Quotes: The Really-Wealthy on the DEBT-Wealth model
“Despite our pessimistic views about inflation, our taste for debt is quite limited. To be sure, it is likely that our company could improve its return on equity by moving to a much higher, though still conventional, debt to business value ratio. Its even more likely that we could handle such a ratio, without problems, under economic conditions far worse than any that have prevailed since the early 1930s.
“Good business or investment decisions will eventually produce quite satisfactory economic results, with no aid from borrowing. Therefore, it seems to us to be both foolish and improper to risk what is important (including, necessarily, the welfare of innocent bystanders such as policyholders and employees) for some extra returns that are relatively unimportant. This view is not the product of either our advancing age or prosperity: Our opinions about debt have remained constant.
“One further aspect of our debt policy deserves comments: Unlike many in the business world, we prefer to borrow in anticipation of need rather than in reaction to it. A business obtains the best financial results possible by managing both sides of its balance sheet well. This means obtaining the highest possible returns on assets and the lowest possible cost on liabilities. It would be convenient if opportunities for intelligent action on both fronts coincided. However, reason tells us that just the opposite is likely to be the case: Tight money conditions, which translate into high costs for liabilities, will create the best opportunities for acquisitions, and cheap money will cause assets to be bid to the sky. Our conclusion: Action on the liability side should sometimes be taken independent of any action on the asset side”
Warren Buffett, American Billionaire, Founder and Executive Chairman of the US investment management company Berkshire Hathaway Inc.
Culled from Berkshire Hathaway’s 1987 Chairman’s Letter to shareholders.
“In 1975 Microsoft had started out in Albuquerque, New Mexico, because that’s where MITS, the little company whose Altair 8800 personal computer kit had been on the cover of Popular Electronics, was located. We worked with MITS because it was the first company to sell an inexpensive personal computer to the general public. In return for our software, MITS gave us royalties and office space the first year we were in Albuquerque.
“But after it was acquired by another company, MITS stopped paying us. We had no income for a year and were basically broke. An arbitrator handling the dispute was four months late in his ruling, and we were hanging on, but only barely. I talked to my father about the legal case during that time, and his advice helped me stick it out. I could have asked Dad for a loan, but I never did. Our attorney was nice enough to wait for payment until we won the case. After that episode, Microsoft has been perpetually cash flow positive. In fact, I developed a rule: We always have enough cash on hand to be able to run the company for at least a year if no one pays us. The MITS experience, suddenly having no income, made me very conservative, a trait that persists to this day.”
William H Gates III, American Billionaire and co-founder of Microsoft Inc. Extract from his book: Bill Gates – “The Road Ahead”
“We did things based on what God had given us at the time. Human confidence is vanity. You won’t find any of our companies overdraw accounts or anything of such. If you go a borrowing, you go a sorrowing. What has happened to those who took loans when interest rate was 8%, now that it is 35%. And to those who took foreign loans when the naira was equivalent to one dollar, now that one-dollar is equivalent to N10 or N12 (1989). What would they do now? Accept what God has done for you, make the best use of it, and pray for more blessing. Only He alone can give what no human beings can”
Chief M K O Abiola, Nigerian Millionaire and Founder of Concord Newspapers & Publishing Group. Culled from Ovation International article: “KOLA: My Beloved Son”.