While reading Warren Buffett’s 2011 letter to shareholders this morning I was struck by this passage (discussing the insurance business).
Many insurers pass the first three tests and flunk the fourth. They simply can’t turn their back on business that their competitors are eagerly writing. That old line, “The other guy is doing it so we must as well,” spells trouble in any business, but in none more so than insurance. Indeed, a good underwriter needs an independent mindset akin to that of the senior citizen who received a call from his wife while driving home. “Albert, be careful,” she warned, “I just heard on the radio that there’s a car going the wrong way down the Interstate.” “Mabel, they don’t know the half of it,” replied Albert, “It’s not just one car, there are hundreds of them.”
Warren Buffett. 2011 Berkshire Hathaway Annual Report.
Great message, and it further reinforces our decision to shut down our affiliate program. It takes an independent mindset to successfully operate any business, whether you’re selling WordPress themes or ice cream cones. In either scenario, following “the other guy” is surely the fastest way to the bottom.
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