“One of the things you will find, which is interesting and people don’t think of it enough, with most businesses and with most individuals, life tends to snap you at your weakest link. So it isn’t the strongest link you’re looking for among the individuals in the room. It isn’t even the average strength of the chain. It’s the weakest link that causes the problem. It may be alcohol, it may be gambling, it may be a lot of things, it may be nothing, which is terrific. But it is a real weakest link problem. When I look at our managers, I’m not trying to look at the guy who wakes up at night and says ‘E = MC 2’ or something. I am looking for people that function very, very well. And that means not having any weak links.” -Warren Buffett, 1991 speech… Read the rest of this article!
In One Up On Wall Street (p. 19), Peter Lynch once remarked that “if anybody’s responsible for the disappearing dividend, it’s the U.S. government, which taxes corporate profits, then taxes corporate dividends, for so-called unearned income. To help their shareholders avoid this double taxation, companies have abandoned the dividend in favor of the buyback strategy, which boosts the stock price. . . Reducing the supply of shares increases the earnings per share, which eventually rewards shareholders, although they don’t reap the reward until they sell.”
I love everything about this Peter Lynch quote, even including the editorial aside that subtly trashes the notion of referring to dividends as unearned income in our tax code. It’s dumb to go through life thinking that the money generated from your labor is the most legitimate source of ways to make money; applying the skill to acquire in ownership interest in a business that … Read the rest of this article!