How to Apply Buffett’s Snickers Bar Analogy to Investing

During their recent episode, Taylor, Carlisle, and Robert G Hagstrom discussed How to Apply Buffett’s Snickers Bar Analogy to Investing, here’s an excerpt from the episode:

Robert: Yeah. It was brilliant. It’s a brilliant thing that said. And so, Lou Simpson said it in a slightly different way. He says, “It’s not hard to pick the great businesses. The difficult thing is hanging onto it.” And so, I’m not sure I hit the bullseye on your answer, Jake, but it is if you got a good company, because you’ve got the returns, return on capital, they’re putting it back to work, favorable, long-term prospects, it’s just looking left and right, thinking, can anybody take you out. That’s what we spend a lot of time on. Can I give you one great story?

Tobias: Yeah, please.

Robert: This was actually–

Jake: Oh, yes.

Robert: Who wrote that? Oh, God I’m having– Morgan Housel? He wrote the Psychology of the Money. Well, in his new book, he said something’s never changed. [crosstalk]

Jake: Same as it ever was. Yeah.

Robert: Yeah. Thank you. So, he tells his story. This is perfect. So, right after the financial crisis, Warren is in, he’s driving his Cadillac and he’s got a reporter in the company. It’s 2009, and the reporter’s down in the dumps like, “Oh, Warren, this is horrible. Banks are going out of business. The worst recession since the Great Depression, the banking systems had.” Warren said, “What was the best-selling candy bar in 1962?” [Jake laughs] And the guy said, “I don’t know.” He said, “Well, what was the best-selling candy bars?” “Well, If I had to tell you, Snickers.”

Jake: Snickers. Yeah.

Robert: So, they were driving along, and then he turned to him and said, “What’s the best-selling candy bar today?” The guy said, “I don’t know.” He goes, “Snickers.” And the conversation ended. There’s the whole essence of the Warren Buffet way. [Jake chuckles] You’re trying to buy a Snickers bar today, it’s going to be a Snickers bar 10 years from now, right? That’s how we think about it. So, once again, I don’t know if that hit bullseye, but that’s how I think. I’m looking for a Snickers bar today that I think will still be the Snickers bar 10 years from now.

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