants and we had the soil. We had the people. And the machine wasn ’ t working. It took leadership to get that machine to function again as it was capable of functioning, and that meant all the difference in the world.
You needed inspiring leadership then, something people believed in. The same is true in wartime and it will be in the future. The nice thing about our country is that even when we have had poor leadership, we ’ ve still done pretty well. I ’ ve always said in investments, that you really want to buy a company that ’ s so good that an idiot can run it, because sooner or later one will. We ’ ve had 43 presidents now, and all 43 haven ’ t been homerun hitters, but the country ’ s done awfully well. Sometimes it ’ s done well in spite of them and sometimes it ’ s done well because of them, but it ’ s really nice to know that we ’ ve got a machine that works so well, even if we don ’ t have the best of leaders at all times. We still ought to try and have the best leader we can.
Q: Why do you always refer to U.S. bonds as risk - free investments?
Warren Buffett: They ’ re not free of purchasing power risk, but they will always be paid in dollars.
Q: Can you just explain to me, as an investor, what you use the bond market for?
Warren Buffett: On balance, we like only businesses. Aside from your own personal talents, a good business is the best asset there is. I mean, the best investment you can make is in yourself.
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If you have a 300 - horsepower motor and you ’ re only getting 100
horsepower out of it, you want