"I always start from a position of fear. And then when I see something that looks attractive, I start getting greedy.... But I'm always looking at the downside on something first. I mean, if you can't lose money, you're going to make money. One reason we've done reasonably well, and this really goes back to when I was age 20 and learned from Graham, because my first 10 years were the best, is we've never lost a lot of money as a percentage of our net worth...in terms of permanent loss. Now, things may go down 50 percent. Berkshire's stock has gone down 50 percent four times in the time that I've owned it. But in terms of permanent loss....we've had plenty of losses, but they've never been the kind that really are destructive. And I always look at the downside first in anything." --Warren Buffett (March 1, 2010)
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Related quote:
"If a catastrophic outcome is possible or you can’t judge the downside, stay away." --Peter Bevelin
[via the Librarian character in All I Want To Know Is Where I'm Going To Die So I'll Never Go There, and a complementary quote to the story about Buffett and Mid-Continent Tab from Friday]