Circle of Competence

I don’t watch CNBC, at all, but I do have their Buffett Watch in my RSS aggregator, so I know when they do interviews with him, which has been fairly often in the past year. CNBC is 99% noise, but when they do pieces on Buffett, you can usually pull up some valuable nuggets.

As such, today was one of those days: The big announcement today that Buffett would be providing $6.5b in financing for the Mars-Wrigley deal got us lucky Buffett fans some new quotes on circle of competence, buying companies, and knowledge in the markets. I thought my readers might want a couple of the good ones:

One the folly of prediction:

“I never have any idea what the foreign exchange or the stock market or the bond market is going to do in any given week or month or year.”

On the attraction of a Mars or Wrigley:

“But there is really nothing that can go wrong with something like the Wrigley or the Mars brands. It’s literally true that they have, ah, faced the test of time over decades and decades and people use more and more of their products every day.”

On those who are buying big banks now:

“Well, I understand a Wrigley or a Mars a whole lot better than I understand the balance sheet of some of the big banks. I know what I’m getting in this, and some of the larger financial institutions, I really don’t know what’s there.”

On when to buy a great company:

“Well, I think a good time to buy a really great business is when you can do it. Many, many years ago, as I remember, Herman Lay offered the Frito-Lay company to Coca-Cola. And he offered them the company first, as I understand it, and they decided for one reason or another they didn’t want to do it then. And of course Pepsico bought it and it’s the best thing they ever did. So if you get a chance to buy a wonderful business, then my advice is, grab it. As Yogi Berra would say, ‘When you come to a fork in the road, take it.””

And Lastly, on our favorite topic here, the Circle of Competence:

“Well, what holds an interest for me is a business I can understand and one that’s got durable long-term competitive advantage and the good management and the price makes sense. If I can find that any place, I’ll do it. And a lot of times, things are just beyond my competence. Somebody can have a wonderful idea that I don’t understand and God bless them. I’ll stick with stuff I understand.”

Read the entire transcript or watch the video here.