Here’s why I harp on Warren Buffett’s good sense.
Not that I have hard figures in front of me, but I’ll wager that I’ve talked more on this blog about Warren Buffett than any other business leader. Maybe that predeliction can stand without needing any defense, but I thought I’d take a minute to hammer home a point that far too many business leaders miss:
Unless your answers are CLEARLY better, COPY the answers of your betters.
Originality is great, and well-seasoned businesspeople certainly develop their own methods and styles for dealing with business challenges. Good. Fine. Go nuts pursuing your own idiosyncratic ways — where it’s fruitful.
Meanwhile, check out this chart:
The blue line represents the stock price of Berkshire Hathaway’s “A” shares over the past 12 months. The intertwining orange and yellow lines are for the Dow Jones Industrial Average and the S&P 500 index. Yes, even Berkshire has slipped in the past year — but a heck of a lot less than the markets as a whole.
“Bold” thinkers have laughed at Buffett through one boom after another, and especially through the dot-com and real-estate bubbles of the past ten years. And yet — somehow, as if by magic — each time he ends up on top . . . again.
Of course, it’s not magic at all. It’s a combination of great financial acumen with a prudential dedication to some basic principles — such as being fearful when others are greedy (as during the bubbles) and being greedy when others are fearful (like right now).
(Thanks to Valeria Maltoni’s post for setting me on this line of thinking. Be sure to check out Charlie Rose’s interview of Buffett that she links to — an interview that was also recommended to me by Dave Livingston.)
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Related posts:
- Keep your powder dry in business.
- Warren Buffett sticks to the tried and true.
- Possibly Mr. Buffett could pay a call to the West Bank?
- Company of the Day: Berkshire Hathaway.
- The luxury of being Warren Buffett.
- “Mark-to-model” as a synonym for “wishcasting.”
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Category: Executives, Finance & Real Estate, Management
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“such as being fearful when others are greedy (as during the bubbles) and being greedy when others are fearful (like right now)”
I like this. I’ll stick it in the back of my mind and remember to bring it back out when considering financial investments in the future!
CP — The key, I think, is to avoid the psychological tendency to go with the herd. Focus, instead, on making the prudent play every single time, regardless of what others are doing.
Hey, I’ve managed to lose only 10% of my assets in the last 12 months too. Guess that makes me as smart as Warren, Tim? ;)
Sure, Russell — why not? ; )
My main point, I guess, is that there’s a good reason why the market likes Buffett so much in bad times: he’s been through it all before and came out smelling like a rose. At times like this, the old-fashioned way works wonders — and former high-fliers acknowledge it.
Some of the qualities you highlight make me think of anchored to core values, and disciplined. It takes a lot of discipline not to be swept into the prevailing thinking (and doing). Thank you for your contribution to this conversation, Tim.
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