Lots of investors understand how to value companies, far fewer actually apply it regularly. I'm always amused when some Wall Street advisor discusses a businesses cash flow and growth rate using terms from his valuation courses, then starts talking about market sentiment and concludes by analyzing it's chart.
It's like a physicist laying out the math perfectly for an orbital launch, but then starts analyzing launch times using Astrology.
Very, very few investors apply valuation methodologies so well they they become true value investors, the name is really a marketing label for most funds. One necessary part of being a value investor that Buffett harps on in his letters is psychology, the ability to avoid bias in order to make decisions and not undo them in a panic. He works really hard to insulate himself from irrational fears, and focus on known facts.
For example, he tries to never know what a company's stock trades at when he reads their annual reports and start making his own estimate of it's value. If it's a great company and it's trading for $100, he doesn't want to be subconsciously biased to raising his valuation estimate just to justify buying it.
There is a great story from his partnership days. His partners were told up front he'd never discuss what they were invested in, he didn't want anyone front-running his trades at hurting the partnerships results. But one day during a market tumble a partner rushes in and demands to know if Buffett had invested in certain stocks that had crumbled. Warren just buzzes his secretary, asks how much the partner's share was worth, and told her to write him a check for that amount, and told the guy you're out.
He wasn't going to panic. He wasn't going to let others try to panic him.
(disclaimer: I say this as someone who's has invested into Berkshire Hathaway)
Buffet's success is only partly his ability to value companies and buy them at good price. He is good at that, no doubt, but it's just half of the story.
The real genius is the way Buffet has structured his business to give him permanent advantage. The core of Berkshire Hathaway is the insurance business, GEICO and Berkshire Reinsurance. These companies are very profitable and generate huge cash inflow. This cash is cheaper compared to what other investors get trough financial sector. Especially when times are tough and money is tight. When other investors must sell something they own or get expensive loan, Buffet is drowning in cash and looking ways to spend it.
Someone who is just as good at valuing companies starts several percentage points behind Buffet when they scramble to finance their acquisition.
This is all true but before he structured his businesses this way, he ran a pure investment partnership for several years where his results were entirely due to his security-picking abilities (the aforementioned anecdote about returning the investor his money is from those days). He clobbered the Dow in those years too.
When he got going, people were mostly just buying what their broker told them to, which was some company the broker had heard about that morning on the elevator. There was such little information out there that his philosophy (buy and sell on fundamentals looking at various ratios) gave him a major advantage. This was Ben Graham and The Intelligent Investor, who Buffett studied under at Colombia, then worked with him.
I'd say Buffett's biggest innovation past that is realizing the role of management. He talks about it in various ways, but I think his main rule comes down to "avoid psychopaths in management; it's a fundamental people don't understand how to discount correctly." There's a lot to that, it turns out.
Then he got into insurance, as you say, to get lots of cheap cash to invest. Compare him to say, Jay Gold, who mostly got rich through stock manipulation or Michael Milken who got rich by inventing the junk bond (a "new" financial product) then went to jail.
Not many successful stock pickers out there; most rich finance people made it from commissions of some form or another, not market gains.
The world is different now though; Graham's methodologies are so beat to death at this point that there's no advantage to be had. Buffett's philosophies on the importance of the management team (not being psychopaths) still apply though.
No one follows Grahams methodologies because you can't raise money doing it. They pay lip service to it. Riches on wall street come from fees on other peoples money, something Buffett voluntarily gave up in the late 60s.
And as far as "avoid psychopaths in management" that's actually nearly opposite Buffett's real philosophy, which is "you want to own a business any fool can run, because sooner or later a fool will be running it". He looks for businesses with strong competitive barriers.
> No one follows Grahams methodologies because you can't raise money doing it.
Or because they're old and beat to death and don't work anymore? They used to work and that's where Buffett started.
> Riches on wall street come from fees on other peoples money
Yes, that's mostly true, which is what I said (I said, "most rich finance people made it from commissions of some form or another, not market gains.")
> And as far as "avoid psychopaths in management" that's actually nearly opposite Buffett's real philosophy,
No, it's really not.
> which is "you want to own a business any fool can run, because sooner or later a fool will be running it".
Didn't Peter Lynch say that? It's a good quote though; I've certainly used it. My favorite Buffett quote is "Risk comes from not knowing what you're doing."
