Memo to Warren Buffett Lovers and Haters Alike

I wrote an (extensive) comment on Warren Buffett on one of the blogs I follow. For my record keeping, as well as possible edification of others, I present to you below:

Context: http://brontecapital.blogspot.com/2012/02/stocks-you-can-fondle-them-and-they.html

John,

I’ve read all (or nearly all; some several times) Warren Buffett’s letters. Suffice it to say, I used to be a fan + admirer.

I appreciate that you give off a nuanced perspective on Buffett. The vast majority of people who opine on Buffett either despise him even while others treat him as if he were the second coming of the Messiah, the Mahdi. Many of these comments in response to this post are a case in point.

Here are my 2 cents, which hopefully is accretive + complementary to yours:

(1) I respect Buffett…nothing more, nothing less, just as an aspiring athlete respects the superstars of yesterday.

(2) I find greater actionable insight by studying Buffett’s words vs. actions throughout the years. For example: Buffett was NOTABLY (and intentionally) MIA from public equity investing for a good chunk of the 1970s.

(3) Buffett has shared his knowledge + experiences freely to the public. His insights are more valuable than a CFA + MBA combined, in my opinion, for money managers. Critics should seriously weigh his positive contributions against their (largely) valid concerns.

(4) Buffett’s exceptional ability to select great businesses from the massive cemetary of losers, is an additional reason his prescription - to own productive assets (e.g. stocks) - is especially dangerous. The “look at me, I can do it!” does NOT mean “So can I!”

The Buffett worshippers would therefore be wise to take his recommendations with a grain of salt, i.e. he’s a better stock picker than the rest of us!

(5) The descriptive vs. the prescriptive - I personally find some of the more concretely helpful material coming from Buffett’s description on how the world works (or doesn’t), rather than his advice on what YOU should do with your money.

(6) Buffett is fallible. He’s said so many times, if I recall correctly. He too can lie, contradict himself and <drum roll> be wrong.

(7) Context matters - Buffett’s AUM has risen with time, as has his strategy, to adapt. This is just one example of why it’s important to take Buffett’s words in the context he wrote/said them. Many (amateur) Buffett lovers treat his words as absolute, context-independent truths; his haters unfairly take his words out of context. Both miss out on the opportunity to learn and grow.

UPDATE (I will add more thoughts as they come,periodically, on this topic)

(8) What’s Buffett’s Politics got to do with his Investment Acumen - There are a good number of friends I love + respect, who have privately shared their not so warm and fuzzy feelings about Buffett with me, due to his…political leaning!

My response: so what? Do you and your spouse share the same political views? Do your sports heroes, role models, crushes, or even other legendary investors share your politics? For the record, I often disagree with Mr. Buffett’s policy prescriptions, but I respect, appreciate, and even welcome that he shares his views publically, because his reasoning, and the case he makes for his views (which I usually disagree with) are much more compelling than others’.

(9) Macro Matters, Straight from the Horse’s Mouth - This is a variation of (7) , but I think it is worth bringing up as a separate item: Buffett credits the USA as a ”rising tide” during his investing career, as one of the important drivers of his success (Specifically, favorable demographic, legal/political, credit + money supply, consumption behavior, and technology/productivity trends). Many of Buffett’s fans, who are dogmatically-inclined, self-described “value investors”, totally don’t seem to get this..even as it has come straight out of the horse’s mouth! The Buffett haters, too, miss his open admission, don’t credit him for at least being a savvy opportunist.

(10) Buffett is Not Responsible for the (occasional) foolishness of his fans - How many times have you heard someone’s investment thesis (or justification) for buying some piece of shit stock (excuse my French): “Warren Buffett said, ‘Be greedy when others are fearful’ ” - I have, and I’ve paid dearly, more so than not.

What scares me is seeing ‘investment professionals’ who ought to know better do essentially the same thing, citing that quote as if it were some holy mantra. Hugh Hendry described these folks as “lazy contrarians”. I’ve found ‘lazy contrarians’ can most certainly make money on these trades, but for reasons that are independent of the originally articulated thesis. That’s fine, but they don’t seem to acknowledge this…and I fear their risk of blowing up increases, with each subsequent ‘success’.  ”Pride cometh before the fall” Memo to Buffett haters: Buffett is not responsible for the poor judgment and mistakes of others.

 

 

 

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