Folly is to ignore lessons from sages

He claims that he and Munger always avoid businesses whose futures they cannot evaluate, no matter how exciting their products might be. Says he: “At Berkshire, we will stick with businesses whose profit picture for decades to come seems reasonably predictable.”

In the annual letter, Buffett repeats the advice he has given on several occasions previously, that is, good investors should “be fearful when others are greedy and greedy when others are fearful”.

In the recent financial crisis, when many investors were deserting the stock market, Buffett’s company invested heavily into the market. He saw the crisis as a big opportunity to purchase good businesses cheaply. As he observes: “Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”

Buffett’s letter is instructive and inspiring, but its value to investors outside the US and Western countries is limited.

The American values, rules and other dynamics that have enabled Buffett to succeed would be hard to replicate elsewhere.

In the end, we have to accept that business practices, like politics, cannot be transplanted wholesale from one country to another.

Prof Makinda teaches at Murdoch University in Australia.