[GEICO] got to thinking that, because they were making a lot of money, they knew everything. And they suffered huge losses. All they had to do was to cut out all the folly and go back to the perfectly wonderful business that was lying there.

What do you want to avoid? Such an easy answer: sloth and unreliability. If you're unreliable it doesn't matter what your virtues are. You're going to crater immediately. Doing what you have faithfully engaged to do should be an automatic part of your conduct. You want to avoid sloth and unreliability.

An investment decision in the common stock of a company frequently involves a whole lot of factors interacting ... the one thing that causes the most trouble is when you combine a bunch of these together, you get this lollapalooza effect.

Everyone caved, adopted loose [accounting] standards, and created exotic derivatives linked to theoretical models. As a result, all kinds of earnings, blessed by accountants, are not really being earned. When you reach for the money, it melts away. It was never there. It [accounting for derivatives] is just disgusting. It is a sewer, and if I'm right, there will be hell to pay in due course. All of you will have to prepare to deal with a blow-up of derivative books.

Recognize reality even when you don't like it-especially when you don't like it.

Sears had layers and layers of people it didn't need. It was very bureaucratic. It was slow to think. And there was an established way of thinking. If you poked your head up with a new thought, the system kind of turned against you. It was everything in the way of a dysfunctional big bureaucracy that you would expect.

We may well have a competitive advantage buying decent businesses at decent prices. But they won't be fabulous businesses and fabulous prices. There's too much competition and money out there, with many buyout specialists.