The Essays of Warren Buffett By Warren B(Free)

Buffett thinks most markets are not purely efficient and that equating volatility with risk is a gross distortion.

“It is better to be approximately right than precisely wrong.”

instead of “don’t put all your eggs in one basket,” we get Mark Twain’s advice from Pudd’nhead Wilson: “Put all your eggs in one basket—and watch that basket.”

One of Graham’s most profound contributions is a character who lives on Wall Street, Mr. Market. He is your hypothetical business partner who is daily willing to buy your interest in a business or sell you his at prevailing market prices. Mr. Market is moody, prone to manic swings from joy to despair. Sometimes he offers prices way higher than value; sometimes he offers prices way lower than value. The more manic-depressive he is, the greater the spread between price and value, and therefore the greater the investment opportunities he offers.

Notes: 1) true in private markets too

Another leading prudential legacy from Graham is his margin-of-safety principle. This principle holds that one should not make an investment in a security unless there is a sufficient basis for believing that the price being paid is substantially lower than the value being delivered.