Also "Long ago, Ben Graham taught me that 'Price is what you pay; value is what you get.' Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down"
The guy has said lots of interesting things and is worth learning more about if you're even tangentially interested in business and investing.
Relying on insurance is not without its risks as the former Lloyds names found out - all it takes is 2 or 3 black swan events and a lot of insurance companies could get wiped out
> then starts talking about market sentiment and concludes by analyzing it's chart
You summarise my experience of the financial industry well. If you haven't already, read "Where Are The Customer's Yachts" by Fred Schwed - very entertaining and funny, in a kind of sad way: https://www.amazon.com/Where-Are-Customers-Yachts-Street/dp/...
I've been a longtime Buffett follower. I haven't seen the HBO documentary yet but am looking forward to it.
I would recommend Buffett's authorized biography "The Snowball" by Alice Schroeder. Before writing it, WB told AS that if she got different stories from different tellers to go with the one that was least flattering to WB.
Since it was written, WB hasn't denounced the book, but has broken off what were cordial ties with the author. Speculation abounds, but mostly it's because she hints that Susie wasn't entirely faithful to Buffett when she left Omaha and moved to California. (She never comes out and says it, but it's implied.)
In any case, it's an excellent book, and the one written with the most access to Buffett and his notes.
Alice Schroeder did a small AMA on reddit years ago that is worth reading.
When asked about their broken-off relationship, she says that they aren't unfriendly or anything, but that she is basically no longer in his inner circle.
Her explanation is that he figuratively laid himself bare before her for the book, which was necessary for it, but that it made things afterward quite awkward. Kind of like seeing a close friend naked.
Second the recommendation for that book. I like it better than the Lowenstein book, but any Buffett-head should read both, of course, as each has some details the other doesn't.
I was also confused about the implications around Susie and just assumed that she had an affair with the tennis coach guy, as cliche as that sounds.
Edit: Dug out the AMA. Definitely read if you are a fan of Buffett / The Snowball.
I also read The Snowball, and my take on it was that Buffett is a seriously duplicitous man. He says one thing and does another. He believes in companies that pay dividends, yet BH does not. He is a folksy family man that has two wives. He is a big Democrat and believer in equality, and yet during the Washington Post workers strike he was working very hard with Katharine Graham to deliver the newspaper and counter the union's efforts.
> He believes in companies that pay dividends, yet BH does not.
The reason he likes companies that pay dividends is that often he can allocate capital better than the companies. CEOs are often tempted to reinvest profits in projects (such as mergers) that generate a sub-standard return. Berkshire is different in that its principal purpose is capital allocation. As long as Buffett succeeds in achieving better than average returns, it makes sense not to pay dividends. There is nothing duplicitous about that.
> He believes in companies that pay dividends, yet BH does not
No, he believes in companies that correctly value the capital they employ. He's happy for a company to use its profit to repurchase shares or expand its business so long as it's likely to achieve a good return.
> He is a folksy family man that has two wives
I would hardly call his actions 'duplicitous'. My take is that Buffett and his first wife Susie grew apart. Susie wanted to separate from Buffett but she still cared for him, so she hired Astrid as a housekeeper and looked the other way when Buffett and Astrid fell in love. I don't understand why they did not officially divorce, but Buffett remained very close with Susie and was happy to leave his fortune to her when he died. Of all the failed marriages, this one seems to have the happiest outcome.
> He is a big Democrat and believer in equality, and yet during the Washington Post workers strike he was working very hard with Katharine Graham to deliver the newspaper and counter the union's efforts.
It's perfectly coherent to believe in civil rights yet feel that some union demands are unreasonable. As a counterpoint to the Washington Post strike, look at Buffett's 1985 comments about the BH textile mill [1]:
"In contract negotiations, union leaders and members were sensitive to our disadvantageous cost position and did not push for unrealistic wage increases or unproductive work practices. To the contrary, they tried just as hard as we did to keep us competitive. Even during our liquidation period they performed superbly."
Buffett clearly cares about his textile workers:
"Could we have found a buyer who would continue operations, I would have certainly preferred to sell the business rather than liquidate it, even if that meant somewhat lower proceeds for us. But the economics that were finally obvious to me were also obvious to others, and interest was nil."
