1/ 'You simply want to acquire, at a sensible price, a business with excellent economics..." What Buffett is referring to is unit economics (which are part of microeconomics). berkshirehathaway.com/letters/1996.h…
Munger: "Microeconomics is what we do. Macro is what we put up with."
Munger: "Microeconomics is what we do. Macro is what we put up with."
2/ If an investor can (1) determine the value of the individual customers of a business; and (2) estimate how many customers they will acquire and how long they’re going to stay, the investor can create a sold DCF prediction about the value of that business on a bottoms-up basis.
3/ "An investor’s time is better spent trying to gain a knowledge advantage regarding ‘the knowable’: industries, companies and securities. The more micro your focus, the great the likelihood you can learn things others don’t.” Howard Marks.
As I was saying before being interrupted, 4/ By understanding how to identify a bad business you can quickly put them in the "too hard" or "don’t touch" piles.
"Good businesses throw up one easy decision after another. Bad businesses throw up painful decisions time after time.”
"Good businesses throw up one easy decision after another. Bad businesses throw up painful decisions time after time.”
5/ “A bad business gives you a horrible choice where the decision is hard to make. Is this really going to work? Is it worth the money? There are plenty of businesses where decisions that come across your desk are just awful. Those businesses, by and large, don’t work very well.”
6/ “There are two kinds of businesses: The first earns 12% and you can take it out at the end of the year. The second earns 12% but all the excess cash must be reinvested — there’s never any cash. We hate that kind of business."
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