Warren Buffett, the Chairman and CEO of Berkshire Hathaway and a famous value investor, is another billionaire. He was ranked the world’s richest man in 2008, and is still in the top few. But Buffett uses very little debt in his businesses.
In fact quite the opposite. He tends to hold large amounts of positive net cash, meaning he has “liquidity” at all times. Here’s a quote from his 2013 letter to Berkshire Hathaway shareholders, something I recommend that all OfWealthers take the time to read. (“Charlie” is Charlie Munger, his long time business partner.)
“Charlie and I believe in operating with many redundant layers of liquidity, and we avoid any sort of obligation that could drain our cash in a material way. That reduces our returns in 99 years out of 100. But we will survive in the 100th while many others fail. And we will sleep well in all 100.”
Buffett may have taken longer to make his fortune than Batista. But his high cash levels and low debt levels mean he will keep his billions.
Debt is all around us these days. Government policies in the developed countries suppress interest rates. The idea is to keep interest costs down for government, businesses and individual people (voters). But cheap debt encourages people to have more and more of it. ...