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What makes A Good Business?

Comparing Great Investing Philosophies Through Real Companies

Investors often ask whether there is a single correct way to identify a “good business.” The short answer—made clear by decades of successful but very different investors—is no.

 

Benjamin Graham, Warren Buffett, Charlie Munger, Philip Fisher, Seth Klarman, Howard Marks, and others all seek intelligent investment outcomes, yet they define risk, value, and business quality differently.

Rather than treating these differences as contradictions, it is more useful to see them as distinct lenses—each highlighting different aspects of the same underlying business.

 

This article does three things:

  1. It compares major investing styles

  2. It clarifies what each style considers a “good business”

  3. It analyzes three companies through multiple lenses

The goal is not to crown a winner, but to sharpen judgment.​​

What is a good business?

Comparing Great Investing Philosophies Through Real Companies

Investors often ask whether there is a single correct way to identify a “good business.” The short answer—made clear by decades of successful but very different investors—is no.

 

Benjamin Graham, Warren Buffett, Charlie Munger, Philip Fisher, Seth Klarman, Howard Marks, and others all seek intelligent investment outcomes, yet they define risk, value, and business quality differently.

Rather than treating these differences as contradictions, it is more useful to see them as distinct lenses—each highlighting different aspects of the same underlying business.

 

This article does three things:

  1. It compares major investing styles

  2. It clarifies what each style considers a “good business”

  3. It analyzes three companies through multiple lenses

The goal is not to crown a winner, but to sharpen judgment.
​

Part I – Comparing the Major Investing Lenses

1. Graham: The Defensive, Balance-Sheet Lens

Benjamin Graham viewed stocks primarily as claims on assets and earnings, not as stories about the future.

A good business for Graham:

  • Has a long earnings history

  • Strong balance sheet

  • Moderate debt

  • Trades below conservative estimates of intrinsic value

  • Offers a margin of safety independent of optimism

Growth is a bonus, not a requirement.
 

2. Buffett: The Business Quality Lens

Buffett shifted the focus from cheapness to economic strength.

A good business for Buffett:

  • Earns high returns on capital

  • Has predictable cash flows

  • Requires limited reinvestment

  • Can be held for decades

  • Has a durable competitive advantage

Valuation still matters—but quality determines whether a business is worth valuing at all.
 

3. Munger: The Moat and Human Behavior Lens

Munger sharpened Buffett’s thinking by emphasizing:

  • Simplicity

  • Incentives

  • Psychology

  • Structural advantages

A good business for Munger:

  • Has a moat that is hard to attack

  • Benefits from favorable human behavior

  • Avoids constant reinvention

  • Is run by rational, owner-oriented management

Munger is willing to pay more for businesses that are almost impossible to screw up.
 

4. Fisher: The Growth and Management Lens

Philip Fisher focuses on what the business can become, not just what it is.

A good business for Fisher:

  • Has long runway growth

  • Strong R&D or innovation culture

  • Exceptional management

  • Industry leadership

Valuation matters less than missing a compounding machine early.
 

5. Klarman & Marks: The Risk and Cycle Lens

Klarman and Marks care less about business glamour and more about avoiding permanent loss.

A good business for them:

  • Has explicit downside protection

  • Survives stress scenarios

  • Benefits from mispriced fear

  • Fits the current market cycle

Cash is an asset. Patience is a strategy.

​

Part II – Three Companies, Multiple Lenses

We now analyze the same three companies through these lenses:

  1. Coca-Cola

  2. Amazon

  3. Tesla

The goal is to see how the same facts lead to different conclusions.
 

1. Coca-Cola

Graham’s View

  • Long earnings history ✔

  • Strong brand and cash flow ✔

  • Moderate leverage ✔

  • Often trades at a premium ✖

Conclusion:
A good business, but often not a good Graham investment unless priced conservatively.
 

Buffett’s View

  • Iconic brand âœ”

  • Pricing power âœ”

  • Global distribution âœ”

  • Minimal capital intensity âœ”

  • Predictable cash flows âœ”

Conclusion:
A textbook wonderful business. Perfect for long-term ownership.
 

