It’s not unusual to hear people say that they’re happy to pay "a fair price" for a business. It usually means they’re willing to pay a little more than what they think the business is worth. But, why would anyone do that? Surely paying a fair price for a business means you’re giving up at least as much as you’re getting. Where’s the profit in that?
"People think they’re investing, they don’t realise that they’re speculating, and there’s a huge difference," explains Bill Fleckenstein, founder of Fleckenstein Capital Management. "When you’re investing, I would say you’re looking around to buy a dollar bill for 60c, let’s say. When you’re speculating, the intrinsic value of the dollar bill is of no interest to you. You’ll buy a dollar bill for three dollars if you think you can sell it for four. The risk is that the dollar bill’s only worth one dollar."..
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