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Two quotes:

"Let's start by defining 'investing.' The definition is simple but often forgotten: Investing is laying out money now to get more money back in the future — more money in real terms, after taking inflation into account." [1]

-Warren Buffett

"Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you're not going to make much different than a 6% return — even if you originally buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you'll end up with a fine result." [2]

-Charlie Munger

- - -

[1] http://money.cnn.com/magazines/fortune/fortune_archive/1999/...

[2] http://ycombinator.com/munger.html




Those are really important and good points...but they're also why the two amigos don't invest in tech

- hard to predict if LinkedIn will be around and in what form in 20 or 30 years

- Munger's statement is true if the company can keep reinvesting capital at that ROE over a long time period. In fact, beyond an inflection point, a company like Microsoft or LinkedIn can become a natural monopoly and increase revenues and profits a lot with relatively little capital - there are actually INCREASING returns to scale. Which is what LNKD investors are apparently betting on.

Tech investing is more about the Next Big Thing, who is the next Microsoft or Google, and less about is there some moat that lets them earn 18% on capital and keep reinvesting the capital over a long period, which is where Buffett is a master.




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