"Charlie and I don’t have the faintest idea what our cost of capital is at Berkshire, and we think the whole concept is a little crazy, frankly. But it’s something that’s taught in the business schools, and you have to be able to answer the questions or you don’t get out of business school. But we have a very simple arrangement in terms of what we do with money—we look for the most intelligent thing we can find to do.... And so, we measure alternatives against each other, and we measure alternatives against dividends, and we measure alternatives against repurchase of shares. But I have never seen a cost of capital calculation that made sense to me." --Warren Buffett (2003)
"It’s your alternatives that are competing for the use of your time or money, that matter in judging whether you take action or not. And of course, those vary greatly from time to time and from company to company. And we tend to make all of our financial decisions based on our opportunity costs, just as like they teach in freshman economics. And the rest of the world has gone off on some crazy kick where they can create a standard formula, and that’s cost. They even get a cost of equity capital for some business that’s old and filthy rich. It’s a perfectly amazing mental malfunction." --Charlie Munger (2003)
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