> Warren Buffett Blog: Warren Buffett: leverage can lead to zero

Wednesday, January 22, 2014

Warren Buffett: leverage can lead to zero

When leverage works, it magnifies your gains. Your spouse thinks you're clever, and your neighbors get envious. 

But leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade — and some relearned in 2008 — any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. 

History tells us that leverage all too often produces zeroes, even when it is employed by very smart people.