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URL:  http://boards.fool.com/warren-on-ben-23444117.aspx

Subject:  Warren on Ben Date:  12/18/2005  5:54 PM
Author:  mhirschey Number:  112723 of 213631

I recently had the pleasure of taking a large group of students to Omaha for a Q&A with Buffett. When available, I'll post the results of that Q&A if there is any interest here. In the meantime, I thought I'd mention my most memorable take-away from that meeting.

A student noted that Buffett has been a much more successful investor than Graham, and yet Buffett attributes much of his success to Graham, why is that?

For the first time, I heard Buffett address this issue head on. Buffett said that it's true, Graham never got really rich from investing. Ben was much more interested in ideas than in making money. However, the lessons Ben taught are very profitable (in order):

1. Stocks represent part ownership in the business. Before Ben, Warren charted prices and did lots of other silly stuff. Ben's perspective was eye-opening.

2. The concept of Mr. Market is vital. The market is very efficient, but not perfectly efficient--and that difference can make you very, very rich. At any point in time, the market price is usually, but not always, appropriate. An intelligent investor is one who can tell the difference between the current market price for a stock and a resonable interpretation of what that part of the business is really worth.

3. The margin of safety concept is also vital. Once an intelligent investor discerns the difference between the current market price for a stock and a resonable interpretation of what that part of the business is really worth, it becomes important to build in an appropriate margin of safety.

These lessons are Graham's most important contribution to Buffett and to you and me. Graham's sensible perspective, combined with Phil Fisher's (and T. Rowe Price's) insights on wonderful companies, has made all the difference for Buffett. If we are paying attention, they can make all the difference for us too.

Mark

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