I'll tell you why I like the cigarette business. It cost a penny to make. Sell it for a dollar. It's addictive. And there's a fantastic brand loyalty.
Interpretation
Warren Buffett highlights the profitability and customer loyalty aspects of the cigarette industry.
In this quote, Warren Buffett expresses his admiration for the cigarette business due to its high profit margins, low production costs, and the strong brand loyalty it fosters among consumers. He notes that the combination of affordability for production and a selling price that generates significant profit, along with the addictive nature of cigarettes, results in a consistent and reliable market position.
In practice
In a business seminar discussing market strategies, this quote illustrates the characteristics of high-margin industries.
I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO) will be making money, and I think Wells Fargo (WFC) will be making a lot of money and there will be a lot - and it's a lot - it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.
If the world couldn't see your results, would you rather be thought of as the world's greatest investor but in reality have the world's worst record? Or be thought of as the world's worst investor when you were actually the best?
Cash never makes us happy, but it's better to have the money burning a hole in Berkshire's pocket than resting comfortably in someone else's.
I think you should read everything you can. In my case, by the age of 10, I'd read every book in the Omaha public library about investing, some twice. _x000D_ You need to fill your mind with various competing thoughts and decide which make sense.
The most common cause of low prices is pessimism - some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.
One’s objective should be to get it right, get it quick, get it out and get it over. Your problem won’t improve with age.
There are good examples of companies - Coca-Cola is one - that invested before there was a huge market in countries, and I think that ended up playing out to their benefit for decades to come.
No one knows the cost of a defective product - don't tell me you do. You know the cost of replacing it, but not the cost of a dissatisfied customer.
I wasn't running toward the theater but running away from the sporting goods store. Of course now that I'm selling spaghetti sauce (with Newman's Own), I begin to understand the romance of business.. the allure of being the biggest fish in the pond and the juice you get from beating out your competitors.
The business of business should not be about money. It should be about responsibility. It should be about public good, not private greed
To me, I would much rather be part of a healthy industry than being the only player in a dead industry.
So many businesses get worried about looking like they might make a mistake, they become afraid to take any risk. Companies are set up so that people judge each other on failure. I am not going to get fired if we have a bad year. Or a bad five years. I don’t have to worry about making things look good if they’re not. I can actually set up the company to create value.
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