68 THE WARREN BUFFETT WAY
consistent results with the same type of products year after year, it is not
unreasonable to assume that those results will continue.
As long, that is, as nothing major changes. Buffett avoids purchasing
companies that are fundamentally changing direction because their pre-
vious plans were unsuccessful. It has been his experience that under-
going major business changes increases the likelihood of committing
major business errors.
“Severe change and exceptional returns usually don’t mix,” Buffett
observes.^6 Most individuals, unfortunately, invest as if the opposite were
true. Too often, they scramble to purchase stocks of companies that are
in the midst of a corporate reorganization. For some unexplained reason,
says Buffett, these investors are so infatuated with the notion of what to-
morrow may bring that they ignore today’s business reality. In contrast,
Buffett says, his approach is “very much prof iting from lack of change.
That’s the kind of business I like.”^7
Buffett also tends to avoid businesses that are solving diff icult prob-
lems. Experience has taught him that turnarounds seldom turn. It can be
more prof itable to expend energy purchasing good businesses at reason-
able prices than diff icult businesses at cheaper prices. “Charlie and I have
not learned how to solve diff icult business problems,” Buffett admits.
“What we have learned is to avoid them. To the extent that we have
been successful, it is because we concentrated on identifying one-foot
hurdles that we could step over rather than because we acquired any
ability to clear seven-footers.”^8
The Coca-Cola Company
No other company today can match Coca-Cola’s consistent operating
history. This is a business that was started in the 1880s selling a bever-
age product. Today, 120 years later, Coca-Cola is selling the same bev-
erage. Even though the company has periodically invested in unrelated
businesses, its core beverage business has remained largely unchanged.
The only signif icant difference today is the company’s size and its
geographic reach. One hundred years ago, the company employed ten
traveling salesmen to cover the entire United States. At that point, the
company was selling 116,492 gallons of syrup a year, for annual sales of
$148,000.^9 Fifty years later, in 1938, the company was selling 207 million