BUFFETT: The best lessons I learned were from Ben Graham, and they came
about when I read The Intelligent Investor when I was 19.

I’d been interested in stocks since I was 7 or 8 years old.

I’d computed my own averages, and had read every investment book in the library.

I was having a lot of fun, but I wasn’t going any place.
I got three ideas out of Ben’s book that have been the cornerstone of every
thing I’ve done, which are to look at stocks as part of a business rather than simply little things that go up and down And then I took to heart his Mr. Marke saga, which I think is vital to having the right attitude
toward market fluctuations.

Then third, the margin of safety. 

Now, if you’re looking for lessons from my own experience, I bought my first stock when I was 11 — three share of Cities Service Preferred at [US]$38.

My older sister bought three shares also.

It went down promptly to $27.
This is when the Dow was at 92 in Junof 1942.

As we walked to school everyday, she reminded me of the most recen price.

I was tired of hearing about it,  so, when it got back to $40, I sold my
shares and she sold hers.

We each mad$5.

It went on to be called at $212 a share or something like that not long thereafter.

So, I decided from there on not to talk to anybody about what I didand just think by myself. 

EFF: The largest least successful investent I ever made in Windsor was U.S.
ndustries. It was a conglomerate, it
was cheap, and it had good
diversification across
about eight or 10 dif-
erent industry lines, but it never really
had critical mass in any one of those
areas. I lost about 50 percent, which
was one of my worst investments ever.
So, that stuck with me as a potential
eeker of critical mass subsequently.

BERNSTEIN: 1958 — when the stock
yields got down below the bond yields,
omething that had never happened
before. At that time, I had two older
partners who were grizzled veterans of
he Great Depression who assured me
hat this was an anomaly that would, in
a short period of time, correct itself and
hat stocks would obviously have to
yield more than bonds all the time. And
’m still waiting for that.

BUFFETT: Peter, be patient.

BERNSTEIN: It took us quite a while 
o understand that if it was not going 
o be a return of the Great Depression,
hen we had a growth situation. And,eally, beginning in 1958 the word
“growth” started to come into
the vocabulary, and people
began to believe in equities.
It was a very dramatic 

TEMPLETON: I would recommend bein
humble. Be open-minded, and do not
be conceited.
NEFF: I’d say to them develop a telling investment philosophy, and then stick to it.
BUFFETT: I’d say be realistic in defining your circle of competence.

Try to figure out what you’re capable of knowing, stay within that, and forget about every thing else.

It means deciding which businesses you know enough to value and which ones you don’t know enough to value. 
BOGLE: One, recognize that the reality
is that precious few investors are going
to beat the market over the long run.
Two, consider yourself a steward of
your clients’ assets and not a salesman.
And three, focus on long-term invest-
ment and not short-term speculation —
on the eternal vagueness of the intrinsi
value of a corporation rather than on
the momentary precision of the price o
a stock. If you do those three things,
you have a fighting chance to emerge
among the winners.
BUFFETT: You can’t expect other people to do your thinking for you either.

You have to really understand the businesses that you’re buying through the medium of stocks.

And unless you’re willing to put a lot into that, you shouldn’t expect to get much out of it.

BRINSON: The best advice I could give
somebody is develop your skill set,
work at it, hone it, and do not follow
the crowd.
BERNSTEIN: Picking up on what Sir
John said: Humility is an enormously
important quality. You can’t win with-
out it. Survival in the end is where the
winners are by definition, and survival
begins with humility.
LEBARON: The very best investors are
the ones who invest according to their
own psyche. You find that their invest-
ment styles are consistent with their per-
sonalities, their intellects, their approach
es to work. It’s not somebody else’s style;
it’s their own, and it’s deeply ingrained.

BUFFETT: And never forget that anything times zero is zero.

No matter howmany winners you’ve got, if you either leverage too much or do anything that gives you the chance of having a zero in there, it’ll all turn to pumpkins and mice.

BUFFETT: The interesting thing to me how little investment professionals
have learned.

John Bogle will have be ter figures on this than I, but if you look back 30 or 40 years to the turnover of portfolios within professionally managed funds, I believe that turnover ratio was a small fraction of the turnover ratio now experienced.

There’s not been a greater focus on actually looking at the long-term prospects of a business and what I would think of as trying toprosper from the actions of the business rather than the actions of the stock over the short term.

And looking out 30 years, I think those comments will probably still apply.

NEFF: The most significant change that I have witnessed since I entered the business in January 1955 is more inclusiveness.

