MARC FULMER
Favorite random business passages
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Without being one, no one can really know what a banker does. [...] Investment banking has no such intuitive counterpart in real life. It took our mothers six months to realize that we weren't stockbrokers, working the phones to sell crappy public offerings to unsuspecting investors. It took us another six months after that to realize that we were, in fact, selling crappy public offerings to investors.

[...]

The word processing portion of an associate's work is like the boxes of Raisinets at the movie theater. They're a staple across the country, no one likes them and they should be rid from the planet, but they're still there.

-- John Rolfe and Peter Troob
Added on: July 24, 2008

A third man cupped his hands together around his mouth and hollered, "Equities in Dallas." Poor Sally. There were many bad places your name could land on the job placement blackboard in 1985, but the absolute worst was in the slot marked "Equities in Dallas." We could not imagine anything less successful in our small world than an equity salesman in Dallas; the equity department was powerless in [Salomon Brothers], and Dallas was, well, a long way from New York. Thus, "Equities in Dallas" became training program shorthand for "Just bury that lowest form of human scum where it will never be seen again." Bury Sally, they shouted from the back of the room.

-- Michael Lewis
Added on: July 7, 2008

Sometimes several regulators are better than one. The solitary regulator becomes risk averse; he or she tries to guard against all imaginable negative outcomes, creating a crushing compliance burden. In the financial industries, where the Fed shares regulatory jurisdiction with the Comptroller of the Currency, the Securities and Exchange Commission, and other authorities, we tended to keep one another in check.

-- Alan Greenspan
Added on: June 21, 2008

The formula for valuing all assets that are purchased for financial gain has been unchanged since it was first laid out by a very smart man in about 600 B.C. (though he wasn't smart enough to know it was 600 B.C.).

The oracle was Aesop and his enduring, though somewhat incomplete, investment insight was "a bird in the hand is worth two in the bush." To flesh out this principle, you must answer only three questions. How certain are you that there are indeed birds in the bush? When will they emerge and how many will there be? What is the risk-free interest rate (which we consider to be the yield on long-term U.S. bonds)? If you can answer these three questions, you will know the maximum value of the bush -- and the maximum number of the birds you now possess that should be offered for it. And, of course, don't literally think birds. Think dollars.

Aesop's investment axiom, thus expanded and converted into dollars, is immutable. It applies to outlays for farms, oil royalties, bonds, stocks, lottery tickets, and manufacturing plants. And neither the advent of the steam engine, the harnessing of electricity nor the creation of the automobile changed the formula one iota -- nor will the Internet. Just insert the correct numbers, and you can rank the attractiveness of all possible uses of capital throughout the universe.

Common yardsticks such as dividend yield, the ratio of price to earnings or to book value, and even growth rates have nothing to do with valuation except to the extent they provide clues to the amount and timing of cash flows into and from the business. Indeed, growth can destroy value if it requires cash inputs in the early years of a project or enterprise that exceed the discounted value of the cash that those assets will generate in later years. Market commentators and investment managers who glibly refer to "growth" and "value" styles as contrasting approaches to investment are displaying their ignorance, not their sophistication. Growth is simply a component -- usually a plus, sometimes a minus -- in the value equation.

Alas, though Aesop's proposition and the third variable -- that is, interest rates -- are simple, plugging in numbers for the other two variables is a difficult task. Using precise numbers is, in fact, foolish; working with a range of possibilities is the better approach.

Usually, the range must be so wide that no useful conclusion can be reached. Occasionally, though, even very conservative estimates about the future emergence of birds reveal that the price quoted is startlingly low in relation to value. (Let's call this phenomenon the IBT -- Inefficient Bush Theory.) To be sure, an investor needs some general understanding of business economics as well as the ability to think independently to reach a wellfounded positive conclusion. But the investor does not need brilliance nor blinding insights.

[...]

Obviously, we can never precisely predict the timing of cash flows in and out of a business or their exact amount. We try, therefore, to keep our estimates conservative and to focus on industries where business surprises are unlikely to wreak havoc on owners. Even so, we make many mistakes: I'm the fellow, remember, who thought he understood the future economics of trading stamps, textiles, shoes and second-tier department stores.

-- Warren Buffett
Added on: June 14, 2008

People named Mba face unique problems thanks in part to the computer age. Ngozi Mba, a marketing executive in Hollywood, is besieged by unsolicited offers to attend business conferences, subscribe to finance journals and be a mentor to students. Why? Because she is a Harvard graduate, which makes her a prime target for anyone mining databases for terms like "Harvard MBA."

-- The Wall Street Journal
Added on: June 13, 2008

Today, we announced a non-exclusive advertising agreement that will provide Yahoo! with access to our AdSense for search and AdSense for content advertising programs on their U.S. and Canadian web properties. [...] We also think this is good for competition. The truth is, this kind of arrangement is commonplace in many industries, and it doesn't foreclose robust competition. Toyota sells its hybrid technology to General Motors, even though they are the number one and number two car manufacturers globally. Canon provides laser printer engines for HP, despite also competing in the broader laser printer market. Google and Yahoo will continue to be vigorous competitors, and that competition will help fuel innovation that is good for users.

-- Official Google Blog
Added on: June 12, 2008

In fact, significant distributions in the early years might have been disastrous, as a review of our starting position will show you. Charlie and I then controlled and managed three companies, Berkshire Hathaway Inc., Diversified Retailing Company, Inc., and Blue Chip Stamps (all now merged into our present operation). Blue Chip paid only a small dividend, Berkshire and DRC paid nothing. If, instead, the companies had paid out their entire earnings, we almost certainly would have no earnings at all now - and perhaps no capital as well. The three companies each originally made their money from a single business: (1) textiles at Berkshire; (2) department stores at Diversified; and (3) trading stamps at Blue Chip. These cornerstone businesses (carefully chosen, it should be noted, by your Chairman and Vice Chairman) have, respectively, (1) survived but earned almost nothing, (2) shriveled in size while incurring large losses, and (3) shrunk in sales volume to about 5% its size at the time of our entry. (Who says "you can't lose 'em all"?) Only by committing available funds to much better businesses were we able to overcome these origins. (It's been like overcoming a misspent youth.) Clearly, diversification has served us well.

-- Warren Buffett
Added on: June 11, 2008