As the supporting scaffolding was removed following the completion of a Roman arch, the responsible engineer was required to stand beneath it. This approach ensured that the engineer designed and built the arch with a substantial margin of safety.
At Cook & Bynum, we have applied the lessons of this highly effective quality control system in two distinct ways. First, we only make investments in companies whose securities provide an appropriate “margin of safety” – meaning they trade at a significant discount to our appraisal of their intrinsic values. Second, we believe it is imperative to have our interests closely and fully aligned with those of our investors. To accomplish this objective, we invest substantially all of our liquid net worth alongside our investors and are more than willing to “eat our own cooking.” As a result, we manage our partners’ money exactly how we manage our own.
We feel it is essential to our long-term success that we have partners who share our goals, so we seek those who are focused on long-term investment results rather than short-term market fluctuations. Having partners focusing on the latter will almost certainly compromise our long-term results.