Just Say No
The Owner's Memo #2
This week is launch week for The Owner’s Memo! This piece about being very selective with my investments is the first of three articles I’ll be publishing this week to celebrate the launch.
Looking back many years ago when I first discovered Graham and Buffett, I recall being struck by how easy it seemed to find potential investments. This would have been around the year 2008. Pfizer at a free cash flow yield over 10%! Verizon with a dividend yield of 6%! Microsoft at a low P/E! But, with a bit more experience, I began to realize that great investing isn’t about finding what appear to be good companies selling at good prices (or good companies selling at any price for that matter), but about sorting through many “very good” investment opportunities (and many more outright poor investments) and resisting buying that which looks to be good in favor of finding that which is absolutely incredible.
It reminds me of something I have heard Buffett say many times. There is an interview by Miguel Barbosa of Alice Schroeder, the author of The Snowball, from back in 2010, and it is well worth reading. I’ve included a copy of it below1.
Miguel Barbosa interview of Alice Schroeder
In it, Schroeder was asked about Buffett’s intellect and investment decision making. She said:
Typically, and this is not well understood, his way of thinking is that there are disqualifying features to an investment. So he rifles through and as soon as you hit one of those it’s done. Doesn’t like the CEO, forget it. Too much tail risk, forget it. Low-margin business, forget it. Many people would try to see whether a balance of other factors made up for these things. He doesn’t analyze from A to Z; it’s a time-waster.
Here, we have insight into one of the greatest investors in the world and the message is clear: wait for the perfect pitch. Buffett has said this many times of course, but the quote above really hits home. Being patient doesn’t mean buying just because prices are down five or ten percent. It means objectively assessing what you would like to see in a business and the price you would like to pay for it. Recall also Buffett’s advice to invest like you have a punch card with room for only twenty investments in it for your whole life. Being patient means walking away without regret if your terms aren’t met. There is always another opportunity around the corner.
Charlie Munger said something similar many times. Here is a quote from his great speech, “A Lesson on Elementary Worldly Wisdom As It Relates To Investment Management & Business”:
And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple.2
Charlie Munger - A Lesson on Elementary Worldly Wisdom 1995-1998
Many times I’ll find potential investments that are good but not great. The price may feel just a bit too high, the management is not as shareholder-friendly as I would like, or maybe the company trends or industry trends could be a little better.
When I find myself in those spots, I try to remind myself of the sheer amount of opportunity out there. The equity of 60,261 companies is listed on major exchanges throughout the world as of January 2026. And this doesn’t count the amount that trades over-the-counter or opportunities that might arise in the huge fixed income market, comprised of corporate debt, municipals, sovereign debt, and mortgage- and asset-backed securities. There are potential investments in commodities and real estate. There are derivatives off of all of those! And there are private equity, venture capital, and angel investing opportunities that might arise for the enterprising investor. There are esoteric alternative investments. There are also completely new business ideas one could develop on their own, like developing or purchasing and running a small business.
I try to remember that my money doesn’t care how it’s made, and the limits should only be defined by my own circle of competence. My job as an investor is to make the best returns possible. Strictly speaking, that means sorting through all of those tens or hundreds of thousands of investment opportunities in order to find the ones that will deliver superhuman returns. It won’t be possible to look through all of them, of course, but keeping this perspective is a good way to counteract any fear of missing out that might surface.
Good investing is as much about maintaining discipline as it is finding opportunities. Search continuously, but wait for the fat pitch down the middle of the plate.
Barbosa originally published the interview at a great blog, Simolean Sense, which no longer appears online. Full credit for the excellent interview goes to him.
“A Lesson on Elementary Worldly Wisdom” was originally published by another excellent publication that is no longer around, the Outstanding Investor Digest. The publication compiled Munger’s speech in three parts, a 1995 talk given at the University of Southern California Marshall School of Business and two talks from 1997 and 1998 given at Stanford Law School. I simply collated those reports for easier reading.