TAO OF WARREN BUFFET # 14 .

Chains of habit
Chains of habit

The chains of habit are too light to be felt and too heavy to be broken.

This is warren quoting the English philosopher Bertrand Russel,because his words so aptly describe the insidious nature of bad business habits that don’t become apparent until it is too late .Such as cost cutting after your business is in trouble,which should’ve been done long before you even got to the doorsteps of danger.The business that becomes bloated with unnecessary expenses in times of plenty is the business that will sink when things turns for the worse.

This propensity to delude oneself also tells you a lot about the management that let the business become bloated with expenses in the first place.It is the best to consciously check where all your habits are taking you long before you get there.If you don’t like the direction where you are headed,the time to change course is before you find your ship sinking in the sea of troubles.

This is what happened to Warren with the Benjamin Graham inspired investment strategy of buying bargain stocks that were selling below book value regardless of the nature of the company’s long-term economics.This was something Warren was able to do with great success during the 1950’s and early 1960’s .But he stayed with this approach long after it wasn’t viable anymore-the chains of habit were too light to be felt.When he finally woke up in the late 1970’s to the fact that Graham bargain ride was over he shifted over to a strategy of buying exceptional business at reasonable prices and then holding them for long periods- thereby letting the business grow in value.With the old strategy he made millions with the new he made billions.

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