Why Warren Buffett thinks companies do not need economists | Watch

Warren Buffett, billionaire investor and Berkshire Hathaway Chairman, believes you do not need an economist to make decisions on buying stocks or companies.

Answering questions at the 2015 Berkshire Hathaway shareholders meeting on the economy and United States interest rates, Buffett noted that neither he nor partner Charlier Munger could predict what exists now.

Can't predict economy, focus on business performance: Buffett

“One thing I can assure you, I can't recall us ever making an acquisition or turning down one based on macro factors. Whether it was See's Candies or Burlington Northern (we bought it at a terrible time) … General economic conditions just don't come up, because we don't know what the next 12 months. 24 months, 30 months…” he said.

The Oracle of Omaha further explained, “We know we don't know what that's (economy) going to look like. But it doesn't really make any difference, if we're buying a business to hold for 100 years. What we have to do, is figure out what's likely to be the average profitability of the business over time, and how strong its competitive mode is… that sort of thing.”

“We think any company that has an economist has one employee too many,” he added and then passed the spotlight to Munger, joking: “Charlie, do you have anything rude to say that I haven't said?” To get a joke back, “Well, it would be hard to top that one”.

Watch: Warren Buffett on hiring economists

Warren Buffett's investment mantra: Hold long term

Over the years, Buffett has been very vocal about his investment mantra. He buys stocks for keeps and holds them for long term. Thus, he views short-term economic outlook and predictions as superfluous when making stock decisions.

In an interview with Yahoo Finance in 2019, he expressed similar thoughts on using economic predictions to make investment decisions.

“Something different happens all the time. And that's one reason economic predictions just don't enter into our decisions. Charlie Munger – my partner – and I in 54 years now never made a decision based on an economic prediction. We make business predictions about what individual businesses will do over time, and we compare that to what we had to pay for them,” he stated.

He added that decisions are not based on good trends or panic, because economics is not a hard science. “There's so many variables. I mean, in the hard sciences, you know that if an apple falls from a tree, that it isn't gonna change over the centuries because of anything or political developments or 400 other variables that go in. But when you get into economics, there's so many variables, and the truth is, you've got to expect good times and bad times in business,” he added.

Economic factors are short-term, company health is the better factor to consider he added, “We're going to have good years, bad years, in-between years, and maybe a disastrous year some year. We care a lot about the price. We do not care about the next 12 months.”