What about the cost of the trade you don't pay to receive dividends. And in the UK if you have your investments in an ISA or stay under your personal allowance (5k£) - the UK is a little more sensible when it comes to tax on investments.
BRK.B shares currently trade around US$160ish/share. The dividend equivalent to selling even a single share would incur $24 in taxes (15%), and the transaction fee for a discount broker is around $7 or $8. So unless the shares have tripled since you bought them, which would have had to have been in 2003 or prior, you're coming out ahead in the US after only one share (savings on long-term capital gains taxes exceed the transaction fee cost). If you sell two shares at a time, it gets you back to 1997.
Yes, tax-advantaged accounts are a different question, but Berkshire can't pay a dividend to just "the people who need money in a tax-advantaged account". If you want a smaller impact from fees, make fewer, larger transactions.
It's not like this requires particularly large sums. At 7 shares per transaction you're already under the industry average stock index fund expense ratio (0.76%), and unlike those funds, that's a cost that's incurred once on just the shares you sell, not annually on your whole investment. People pay higher (relative) fees to withdraw cash from an ATM.
> US$160ish/share. The dividend equivalent to selling even a single share would incur $24 in taxes (15%),
You aren't taking the purchase price of that share into consideration. If you bought the share at $140, your profit is only $20, and the tax on the equivalent dividend would only be $3.
Conversely, if you get dividends but do want to keep the money in the market, then you pay for the cost of a trade (or trades, for a portfolio) to buy more shares.
Frankly, I think the Berkshire approach, or at least companies that offer a dividend reinvestment plan, makes a lot of sense. For the average investment, dividends are fiddly, modest amounts of income that you just need to do tax paperwork for and then deal with reinvesting. Much more convenient to do nothing during the accunulation phase of your wealth building, then sell shares when you want the money back.
I came across an interesting story the other day about his relationship with Rose Blumkin, Founder of Nebraska Furniture Mart and how she tricked him into buying NFM without a non-compete clause and he paid the price. Story: http://www.infoblizzard.com/the-blog-smog/a-humorous-story-a...
I read the link and am left to wonder at the role of business ethics in a business deal. Was it unethical for her to start a competing business? Seems like an uncool move, but of course I'm reading this years after the fact.
On a practical level, if I sell my small business, is a non-compete really something that's practical? If all I know is furniture sales and all my contacts are in the furniture business, etc what am I supposed to do now, assuming the sale didn't make me incredibly wealthy to the point where I dont need to work ever again?
Its unrealistic to expect people to suddenly learn new skillsets later in life, especially if they have decades invested into these skillsets. I think this is why non-competes in many industries are ultimately unenforceable and why the courts or state legislatures never want to make non-competes powerful. People aren't machines. They can't really be retooled. If I get a job with Bigco and then switch to Smallco, Bigco shouldnt be able to tell me I can't be a programmer there. Corporations shouldn't have this level of power over us.
Even if we dismiss the first scenario as a 'business sale' I'd argue that sole proprietor businesses or any business with only a few people is much closer to being an employee somewhere. You can't expect someone to give up their only skills for 5 to 10 years for a modest sale. Not every sale is a SV-like billion dollar plus sale.
>, if I sell my small business, is a non-compete really something that's practical?
Yes, it's practical. If the non-compete is explicit and part of the conditions for the sale, the owner-seller is supposed to factor that into her selling price. E.g. if the owner has a mental price of $2 million to sell the furniture business but is unhappy about not being able to open another store, she needs to raise her price to $3 million to be content with not competing. In other words, the buyer of the business is partially paying the previous owner to not compete -- for a limited time such as 5 years.
Maybe you're thinking of employees and their unenforceable non-compete clauses trying to prevent them working for competitors in California. That doesn't apply to the owners selling their businesses.
Usually a non-compete like that is geographically boxed.
When you're selling a business, you're selling the future. If you sell your furniture business, then turn around and open up a store down the road, you're attacking the ROI that you projected going forward and the buyer acted upon in good faith. Sketchy.
Employees are a different matter, as it's a one-sided arrangement where the employee has little bargaining power. Small businesses are different -- both parties are free agents.
My thinking is that I sell my furniture store but then get a job at a different furniture store. I don't necessarily see that as an attack on their ROI. But yes, starting a new company nearby I could see being blocked for x amount of time. The problem I see is that NDA's aren't that granular. They're fairly strict and can hurt one's ability to find work.
