Berkshire Hathaway – Stay With Simple Propositions

Business Guideline:

“Our failure here illustrates the importance of a guideline – stay with simple propositions – that we usually apply in investments as well as operations.  If only one variable is key to a decision, and the variable has a 90% chance of going your way, the chance for a successful outcome is obviously 90%.  But if ten independent variables need to break favorably for a successful result, and each has a 90% probability of success, the likelihood of having a winner is only 35%.”

Berkshire Hathaway Letters to Shareholders, p.515

Reflections from Buffett and Munger after MidAmerican, a Berkshire portfolio businesses, wrote off a major investment in a zinc recovery project.

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