Munger’s View

  • Brand + habit = moat âœ”

  • Simple product âœ”

  • Embedded in daily life âœ”

  • Low disruption risk âœ”

Conclusion:
An almost ideal business. Boring in the best possible way.
 

Fisher’s View

  • Limited growth âœ–

  • Mature market âœ–

Conclusion:
A strong business, but not exciting enough. Fisher would likely pass.
 

Klarman / Marks View

  • Stable âœ”

  • Defensive âœ”

  • Limited downside âœ”

Conclusion:
At the right price, a solid capital-preservation holding.
 

2. Amazon

Graham’s View

  • Historically thin margins âœ–

  • High reinvestment âœ–

  • Asset-light but aggressive âœ–

  • Hard to value conservatively âœ–

Conclusion:
Too speculative. Insufficient margin of safety.
 

Buffett’s View

  • Extraordinary business model âœ”

  • Strong competitive position âœ”

  • Long-term cash flow potential âœ”

But:

  • Hard to predict âœ–

  • Management must execute flawlessly âœ–

Conclusion:
A great business—but not within Buffett’s traditional comfort zone (though he later acknowledged missing it).
 

Munger’s View

  • Platform economics âœ”

  • Network effects âœ”

  • Scale advantage âœ”

  • Customer obsession âœ”

Conclusion:
An exceptional business with a widening moat, but dependent on continued rational management.
 

Fisher’s View

  • Massive runway âœ”

  • Innovation engine âœ”

  • Visionary leadership âœ”

Conclusion:
Almost the ideal Fisher company.
 

Klarman / Marks View

  • High valuation risk âœ–

  • Sensitive to capital markets âœ–

  • Execution risk âœ–

Conclusion:
Unattractive unless pessimism creates a clear mispricing.
 

3. Tesla

Graham’s View

  • Highly volatile earnings âœ– 

  • Uncertain asset value âœ–

  • Speculative assumptions âœ–

Conclusion:
Not investable.
 

Buffett’s View

  • Capital-intensive âœ–

  • Competitive industry âœ–

  • Rapid technological change âœ–

Conclusion:
Too unpredictable. Lacks durable moat by Buffett’s standards.
 

Munger’s View

  • Admiration for execution âœ”

  • Skepticism about durability âœ–

  • Industry economics unfavorable âœ–

Conclusion:
An impressive company, but not a great long-term business.
 

Fisher’s View

  • Visionary leadership âœ”

  • Industry transformation âœ”

  • Large potential market âœ”

Conclusion:
A classic Fisher-style investment—high risk, high reward.
 

Klarman / Marks View

  • Narrative-driven pricing âœ–

  • High downside if expectations shift âœ–

Conclusion:
Avoid. Risk asymmetry is unfavorable.
 

Part III – What This Comparison Teaches

The same business can be:

  • A wonderful investment for one philosophy

  • Uninvestable for another

This is not a flaw—it is the point. It all depends on your own philosophy and strategy (long, medium or short term). 

If you want to check your risk profile, check our test. 
 

Key Insights

  • There is no universal definition of a “good business”

  • Every style embeds assumptions about:

    • Risk

    • Human behavior

    • Time

    • Uncertainty

  • Mixing philosophies leads to confusion and poor decisions. 
     

The Final Unifying Question

Across all these approaches, one question remains central:

Do you understand why this business might succeed—and what could permanently destroy it?

Your job as an investor is not to adopt someone else’s conclusions (so don't listen to that uncle with the "next best thing"), but to:

  • Choose a framework that fits your temperament / or character. 

  • Apply it consistently. (This can be hard, because hypes can causes you to starting doubting yourself)

  • Accept what it excludes as well as what it includes

A good business is not universal.
A good investing process, however, is.

​​​

I. Investing Philosophies — Primary Sources

Benjamin Graham
Warren Buffett
Charlie Munger
Philip Fisher
Seth Klarman
Howard Marks

II. Company-Specific Sources

Coca-Cola
Amazon

Tesla

III. Cross-Framework & Comparative Sources

Rational Investing
Understanding the Business

Quizzes & Assessments

Test your own Risk Profile

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