Warren Buffett's Analogy About About Boobs And Porn Shop Operators Is Just Brilliant
Buffett has a way of explaining complicated finance topics so that they're fun and understandable.
Carleton English of Belus Capital Advisors points us to this gem of a quote from 2008 where he takes a jab at private equity.
Someone had asked the Oracle of Omaha why people sell their companies to him instead of private equity firms. This is the type of question that you might hear later this week. Here's Buffett's response:
“You can sell it to Berkshire, and we’ll put it in the Metropolitan Museum; it’ll have a wing all by itself; it’ll be there forever. Or you can sell it to some porn shop operator, and he’ll take the painting and he’ll make the boobs a little bigger and he’ll stick it up in the window, and some other guy will come along in a raincoat, and he’ll buy it."
According to Bloomberg, Buffett delivered this doozy during some Q&A with a 300 executives in Toronto.
He's basically explaining that there is more than one way for a company to get to a certain market value.
Private equity often involves a lot of debt, a lot of cuts, and usually a lot of risk before a company is turned around and sold back on the market.
Berkshire and Buffett, on the other hand, often take a more passive approach. Typically, Buffett seeks out what he considers to be undervalued, yet well run companies. And then he just waits for them to get to their intrinsic values.
Anyways, we hope this weekend's events in Omaha yield some more great quotes.