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.
Oneβs objective should be to get it right, get it quick, get it out and get it over. Your problem wonβt improve with age.
If Vancouver did not succeed as Starbucks from '87 on, our entire international business, which is now thousands of stores and a significant amount of growth and profit, may not have existed.
I think one of the things people don't understand is we can build more shareholder value by lowering product prices than we can by trying to raise margins. It's a more patient approach, but we think it leads to a stronger, healthier company. It also serves customers much, much better.
Industry is the soul of business and the keystone of prosperity.
On the simplest level, telecommuting makes it harder for people to have the kinds of informal interactions that are crucial to the way knowledge moves through an organization. The role that hallway chat plays in driving new ideas has become a cliche of business writing, but that doesn't make it less true.
I think that the direct conversation is exactly what companies need to earn trust of customers. Admit an error. Fix a problem. Commit to doing better. That is only human.
Part of company culture is path-dependent - it's the lessons you learn along the way.
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