A fellow who was a pal of Charlie Munger’s—another non-business school type—whowas a math major at USC. He went to work for IBM after graduation and was an IBM salesmanfor a while. After I got to Charlie, Charlie got to him. This happens to be the record of RickGuerin. Rick, from 1965 to 1983, against a compounded gain of 316 percent for the S&P,came off with 22,200 percent, which, probably because he lacks a business school education,he regards as statistically significant.

One sidelight here: it is extraordinary to me that the idea of buying dollar bills for 40cents takes immediately with people or it doesn’t take at all. It’s like an inoculation. If itdoesn’t grab a person right away, I find that you can talk to him for years and show him records,and it doesn’t make any difference. They just don’t seem able to grasp the concept, simpleas it is. A fellow like Rick Guerin, who had no formal education in business, understandsimmediately the value approach to investing and he’s applying it five minutes later. I’ve neverseen anyone who became a gradual convert over a ten-year period to this approach. It doesn’tseem to be a matter of IQ or academic training. It’s instant recognition, or it is nothing.

Stan Perlmeter who had a 4,277.2% return was a liberal arts major at the University ofMichigan who was a partner in the advertising agency of Bozell & Jacobs. We happened tobe in the same building in Omaha. In 1965 he figured out I had a better business than he did,so he left advertising. Again, it took five minutes for Stan to embrace the value approach.Perlmeter does not own what Walter Schloss owns. He does not own what Bill Ruane owns.

These are records made independently. But every time Perlmeter buys a stock it’s because he’sgetting more for his money than he’s paying. That’s the only thing he’s thinking about. He’snot looking at quarterly earnings projections, he’s not looking at next year’s earnings, he’snot thinking about what day of the week it is, he doesn’t care what investment researchfrom any place says, he’s not interested in price momentum, volume, or anything. He’ssimply asking: What is the business worth·

I selected these men years ago based upon their framework for investment decision-making. Iknew what they had been taught and additionally I had some personal knowledge of their intellect,character, and temperament. It’s very important to understand that this group has assumed far lessrisk than average; note their record in years when the general market was weak. While they differgreatly in style, these investors are, mentally, always buying the business, not buying the stock.

A few of them sometimes buy whole businesses. Far more often they simply buy small pieces ofbusinesses. Their attitude, whether buying all or a tiny piece of a business, is the same. Some ofthem hold portfolios with dozens of stocks; others concentrate on a handful. But all exploit thedifference between the market price of a business and its intrinsic value.