Warren Buffett discusses his criteria to invest in a business for the long-term during the Charlie Rose interview. During the conversation, Warren Buffett says that he looks for business with durable competitive advantages that is trading at an attractive price.
Warren Buffett’s Criteria Of Long Term Investment
A central tenet of your investing is invest for the long term. And this comes from Brian White who says how might Bill and Warren convince investors to think beyond short term returns to encourage world changing innovation.
Well I’ve spent my life trying to convince people of investing for the long term. And if I knew how to double my money tomorrow I’d probably invest for the short term to think I pay it much. It’s much easier to invest for the long term if you’re just talking pure investment because you know what’s going. In my view be very high probability. What’s going to happen. Can in 20 years from now in a major way. And I don’t have the faintest idea what’s going to happen tomorrow or next week. But you wouldn’t get if you talked about societal and it’s very tough because.
Politicians face elections either every two years or six years and the way the way you think congressional districts have been organized primaries have become more and more important. And so it’s very hard. To have. Politicians think of something as wonderful for the country for 20 years what will cost them the election. Two years from now and that’s a basic problem in a democracy and I gets to be more of a problem as. As. We get. Rain we’ve arranged congressional districts so the primary dominates because a very limited number of people turn out in their motive. They tend to be on the extremes of both parties. So it’s not easy
Whether you’re going to make an investment in a company or whether you going to buy the company what are the factors that you have to be. That you’re looking for. What test?
I’m looking for durable competitive advantage I’m looking for something that has a moat around it for a considerable period of time and I’m looking for an honest and able management tomorrow because I don’t know how to run it myself and I’m looking for a purchase price that’s not excessive but it’s better to pay a little too much for something that’s a very good business than it is to buy some bargain but really good company but not much of the future and I don’t know what. I don’t have a ability to predict with a higher. High probability of success. The future of most companies so I’m looking for the exception but the nice thing is if there are thousands of companies out there I really have to be right on a couple. I mean it’s exactly the opposite. Of a baseball where you have called strikes and the pitcher is trying to throw it to the worst part of the strike zone for you. And. If he succeeds in getting into that corner to three times and you don’t swing you’re out and investing and so it’s called strike things I can sit there all day and somebody confronting one company after another and finally I get one of my sweet spot.
Both of you have chosen both wives and partners. Well. Charlie Munger added what?
Charlie Munger changed my views. He’d be find them in a huge way in terms of. Looking for the quality companies and. Looking further the ability to make an investment that would work out well for five or 10 or 20 years as opposed to something might there might be one. I call him cigar but investing or that was one puff left in the cigar but the cigar was free. So you picked up these disgusting looking things and got one puff out of one onto another one and that worked OK but it was small scale and it really doesn’t build something satisfying. So so he he kept forcing me in the direction of saying you know is this really a business we want to hold for forever and and do we want to get to so it was like a marriage mean you want to get associated with this person forever.