In a 1985 interview with financial journalist and author Adam Smith, Warren Buffett shared the principles behind his extraordinary investment success.
Smith, who had met Buffett early in his career, admitted on camera that he regretted not investing with Buffett when he had the chance.
Buffett, never one to brag without data, responded calmly: “If you joined the partnership when we started in 1956 and reinvested the proceeds in Berkshire… I think you’d have a little over $15 million now from $10,000.”
A Calm Mind Is a Winning Strategy
Buffett made it clear that reacting emotionally to market drops is one of the worst things an investor can do.
He explained that people often panic when their stock price drops, assuming the market knows something they don’t.
“If your stock goes down 10% and that upsets you, it obviously means that you think the market knows more about the company than you do. In that case, you’re the patsy,” he said.
Instead of panicking, Buffett said a rational investor would use a price drop as a chance to buy more, but only if they understand and believe in the business.
“We own parts of businesses when we own stocks, and the New York Stock Exchange being open has nothing to do with whether the Washington Post is getting more valuable over a five- or ten-year period,” he said.
That’s why he famously said he wouldn’t mind if the stock market shut down for two years. For Buffett, what matters is the value of the business, not the daily stock price.
Temperament Beats Intelligence
Buffett said success in investing has more to do with emotional discipline than IQ.
“Being a sound investor really just requires a certain control of your temperament and the ability to know what you know and know what you don’t know,” he told Smith.
He stressed that the stock market is filled with distractions that lure people away from rational thinking.
Price movements, market predictions, and media noise often push investors to act out of fear or greed.
His approach has always been about understanding a business deeply and holding onto it for the long run, regardless of short-term market noise.
“You name 10 high-tech companies to me and ask me where they’re going to be in 10 years or 10 months, and I don’t have the faintest idea,” he said.
That’s why he focuses on businesses with staying power and predictable cash flows, like the Washington Post or Coca-Cola. These are companies that keep delivering, regardless of what the broader market is doing.
A Message for Everyday Investors
Buffett said the average investor should ignore Wall Street’s obsession with quick wins and short-term moves.
“People would much rather be promised that they’re going to win a lottery ticket next week than that they’re going to get rich slowly,” he said.
He added that real investing success comes from buying great businesses and letting time work in your favor.
“Occasionally, sensational businesses are given away,” he recalled, noting that in the 1970s, the entire Washington Post company was selling for far less than the value of its assets.
“The price was there for all to see, but people just didn’t feel very enthusiastic about the world then.”
The key, he argued, is patience. Buy good businesses at fair prices, hold onto them, and don’t let fear or hype sway your judgment.
Buffett’s message to investors was simple but powerful: if you trust your understanding of a company, the market’s opinion shouldn’t shake you.
IMAGE CREDIT: “Warren Buffett, Medal of Freedom Ceremony” by Medill DC, via Flickr. Licensed under CC BY-SA 2.0. Image adjusted for layout.