Thanks. Re read it after some time.
Following takes time to really absorb and apply.
"When we look at the future of businesses we look at riskiness as being sort of a go/no-go valve. In other words, if we think that we simply don’t know what’s going to happen in the future, that doesn’t mean it’s risky for everyone.
It means we don’t know – that it’s risky for us. It may not be risky for someone else who understands the business.However, in that case, we just give up. We don’t try to predict those things. We don’t say, “Well, we don’t know what’s going to happen.” Therefore, we’ll discount some cash flows that we don’t even know at 9% instead of 7%. That is not our way to approach it.
Once it passes a threshold test of being something about which we feel quite certain we tend to apply the same discount factor to everything. And we try to only buy businesses about which we’re quite certain.As for the capital asset pricing model type reasoning with its different rates of risk adjusted returns and the like, we tend to think of it – well, we don’t tend to think of it. We consider, it nonsense.But we think it’s also nonsense to get into situations – or to try and evaluate situations – where we don’t have any conviction to speak of as to what the future is going to look-like. I don’t think that you can compensate for that by having a higher discount rate and saying, “Well, it’s riskier. And I don’t really know what’s going to happen. Therefore, I’ll apply a higher discount rate.”