When I started, there were hardly any women analysts or portfolio managers.

Now, we have women making significant contributions.

I can remember Warren saying back when he came out of Columbia and wanted to work for Ben Graham, that Ben said, “I only hire Jewish people because they don’t get a proper break in the investment community.”

And so, as I recall, Warren said, “OK, I’ll work for you for nothing.” 

BUFFETT: And he said I was over-priced!

NEFF: [laughing] He paid you too muchthen.

Anyway, the doors are wide open now.

In recent years, the field has broad- ened even more to include minorities to a considerable degree.

In fact, the CEOs of American Express, Fannie Mae, and Merrill Lynch — significant companieswith links to the investment community — all happen to be black.

I think we’ve come a long way.
As to what we’re going to remember 30 years from now, I think it’s already been touched on by Warren and others,and that’s the lack of professionalism that we have in the investment community at this time. 

BUFFETT: The ultimate irony of the investment business is that there’s no question that an obstetrician will deliver babies better than the husband or the wife.

Or if you take dentists as a whole, they will remove teeth or fill teeth better than if the patients try to do it themselves.

But in the investment world, somebody who believes in American business — and who will seek out the lowest way to participate in business and do it consistently — willachieve results that exceed those of investment professionals as a group.

It’s the only industry I can think of where the professional’s efforts subtract value from what the layman can do himself.

BUFFETT: You were an idealist.

BUFFETT: The only real way to get improvement in corporate governance is to have big investors demand it.

A relatively small number of large institutional investors who decided they would withhold their votes when they
BUFFETT: The tax law can govern the horizon of investors, and it may be about the only thing that can govern the horizon that investors utilize.

Butin the end, to get better corporate governance, you have to have owners who are true owners, and they have to behave like owners.

NEFF: I was an activist in the sense that we would vote against management when stock option plans seemed too rich or mergers seemed ill-advised.

On things where we had some expertise, why, it seemed a useful partnership with the management.

But it seems to me that CALPERS and all of the world want to become super-involved, like the selection of chief executive officer or to be represented on the board, as opposed to being able to offer opinions that, from your special vantage point, you have some ability to contribute.

It seems to me that a professional shareholder has an obligation on that score, and there ought to be some way to do it without getting all tied up in bureaucracy.

BUFFETT: I would say to only buy a stock that you’d be comfortable owning if they closed the stock exchange for three years tomorrow.

Always leave amargin of safety, stick with what you understand, and quantify.

NEFF: I’d like to make a pitch for low price earnings ratio investing, which has been my prevailing philosophy.
These aren’t outstanding companies,but they’re good companies at a substantial discount, overlooked, misunderstood, forgotten, out of favor.

And time and time again, you see these opportunities.

It just seems so much the easy way to go for somebody who’s willing to work a bit at it and take on the marketplace.

John Neff, CFA
Value investor extraordinaire John B.Neff, CFA, was the manager of the US$13 billion Vanguard Windsor fund for 31 years.

Having served as managing partner, senior vice president, and member of the executive committee at Wellington Management Company, Neff  formally retired on 31 December 1995.
His latest book, John Neff on Investing,was published in November 1999.
Neff currently serves as a trusteeor Board member for the University of Pennsylvania, Case Western Reserve University, the Chrysler Corporation, andCGU Insurance Group.

Over the years, he also has served on the AIMR,FAF, and ICFA boards.
In 1995, Neff received AIMR’s Award for Professional Excellence. 

“I’d like to make a pitch for low price earnings ratio investing, which has been myprevailing philosophy....
It just seems so much the easyway to go for somebody who’s willing to work a bit at it and take on the marketplace.”
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Warren Buffett Celebrated as the greatest stock market investor of modern times, Warren E.
Buffett has served as chairman of the board and chief executive officer of Berkshire Hathaway Inc. — a holding company owning subsidiaries engaged in a number of diverse business activities — since 1970.
Buffett studied under Benjamin Graham while earning his master’s degree in economics (1951) at Columbia University.

Today, the “Oracle of Omaha,” as somecall him, serves as a director of the Coca-Cola Company, the Gillette Company, and the Washington Post Company.
He also is a life trustee of both Grinnell College and the Urban Institute.
In 1993, Buffett received AIMR’s Award for Professional Excellence.

“No matter how many winners you’ve got, if you 
either leverage too much  or do anything that gives 
you the chance of having a  zero in there, it’ll all turn to pumpkins and mice.”