Friday, July 06, 2001

My current subway reading is the current installment of Warren Buffett's annual chairman's letter to Berkshire Hathaway shareholders (no, I'm not a shareholder). On top of a little bit of discussion of how Berkshire's businesses did he adds a lot of general investment and management philosophy. Here's a nice quote from this year's report:
The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities - that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future - will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.

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