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1/6 Awesome passage on price vs. quality, from 1979 BRK letter: "In some businesses--a network TV station, for example--it is virtually impossible to avoid earning extraordinary returns on tangible capital employed in the business."
2/6 "And assets in such businesses sell at equally extraordinary prices, one thousand cents or more on the dollar, a valuation reflecting the splendid, almost unavoidable, economic results obtainable. Despite a fancy price tag, the 'easy' business may be the better route to go."
3/6 "We can speak from experience, having tried the other route. Your Chairman made the decision a few years ago to purchase Waumbec Mills in Manchester, New Hampshire, thereby expanding our textile commitment."
4/6 "By any statistical test, the purchase price was an extraordinary bargain; we bought well below the working capital of the business and, in effect, got very substantial amounts of machinery and real estate for less than nothing. But the purchase was a mistake . . ."
5/6 "Both our operating and investment experience cause us to conclude that 'turnarounds' seldom turn, and that the same energies and talent are much better employed in a good business purchased at a fair price than in a poor business purchased at a bargain price . . ."
6/6 Buffett lays it out SO clearly here. Better to purchase the 'easy' business at 1,000 cents on the dollar than the poor business for less than working capital (with machinery and real estate thrown in)!
