Capital Efficiency Quotes

Again two manufacturers may employ the same amount of fixed, and the same amount of circulating capital; but the durability of their fixed capitals may be very unequal.

Information is a substitute for time, space, capital, and labor.

I think there's an awful lot of twaddle and bullshit on EVA. The whole game is to turn retained earnings into more earnings. EVA has ideas about cost of capital that make no sense. Of course, if a company generates high returns on capital and can maintain this over time, it will do well. But the mental system as a whole does not work.

GDP is a function of capital, labour and how productively you use both.

One of the best investors around, Joel Greenblatt, has written a popular, charming and funny book about investing in great companies at low P/E multiples. To simplify an already simple book, great companies are generally measured as companies that can generate lots of profit without requiring a lot of capital. This means that they have high ROEs.

The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.

The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.

If I am right in supposing it to be comparatively easy to make capital-goods so abundant that the marginal efficiency of capital is zero, this may be the most sensible way of gradually getting rid of many of the objectionable features of capitalism.

Over the years, the U.S. economy has shown a remarkable ability to absorb shocks of all kinds, to recover, and to continue to grow. Flexible and efficient markets for labor and capital, an entrepreneurial tradition, and a general willingness to tolerate and even embrace technological and economic change all contribute to this resiliency.

Startups are often very undercapitalised, but I found that to be very beneficial because it forces you not to throw money at problems. Instead, you learn all the nuts and bolts of what you're doing and become an expert.

As an investor with small capital, one should prefer businesses that have high returns on capital and that require little incremental investment to grow.

We like companies that can get big and powerful on $50 million or less and not two, three, four or five billion.

It always seemed mad to me that people who have common investment objectives, let alone are related to each other, should take their capital and allow it to be less efficient by breaking it up into smaller bits.

Too many startups get in the habit of continually raising more and more money, which has the deleterious effect of both pushing out profitability and limiting your exit options. The less rounds of capital you need to raise, the more of your company you get to own.

You should command and demand the tenfold leverage on your dollars when you give it away as well.