Lessons from the Oracle: Warren Buffett
In 2008, I sat down for lunch with Warren Buffett. Meeting the world’s richest person was different than anticipated. Warren has earned, with good reason, a reputation for wisdom that is both elusive and resonating.
Three lessons from Warren Buffett follow.
In 2008, I sat down for
lunch with Warren Buffett.
Meeting the world’s richest
person was different than
anticipated. Warren has
earned, with good reason,
a reputation for wisdom
that is both elusive and
resonating. On the cusp of
a new investment theory,
I was eager for Warren’s
feedback
.
Social nuance hindered
pitching my methodology
in detail. Nonetheless,
Warren’s closing remark
summarizes three lessons
learned: ”you’ve got to
carve your own path and
steer clear from the herd”.
Lesson 1: Build a machine
for stock selection.
Why a
machine? It’s a disciplined,
unemotional process,
capable of repeating over
and over again. Recalibrate
as new data emerges.
Share price isn’t data.
Ignore the noise. Betting
against the herd is easier
when decisions flow from a
well-engineered,
systematic selection
process.
If it’s well built,
output will be consistent in
the long run.
LESSONS FROM THE ORACLE
October 27, 2014
by C.R. (on Harvest)
Lessons From The Oracle
“Betting against the herd is easier when decisions flow from
a well-engineered, systematic selection process.”
Lesson 2: Don’t buy stocks, hire CEOs.
Buying a stock means hiring the company’s CEO and senior team to manage your portfolio’s allocation.
Focus on the CEO. What drives his/her decision-making? Overly broad or too narrow of an ethical
framework, and decisions can go awry. Accordingly – when the financial crisis hit, Warren was promptly
hired at $58.80/share (split adjusted) for Berkshire Hathaway. In 2012 Mark Zuckerberg gained increasing
responsibility as his one-time management fee declined to $19.63/share for Facebook. Over the years,
I’ve similarly employed Steve Jobs (Tim Cook), Rick George (Steve Williams), Reed Hastings, Robin Li, Elon
Musk, Ed Clark, and Lloyd Blankfein. I’ve passed on many other tempting well-knowns. Moreover, as
indicated by infrequent trading in my model portfolio on
Harvest Exchange
, I haven’t had to fire many CEOs.
Lesson 3: S
tay the course in stormy weather
Investment selections since that day have performed, over
the long-term, beyond my greatest expectations. After
entering positions, some experienced severe short-term
declines. Intervening financial and sovereign debt crises
were similarly challenging. Steadied by research, I stayed
the course. My performance on
hvst.com
offers a
reflection. It’s an understatement to say – this is a testament
to the resonating value of my time with
Warren Buffett.
When we parted, I knew –
I had shaken hands with Midas
.
October 27, 2014
by C.R. (Published on Harvest Exchange)
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