How the power players do it - by Fortune senior editor at large Patricia Sellers

How Buffett learned to buy great businesses

November 8, 2013: 1:19 PM ET

Even Warren Buffett wasn't the smartest guy when he started investing. Who taught him to hunt for quality?

When Warren Buffett began investing more than 60 years ago, he tended to buy mediocre businesses at mediocre prices.

Then someone gave the Berkshire Hathaway (BRKA) CEO the best advice he says he ever got. That is: Pay up for really good businesses like American Express (AXP) and See's Candies.

Buffett's adviser: Charlie Munger, who is now 89 years old and Berkshire Hathaway's vice-chairman. Munger convinced Buffett, 83, to learn to "make silk purses out of silk." And that philosophy has turned out to be a key to the two men's extraordinary investing success.

"Forget the sow's ears," says Buffett, who applies the "silk purse" credo to all his relationships in life.

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About This Author
Pattie Sellers
Pattie Sellers
Senior Editor at Large, Fortune
Executive Director of MPW/Live Content, Time Inc.

Pattie Sellers has written more than 20 Fortune cover stories including "Marissa Mayer: Ready to Rumble at Yahoo," "Muhtar Kent's New Coke," "Oprah's Next Act", "The $100 Billion Woman" (Melinda Gates), and "Gone with the Wind" (Ted Turner). She co-founded Fortune Most Powerful Women and oversees the Fortune MPW Summit, the preeminent gathering of women leaders in business and beyond—and programs such as Fortune MPW Entrepreneurs and the Fortune-U.S. State Department Global Women Leaders Mentoring Partnership. Pattie also develops Live Content across Time Inc. Her blog, Postcards, is about how power players lead and navigate their careers. Pattie won Time Inc.'s prestigious MVP award for her performance in 2012.

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