I don't think she 'tricked Buffett' on the deal. She started the competing business in anger after arguing with members of her family about running the main business. Dunno about the ethics. It worked out pretty good for Buffett in the end. He bought NFM for $80m and last year the Dallas branch alone did $750m in sales.
Nebraska Furniture Mart is such a weird anomaly. You hear of the local places being run out of town by all the national big chains, but the national big chains can't compete with Nebraska Furniture Mart locally, and the ones than spring up around it, shortly die off.
"Mrs. B." was a total hustler (in a good sense). I grew up going to NFM.
We were once there to buy carpet; she's wheeled up to us in her cart (she had to be 80+ at the time), nearly hit my little sister and basically said "what price do you need to purchase this carpet today?".
She was famous for running the sales floor, even though she could have long retired prior.
From the article: financial questions “are easy,” as Buffett says. “It’s the human problems that are the tough ones.”
Preach. The more I 'practice business' the more I come to appreciate that the only thing out of your control are people (and that's probably a good thing). Everything else you can structure some kind of deal to resolve, but people are emotional, untrusting, illogical and often good at hiding their true motives.
I think Buffett would say not just people, but you are emotional, untrusting, illogical and good at hiding your motives from yourself. Thats why he preaches about how you live your life affects the quality of your decisions. He's not on Wall Street for a reason, living in Nebraska shields him from a lot of superfluous nonsense and allows him to focus on factual analysis and decisions.
I find some of his dealings disturbing. https://www.publicintegrity.org/2015/04/03/17024/warren-buff...
On a personal level he took over a local manufacturing co. in the city I live in. My former neighbor was working there when he took over the company. In a press release he said he was pleased with managements performance at the company and they should continue to operate as they were. My neighbor in his early 60's was worked 7 days a week , 11 to 12 hr. days. It was apparent they were trying to force him out. They accomplished their goal , he had a stroke on the job and died a few days later. I agree Warren was not responsible personally , I don't know where the buck stops. I lost a good neighbor soon after his dog passed.
Sounds like you have a problem with the owners/managers, not Warren. Do you really think he came all the way from Nebraska to point out your neighbor and tell management to work him to death?
Warren is notoriously hands off with the businesses he buys. He typically buys them because they are well run and he doesn't have time to fix anything.
By took over I meant he bought the company. If you read the bottom of my comment . . ( I agree Warren was not responsible personally , I don't know where the buck stops. )
OT, but it's annoying the way The New Yorker writes cooperation 'coöperation' (ditto 'reëlect'). There's zero justification for this, etymologically or orthographically, it's just pure pretension.
Lol typical hacker news blowhard going off on something they have no idea about . "Orthographically" speaking there IS a justification and you would've found it if you spent three seconds of effort:
diaeresis (plural diaereses)
1. (orthography) A diacritic ( ¨ ) placed over a vowel letter (especially the second of two consecutive ones) indicating that it is sounded separately, usually forming a distinct syllable, as in the English words naïve, Noël and Brontë, the French haïr and the Dutch ruïne.
It makes perfect sense to use the diacritic in this way and it is part of their style guide, has been for some time.
You couldn't even spend the time researching what you're complaining about. Talk about pretension.
I'm well aware it's a diaeresis, and that it's part of their house style. That's exactly what I'm objecting to.
The diaeresis is obsolete modern English (with rare exceptions) and putting it in interrupts the flow of reading.
There is no excuse for it in 'cooperation', and only the only reason they do it is in order to show off they know about it - IOW pretension.
Yes, there is. A) it is a perfectly grammatically and orthographically correct usage of the di B) There is no prescriptive body which governs usage of American English - there's no need for an "excuse" to use an orthographic feature of the language as if it is some clause violated.
The reason they do it is because it's the New Yorker. It's their house style. It's what their readers expect and understand and it has become a tradition and perhaps even emblematic of the magazine and its brand. Complaining about the "pretentiousness" of the New Yorker is like complaining about the convoluted commands in eMacs or vim - it's not a problem, it's a feature.
Any deviation from the norms of English calls attention to itself, and distracts from the meaning. This can be done by great writers, but always with reason.
