Quality at a Fair Price — The Buffett Evolution

Buffett began his career buying cigar butts — cheap, ugly businesses with one puff of value left. Then Charlie Munger showed him a better way: buy a wonderful company at a fair price rather than a fair company at a wonderful price.

Why This Matters

The evolution from Graham to Buffett represents the most important conceptual shift in value investing. Graham sought statistical cheapness — stocks priced below liquidation value, regardless of business quality. Buffett, influenced by Munger and Philip Fisher, recognised that the highest long-term returns come not from buying temporary cheapness but from owning businesses whose competitive advantages allow them to compound capital at high rates over very long periods. A mediocre business bought at a large discount to book value might produce a 50% return. An exceptional business bought at a fair price might produce a 20× return over two decades.