Borrowing Quote by Charlie Munger
“Obviously, consideration of costs is key, including opportunity costs. Of course capital isn't free. It's easy to figure out your cost of borrowing, but theorists went bonkers on the cost of equity capital. They say that if you're generating a 100% return on capital, then you shouldn't invest in something that generates an 80% return on capital. It's crazy.”
About This Quote
Source Speech: Annual Shareholder Meeting, Berkshire Hathaway, 1995
Understanding all cost components, especially opportunity cost, is essential for sound investment decisions.
In simple terms: Consider all costs before investing.
Key Takeaway
Factor in hidden costs.
Themes
finance
investment
decisionmaking
Mood
analytical
cautious
Type
advisory
educational
When to use this quote
- Evaluating project returns
- budget planning
- risk assessment
- portfolio management
Key Concepts
Opportunity cost
cost of equity
capital allocation
Questions to Reflect On
- How do you quantify opportunity cost in your projects?
- What hidden costs might you be overlooking?
A Different Perspective
Ignoring opportunity cost can lead to suboptimal choices.
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