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At Berkshire’s Annual Meeting, Warren Buffett was asked how he values declining businesses. His answer: “Generally speaking, it pays to stay away from declining businesses… The real money is going to be made by being in growing businesses.” ___ The lesson is simple but often ignored. A low multiple on a declining business is not a margin of safety — it’s 𝘰𝘧𝘵𝘦𝘯 a value trap dressed up as one. When something is offered at “only 6x EBITDA,” the question worth asking is why. Munger’s quip says it all — declining businesses can still generate cash, but they are not worth nearly as much as growing ones. The cigar-butt approach — finding a cheap business and getting one last puff out of it — is not where the real money is made. Perhaps the most underappreciated point Buffett makes is this: the same amount of energy and intelligence applied to declining businesses, if redirected toward truly great and growing ones, will simply work out better. Every hour spent trying to squeeze value out of a deteriorating business is an hour not spent finding the next great compounder. The research, the diligence, the conviction required — it’s the same effort either way. The question is where you point it, so point it towards growing businesses.