Good writing reveals something about the reader.
Bad writing reveals something about the writer.
However since you now seem to agree that it's pretentious, which was my original point, I'll leave it there.
I agree. And I say this with all due respect to tdk, unless you want to be a "typical Hacker News blowhard," don't make irrelevant critiques! It's this kind of stuff that gets me riled up about HN comments. This, and the classic "No. You're wrong..." brusque replies.
We get it, you don't like the style of the article (and you might not like the style of the New Yorker), but why does that matter? The article used paragraphs, was free of grammatical errors, and was highly readable.
The New Yorker is a magazine, not a broadsheet paper. I suppose you might have confused it with the New York Times, but the Times doesn't use the style rule in question and so the claim would be untrue about that publication, as well.
It's interesting how it does tend to be the second of two, because you never see it occur on thirds even where it "works", such as sequoïa, aqueöus, Hawaiiän, or Louïe.
It doesn't work in those, because the vowel marked does form a dipthong with the preceding vowel in two of them, and wouldn't ordinarily in the sequence of vowels in the other two.
Those "pretentious" dots are the difference between a chicken coop and a worker coöp. They're to completely different words, and the spelling makes this clear.
I'm anti-snob but I do like it when publications write "résumé" instead of "resume" for a job seeker's summary.
Those extra accent marks make it much more readable. Without them, I always mentally pronounce "employe resume" as "employee rezoom" and then backtrack to correct myself to pronounce it as "employee rayzoomay".
The comments below explain a bit of the reasoning, but I agree. In cases where there is no alternative meaning to the word, this makes for a confusing read, especially since ö is a letter with a completely different sound in several European languages (German, and I think Norwegian and Danish, and my local dialect of Slovenian :P), pronounced as "oe"
Oh it's total pretension, but there _is_ justification for this. The diaeresis separates out the second vowel. It's pronounced not "rehlect" but "re-elect".
Hacker News is not a trade union or some other special interest group where the nature of discussion topics is predictable and consistent. It's a group of people who start off with a special interest, tech, but are more broadly interested in life. If you want a forum exclusively about tech, HN is not it.
As to worshipping rich people, anything you consider worth people's time can be similarly dismissed as perfunctory worship of it.
I'm probably gonna be downvoted for this, but what the heck. I watched the Warren Buffet documentary on HBO with my 11 year old daughter. Now, I've raised my daughter to have an entrepreneurial mindset and to always look at ways to add value to the world. The major points of the documentary that stood out to her were that he has lots of money. He owns pieces of companies who do well, and in turn he does well. His wife didn't feel that was an ideal way to live her life and left to provide value to actual people.
I didn't really know what to say, because she is right. Warren Buffet is good at picking companies who are undervalued and making money from that. That's a skill I guess. But do you want a country filled with Warren Buffets? Is there any reason to value this kind of parasitic success? The guy isn't really much different than the mafia or a loan shark. He loans money to companies he thinks will succeed, and wants interest paid back to him. At least Bill Gates provided value (and he was predatory in doing so) and his work changed the world. Aside from his eventual philanthropy, it's hard to see how Warren Buffet has changed the world.
Maybe I'm missing something. But how do you inspire a young person to be like Warren Buffet. And more importantly, should you?
Is there any reason to value this kind of parasitic success?
I'm not sure you quite understand what Buffett does. Yes, his company invests in other companies. However, it's more typical for him to invest to: (1) gain a controlling share and (2) realign the company's management and strategy.
He often turning around companies through his own expertise. Not just "loaning them money and collecting interest".
Actually, not true! His philosophy is to invest in solid business that will generate outsize profits in the future. Early on, he tried to buy undervalued companies and then try to turn them around, but he admits that this was a bad strategy, so he changed.
Perhaps I'm nitpicking, but I don't think it's fair to characterise loaning money successfully as "parasitic". Credit is a useful thing to provide, many endeavours valuable to people would not exist without it. Moreover, loans (and trade more generally) aren't necessarily zero-sum; Warren Buffett getting rich doesn't automatically mean somebody somewhere else is losing out.
>Warren Buffett getting rich doesn't automatically mean somebody somewhere else is losing out.
