Dan Sweet

This is the fifth in a series of twelve posts. The introduction to the series is here. By way of review, these are my notes of Warren Buffett’s responses to questions from Notre Dame and Stanford MBAs on October 9. 2007.

How do you decide on an appropriate premium over book?

We don’t use book at all.  It is future cash flows and our certainty of them.

See’s Candies – enduring competitive advantage.  Mirror, Mirror, on the wall, how much should I raise the price of candy this fall?  We’re hiring girls to slap guys who buy them Russell Stovers.  We’ve grown $4 million pretax profits to $80 million pretax profits.  The business is going nowhere on volume.

Coke – loses money at Olympics and Disneyworld but people all have a favorable image of Coke in their mind.  You can’t get that share of mind through advertising.

Ask what is it going to produce over time in terms of cash?

If a business depends on capital it’s a bad business.

Real investment equation from 600 B.C.  Aesop – a bird in the hand is worth two in the bush.  Got to be sure they really are in the bush.

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