Archive for January 22nd, 2022

Enduring Success

Our criterion of “enduring” causes us to rule out companies in industries prone to rapid and continuous change.  Though capitalism’s “creative destruction” is highly beneficial for society, it precludes investment certainty.  A moat that must be continuously rebuilt will eventually be no moat at all.
Additionally, this criterion eliminates the business whose success depends on having a great manager.  Of course, a terrific CEO is a huge asset for any enterprise, and at Berkshire we have an abundance of these managers.  Their abilities have created billions of dollars of value that would never have materialized if typical CEOs had been running their businesses.
But if a business requires a superstar to produce great results, the business itself cannot be deemed great.  A medical partnership led by your area’s premier brain surgeon may enjoy outsized and growing earnings, but that tells little about its future.  The partnership’s moat will go when the surgeon goes.  You can count, though, on the moat of the Mayo Clinic to endure, even though you can’t name its CEO.
Long-term competitive advantage in a stable industry is what we seek in a business.  If that comes with rapid organic growth, great.  But even without organic growth, such a business is rewarding.  We will simply take the lush earnings of the business and use them to buy similar businesses elsewhere.  There’s no rule that you have to invest money where you’ve earned it.  Indeed, it’s often a mistake to do so:  Truly great businesses, earning huge returns on tangible assets, can’t for any extended period reinvest a large portion of their earnings internally at high rates of return.
    —     Warren Buffett
[Reading the above, all I could think of was that the same seems (IMHO) to be true / valid for education, teachers, students and public schools.  We concentrate the most funding on the “best” schools, the “best” teachers and the “best” students, when we should be trying to spread excellence around to the greater benefit of all.  There is a role for “centers of excellence” in education, but they should not be the goal in and of themselves.   —    kmab]
On This Day In:
2022 Enduring Success
2021 Dealing With Trumpism, Racism and Fascism In America
Just Wondering
2020 And So Must Good Government
2019 Are You Done Watching?
2018 Spineless Capitulation By The Democrats
Woe Is Me…
2017 Sincerely Yours
2016 Only Good To Say
2015 A Series Of Temporary Conditions
2014 Gaps
2013 Duty
2012 Cost Not Price
2011 The Simple Normalcy Of Everyday Life – “Squirrel!”

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