Fearful when others are greedy; greedy when others are fearful

Warren Buffett’s contrarian investing maxim, which recurs throughout the Berkshire Hathaway Annual Letters. The underlying premise is that “fear and greed” are “two super-contagious diseases” that will “forever occur in the investment community,” producing market aberrations that are “unpredictable, both as to duration and degree.” Rather than trying to time these epidemics, Buffett’s stated goal is “more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

In the letters the principle shows up as an actual operating rule, not just rhetoric — Berkshire “sharply reduced our wind exposures” in the super-cat (catastrophe reinsurance) field precisely when “a flood of capital” had entered and driven prices down, “parallel[ing] that which we employ in financial markets.” Buffett also frames it as guidance for ordinary investors: those who insist on timing the market “should try to be fearful when others are greedy and greedy only when others are fearful,” since “excitement and expenses are their enemies.” Kyle’s own notes pair the inversion with the discipline to “never celebrate for too long” and to “be selective until you find a good one, then be greedy and double down” — tying it to Manage Expectations and Valuation.

Where this appears

• Berkshire Hathaway Annual Letters — Buffett’s recurring contrarian maxim; cited verbatim in the letters, applied to reinsurance pricing, and flagged in Kyle’s notes on managing expectations and selective double-downs.