R — Original text (Reading)
"We think of ourselves as business analysts — not as market analysts, not as macroeconomic analysts, and not even as security analysts." (1987) "Charlie and I are not stock-pickers; we are business-pickers." (2021)
I — Methodology skeleton
Buying a stock = buying part of a business, and it should be evaluated using the same standards as buying the entire business:
- Focus on the business's economic characteristics (moat/pricing power/management), not stock price movements
- Focus on long-term cash flow generation ability, not quarterly earnings fluctuations
- Do not predict market direction; only analyze business quality
- The holding period is measured in "years"; what is measured in "days" is trading, not investing
A1 — Application in the book
Case: Apple investment
- Problem: How to do value investing in the technology industry?
- Use: Treat Apple as a business rather than a stock—evaluate its ecosystem lock-in effect, user loyalty, and cash flow
- Result: 5.55% equity stake; Berkshire's share of Apple earnings ($5.6 billion) far exceeds the dividends received ($785 million)
A2 — Trigger scenarios
- The user asks "Will this stock go up?"—should shift to "Is this business good?"
- The user is looking at candlestick charts or technical indicators—should shift to looking at financial statements and business models
- The user focuses on "market sentiment" rather than "business analysis"
- The user is fixated on short-term stock price fluctuations
Language signals
- "Will this stock go up?"
- "How are the technicals?"
- "The stock price has reached support"
- "It fell X% today, should I sell?"
Distinction from adjacent skills
- Difference from
mr-market: Mr. Market focuses on how to deal with price fluctuations; doing business focuses on not looking at price at all and only looking at the business
E — Executable steps
-
Assume you are going to buy the entire company—use the same standards as evaluating a private business
- Completion standard: write one page on "If this company were unlisted, how much would you be willing to pay to buy it"
-
Evaluate three core dimensions
- Economic characteristics (moat width)
- Management quality (integrity + ability)
- The relationship between price and value
- Completion standard: each dimension has specific evidence to support it
-
Ignore all market noise(stock price movements/analyst ratings/market sentiment)
- Completion standard: the decision document contains nothing related to price movements
B — Boundaries
- Requires a circle of competence—you cannot analyze every business
- Unlisted companies have no liquidity and cannot be simply analogized
- Author's blind spot: Buffett can influence corporate decisions (controlling stakes/board seats), while retail investors cannot
Related skills (to be filled in stage 3)
- depends-on: circle-of-competence, economic-moat
- composes-with: aesop-three-questions, look-through-earnings
Audit information
- Verification passed: V1 ✓ / V2 ✓ / V3 ✓
- Distillation time: 2026-04-16