I guess my point wasn't that somebody else was losing out. But that Warren Buffet could have made 1/1000th the amount of profit as he did and the world itself would not have lost out. Only Warren Buffet gains, not the world as a whole. Ultimately what value does Warren Buffet's success in terms of dollars bring to the world? Again, ignoring his eventual philanthropic choices.
Microsoft was founded by Bill Gates and Paul Allen. They have, and do, sell products and services. Celebrating Warren Buffet is analogous to celebrating someone who was a provider of capital to Microsoft rather than the people who provided the products and services. The people who found and build companies are "Makers". Warren Buffet is not a "Maker", he profits off of "Makers".
For some reason, it really sounds like you have an axe to grind with Mr. Buffet or maybe with captialism in general.
From my perspective, the problem with finance today is the tendency to think short term. The endless pursuit for profit next quarter. This is not the method Buffet uses... I find it refreshing to hear someone like him suggest that a longer term view is needed.
Sure, he isn't changing the world directly by running a massive software company but he contributes in the way he can and that's all you can really ask of anyone.
I have no axe to grind with Buffet in particular. He just happens to be the topic of this post. What I do take issue with is the making of what I would call "meta-money". People making money by doing little more than manipulating the money of others. Warren Buffet just happens to be a great example of this. If you think of the world as producers and consumers, then what is it that Warren Buffet produces? What is he doing to add value to the world such that he is justified in making billions of dollars doing that?
Don't get me wrong, I'm not saying he is a bad person or that he is not highly intelligent or even shouldn't be successful. What I am saying is that it's hard to justify that he has added proportional value to the world that is worth the money he has made. To each his own, but if this were a world full of people who only wanted to benefit upon the production done by others, then this would be a troublesome world. Just imagine, could Linus Torvalds have chosen to turn Linux into a profitable venture? Could he have been all about the money and not about producing a truly great OS that people could build upon? I just don't think it's wise to put Warren Buffet as a success story above, say, Linus because he made so much more money. I'd rather live in a world of mostly Linus' than a world of mostly Buffet's.
Buffett's a poor example of the meta-money problem. A lot of the finance industry probably adds negative value and is a problem. Buffett does add some value. If you think sound finance has no value take a look at Venezuela, Argentina, the dot com bubble, the housing bubble and so on.
He makes capital. Capital is a resource that you need to run, say, a software company. Makers don't usually go too far without it. And they, makers, are the ones who put their creations on the market, for good reason.
First, he's rarely loaning money. The vast majority of the time he's an investor and an owner. He's taking risk of loss.
Second, he's creating value for these businesses. The owners have worked hard, they need to sell to someone, and Warren provides them a way to keep building their lives work without having Wall Street force them to change how they do things.
Without buyers for shares, there can be no sellers, and then there are no capital markets, and we are all far poorer for it.
What your daughter could learn from Warren is
1) Basic investment valuation skills, which can be applied to any investment, business, or purchase (including cars and homes) and improve her live in many ways.
2) Business management skills. Understanding what makes a good vs. a bad company, competitive barriers, motivation, etc.
3) The need to avoid bias in decision making. He spends a great deal of time managing his own mental framework to ensure emotions and outside forces don't lead him to make less rational decisions.
She can read his investor letters for free online, and learn many of these skills just by reading them.
It's ironic that she's entrepreneurial, and all you can take from the documentary is that he intended to donate all his wealth to charity after he died and it had grown to the largest size possible, and his wife convinced him no, it was better to do it while he was still alive. And that somehow makes him a bad guy.
It's not so much rich-people worship as it is about observing another individual who happened to become one of the richest people in the world. We can learn a lot from each other - being ignorant of the person next to you is a dangerous habit.
You should read some of Buffett's voluminous writings. There is nothing like a lottery going on, he's the most skilled investor the world has ever created.
In his twenties and thirties he ran the Buffett Partnerships and averaged around 35% a year returns, over 13 or 14 years, beating the market by a massive amount.
He retired around age 40, then bored went back to full time work running a company he controlled, Berkshire Hathaway. At one point he had beaten the market all but a couple of 50 years.
In his shareholder letters he describes very clearly how he does it. Its a combination of being an excellent value investor, understanding which companies have competitive moats, and working very hard at reducing negative psychological biases.
We can't be as good as investor as WEB, but reading and understanding his shareholder letters will make you a much better one in anything you do (buying a house, car, etc), and understanding the psychological biases that drive you to bad investing decisions can be applied in many areas.
