A plaque remaining from the Big Apple Night Club at West 135th Street and Seventh Avenue in Harlem.

Above, a 1934 plaque from the Big Apple Night Club at West 135th Street and Seventh Avenue in Harlem. Discarded as trash in 2006. Now a Popeyes fast food restaurant on Google Maps.

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Entry from May 27, 2011
“Risk comes from not knowing what you are doing”

"Risk comes from not knowing what you are doing” is a quotation from billionaire investor Warren Buffett (who got rich by knowing what he’s doing). The popular investment saying has been cited in print since at least 1995 and 1999; one source (from 2011, below) credits Buffett’s line to a 1994 interview.

Wikipedia: Warren Buffett
Warren Edward Buffett (pronounced /ˈbʌfɨt/; born August 30, 1930) is an American investor, industrialist and philanthropist. He is widely regarded as one of the most successful investors in the world. Often called the “legendary investor, Warren Buffett”, he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is consistently ranked among the world’s wealthiest people. He was ranked as the world’s wealthiest person in 2008 and is the third wealthiest person in the world as of 2011.

Buffett is called the “Oracle of Omaha” or the “Sage of Omaha” and is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth. Buffett is also a notable philanthropist, having pledged to give away 99 percent of his fortune to philanthropic causes, primarily via the Gates Foundation. He also serves as a member of the board of trustees at Grinnell College.

Wikiquote: Talk:Warren Buffett
Risk comes from not knowing what you’re doing.

“Risk comes from not knowing what you’re doing.—Warren Buffett”
Coffee Mug

GoogleGroups: misc.invest.stocks
Newsgroups: misc.invest.stocks
From: (Brendan E. O’Connor)
Date: 1995/10/18
Subject: Re: Warren’s Way

Please read page 94 of Hagstrom’s book again.  I don’t think he’s “advocating” use of the risk-free rate, just reporting what Buffett has said.  Here’s an excerpt:

“Many people will be surprised to learn that the discount rate that Buffett uses is simply the rate of the long-term U.S. government bond, nothing else.  That is as close as anyone can come to a risk-free rate.

“Acacemics argue that a more appropriate discount rate would be the risk-free rate of return plus an equity risk premium, added to reflect the uncertainty of the company’s future cash flows.  Although Buffett does admit that as interest rates decline he is apt to be more cautious in applying the long-term rate, he does not add a risk premium to his formula for the simple reason that he avoids risk....business risk is reduced, if not eliminated, by focusing on companies with consistent, predictable earnings.  ‘I put a heavy weight on certainty,’ he says.  ‘If you do that, the whole idea of a risk factor doesn’t make any sense to me.  Risk comes from not knowing what you’re doing.’”

Google Books
Warren Buffett:
Master of the Market

By Jay Steele
New York, NY: Avon Books
Pg. 201:
Here’s something to remember always: “Risk comes from not knowing what you are doing.”

Bellmont Securities
Mr Buffett, What are More of Your Secrets?
April 11, 2011
In my last article “Mr Buffett, What are Your Secrets?” I wrote about Warren Buffett’s “secrets”. My point was that when you know where to look, you will find answers to most of the main questions that investors want to know from Buffett. He has already answered them in his writings and interviews over the years. The article was written as a make-believe interview taking place in Gorat’s Steak House in Omaha, Nebraska, Buffett’s favourite place to eat.
WB: Over the years I have made lots of comments on this topic. The first point is, as I said in an interview back in 1994 “Risk comes from not knowing what you are doing.” For example, here is what I told Washington Post reporter Bob Woodward (of Watergate fame) a few years ago, “Investing is reporting. I told him to imagine he had been assigned an in-depth article about his own paper. He’d ask a lot of questions and dig up a lot of facts. He’d know the Washington Post. And that’s all there is to it.”

Posted by Barry Popik
New York CityBanking/Finance/Insurance • (0) Comments • Friday, May 27, 2011 • Permalink