Preface xviiSome things became clear quickly. Buffett’s level of activity in the
stock market has dropped off signif icantly in recent years; he has bought
entire companies more often than he has bought shares. He has on oc-
casion moved more strongly into bonds—investment-grade corporate,
government, even high-yield—and then, when they became less attrac-
tive, moved out again.
Some of these newly acquired companies are prof iled in the chapters
that follow, along with a discussion of how the characteristics of those
companies ref lect the tenets of the Warren Buffett Way. However, since
many of these companies were privately held before Buffett bought
them, the specif ics of their f inancial data were not publicly available. I
cannot, therefore, discern with any conf idence what Buffett might have
thought of those companies’ economic conditions, other than to say that
he clearly liked what he saw.
For this updated edition, I also took the opportunity to incorporate
some material that was not presented in the original book. I added a
chapter on Buffett’s style of portfolio management, a style he has labeled
“focus investing.” It is a cornerstone of his success, and I highly recom-
mend it. I also included a chapter on the psychology of money, the many
ways that emotion plays havoc with good decisions. To invest wisely, it
is necessary to become aware of all the temptations to behave foolishly.
It is necessary for two reasons: If you know how to recognize the emo-
tional potholes, you can avoid tripping into them. And you will be able
to recognize the missteps of others in time to prof it from their mistakes.
Ten years is either a very long time, or not long at all, depending on
your circumstances and your personal view of the world. For investors,
what we can say is that during these ten years, context has changed but
the basics have not. That’s good, because in another ten years the con-
text can change back again, or change in an entirely different direction.
Those who remain grounded in basic principles can survive those up-
heavals far better than those who do not.
In the ten years since I wrote The Warren Buffett Way,the noise
level in the stock market has continued to rise, sometimes to a deafening
screech. Television commentators, financial writers, analysts, and market
strategists are all overtalking each other to get investors’ attention. At the
same time, many investors are immersed in Internet chat rooms and mes-
sage boards exchanging questionable information and misleading tips.