Completely agree. I honestly believe reading the shareholders letters is one of the best "life lessons" readings I have come across. One of the reasons for this is that it's written consistently across the span of one (intelligent) person's life, spanning decades of changes and challenge. WB is transparent about making predictions, and likewise reflective when they don't turn out. He's extremely gracious to everyone around him (constantly calling out great attributes about business partners, colleagues, and even competitors). He's got this consistently optimistic tone about him which is hard to ignore - what could be brittle-dry business writing, instead is full of cheeky humor, anecdotes, advice, etc.
In contrast, when I read [auto]biographies of notable people today, we are ONLY seeing the life from a snapshot in time - n accumulation of their life, from deliberately chosen points of view - and we never get to see that relatable part of "what was this person thinking when they were 35 years old, stuck in a panicked business climate".
I also think its fascinating to see people's decision-making processes and attitudes change over time. For example, anyone who has read WB's shareholder letters see his attitude change from "buy cigar butts, and sell those" (basically, find OK assets which are undervalued) to "pay a premium for great things, and hold them forever". WB even reflects on this attitude change at times - some of his earlier purchases (like the actual textile mill) was an attempt to identify decent businesses in a bad spot, buy them on the cheap, and turn them around. Later, he basically said - that was just a bad idea, and it's buying trouble for years. Instead, pay a premium for a company which is solid, run by solid people... and let that naturally appreciate in value, and get out of its way.
WB mentions Dale Carnegie frequently - I do think reading both "How to Make Friends & Influence People" and Berkshire's Letters to Shareholders could basically be a business course itself - how to do business honorably, ethically, and respectfully. Lots of lessons to be learned there.
You may note the domain name of this site is ycombinator.com which is an incubator producing profit making companies. There are few who know more about profit making companies than Buffett.
I've figured out how to produce returns using cash secured or naked option strategies utilizing informational asymmetry gained from rigorous analysis of corporate Q's and K's that will actually generate wealth not slowly build it like value investing does.
This critical edge that has been hiding in plain sight but validated by actual large funds using the same methods.
Someday, newyorker.com and HN will be reading how a "Korean Canadian stock whiz turns his $50,000 CAD tax free savings account into $50,000,000 CAD"
edit: due to downvotes I will not be revealing this prized strategy.
The downvotes say it all, but don't ever write naked options. The strategy has positive expectancy, except every few years you lose >100% of capital, since the risk is almost unbounded.
I write naked puts almost every week. It's about the only way I buy highly liquid tech stocks nowadays. The risk is absolutely bounded, of course (and similar to buying a stock outright).
Naked options are not the problem; naked calls are, of course, far more risky and most investors are barred from writing naked calls on individual issues.
It's interesting to note that Buffets wife was regularly active in supporting civil rights as well as Buffet himself. Combine this with his $5Billion bailout of Goldman Sachs along with Goldmans CEO joining the battle lines along with the Linux community, white and black hat hackers and you've got a perfect storm for an attack on the trump administration which will result in its fiery demise.
Man, I'm starting to hate elaborate fantasies about how Trump will finally go down almost as much as I actually hate Trump, and that's a pretty high bar.
It's like a physicist laying out the math perfectly for an orbital launch, but then starts analyzing launch times using Astrology.
Very, very few investors apply valuation methodologies so well they they become true value investors, the name is really a marketing label for most funds. One necessary part of being a value investor that Buffett harps on in his letters is psychology, the ability to avoid bias in order to make decisions and not undo them in a panic. He works really hard to insulate himself from irrational fears, and focus on known facts.
For example, he tries to never know what a company's stock trades at when he reads their annual reports and start making his own estimate of it's value. If it's a great company and it's trading for $100, he doesn't want to be subconsciously biased to raising his valuation estimate just to justify buying it.
There is a great story from his partnership days. His partners were told up front he'd never discuss what they were invested in, he didn't want anyone front-running his trades at hurting the partnerships results. But one day during a market tumble a partner rushes in and demands to know if Buffett had invested in certain stocks that had crumbled. Warren just buzzes his secretary, asks how much the partner's share was worth, and told her to write him a check for that amount, and told the guy you're out.
He wasn't going to panic. He wasn't going to let others try to panic him.