Mazor'sEdge

If you take a company that, in the end, never makes any money, but trades, changes hands, representing a valuation of $10 or $20 billion for some time, there’s no wealth created. There’s a tremendous amount of wealth transferred.

…but in the end the only wealth creation comes about through what the business creates.

There’s no magic to it. If a company that’s not worth anything sells for $20 billion and 5 percent of it changes hands, somebody takes a billion dollars from somebody else. But investors as whole gain nothing.

They all feel richer. It’s a very interesting phenomenon. But they can’t be richer, except as a group, unless the company makes them richer.

And it’s the same principle as a chain letter. If you’re very early on a chain letter you can make money. There’s no money created by chain letters. In fact, there’s the frictional cost of envelopes, and postage, and that sort of thing.

So the net, there’s some money destroyed a little bit. And there’s money destroyed by the frictional cost of trading and investing, and that comes out of investor’s pockets.

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© 2026 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Warren Buffett has emphasized that stock prices often diverge from a company’s true value during periods of heavy speculation, but ultimately align with fundamentals over time.

Speaking at Berkshire Hathaway’s 2000 annual meeting, Buffett cited his mentor Benjamin Graham’s observation from The Intelligent Investor: “In the short run it’s a voting machine, and in the long run it’s a weighing machine.”

Buffett added, “Sooner or later, the amount of cash that a business can disgorge in the future governs the value it has… But it can take a long time.”

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2026 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Warren Buffett has long cautioned investors about the dangers of leverage, the practice of using borrowed money to boost returns. While it may seem attractive, he warns it can quickly destroy even the most successful investors when markets shift.

“Whenever a bright person, a really bright person, goes broke that has a lot of money, it’s because of leverage,” Buffett told shareholders at Berkshire Hathaway’s 1999 annual meeting. “It would be almost impossible to go broke without borrowed money being in the equation.”

For Buffett, the lesson is clear: long-term success in investing comes from patience and discipline, not debt-fueled risk.

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2026 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Warren Buffett says investors should focus less on rigid formulas like price-to-earnings ratios and more on where a company is headed. Speaking at Berkshire Hathaway’s 1995 annual meeting, Buffett drew on advice from hockey great Wayne Gretzky: “Go where the puck is going to be, not where it is.”

“It’s the future that counts,” Buffett emphasized, “It isn’t a multiple of today’s earnings that are primarily determinative of things.” He underscored that long-term success in investing comes from anticipating future performance rather than relying solely on current metrics.

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2026 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.