1988

Buffett described the Coca-Cola purchase as the product of a long-held conviction about the business rather than a forecast of near-term results. He wrote that he preferred a wonderful business at a fair price to a fair business at a wonderful price, and that the Coca-Cola investment embodied that preference: a consumer franchise with global reach, durable consumer attachment, and the capacity to raise prices over time.

On the rationale for the Coca-Cola purchase.

Icahn acquired control of Trans World Airlines through a hostile tender in 1985 and took the company private in a heavily leveraged 1988 transaction that left the airline carrying enormous debt while he sold his equity stake for a reported substantial gain. The deal is remembered as the archetype of the 1980s raider era: asset sales, debt loads, and a departing raider enriched while the operating company struggled.

Buffett wrote that an investor's goal is not to calculate a business's intrinsic value to many decimal places but to have enough conviction that the value is well above the price. He emphasized that a rough but correct estimate is more useful than a precise but wrong one, and that the chief error is not arithmetic imprecision but buying businesses one does not understand.

On the precision-vs-correctness point in intrinsic value.

TWA's subsequent path — bankruptcies, shrinking, and eventual absorption by American Airlines — is usually cited against Icahn, and he has responded over the years that the airline's union structure and the industry's economics made any ownership outcome a fight for survival. The episode remains the standard exhibit in the debate over whether activist gains come at the expense of operating companies and their employees.

Decision — Bought Nikkei puts (“Count me among the skeptics”). Context: 1988 letter carries the verbatim line; 1990 letter reports results. Outcome (known): $2.4M realized gains in 1990 as Japan fell 38.7% — the first famous crisis trade.