You just have to stay within the circle of competence, the things that you can understand. And look for things that are selling for less than they’re worth, of the ones you can value.
And you can start out with a fairly small circle of competence and learn more about businesses as you go along.
But you’ll learn that there are a whole bunch of them that simply don’t lend themselves to valuations and you forget about those.
Accounting helps you in that. You need to understand accounting to know the language of business, but accounting also has enormous limitations. And you have to learn enough to know what accounting is meaningful and when you have to ignore certain aspects of accounting.
You have to understand when competitive advantages are durable and when they’re fleeting.
And then have to learn the difference between a hula hoop company and Coca-Cola. But that isn’t too hard to do.
And then you have to know how to think about market fluctuations and really learn that the market is there to serve you rather than to instruct you.
And to a great extent, that is not a matter of IQ. If you’re in the investment business and you have a IQ of 150, sell 30 points to somebody else, ’cause you don’t need it.
You need to be reasonably intelligent. But you do not need to be a genius—at all. In fact, it can hurt.
But you do have to have an emotional stability. You have to have sort of an inner peace about your decisions. Because it is a game where you get subjected to minute-by-minute stimuli, where people are offering opinions all the time.
You have to be able to think for yourself. And I don’t know how much of that’s innate and how much can be taught.
But if you have that quality, you’ll do very well in investing if you spend some time at it. Learn something about valuing businesses.
It’s not a complicated game. As I've said many times — it’s simple, but not easy.
It is not a complicated game. You don’t have to understand higher math. You don’t have to understand law. There’s all kinds of things that you don’t have to be good at. There’s all kinds of jobs in this world that are much tougher.
But you do have to have sort of an emotional stability that will take you through almost anything. And then you’ll make good investment decisions over time.