JBird
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Posts posted by JBird
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I don't see how someone else's checklist could be of any help in one's investing. There is no right way to invest. The primary goal is to protect capital and thus put yourself in the best possible position to make money. How you go about that is an individual, not a group, decision. As a wise man once said, "now the world don't move to the beat of just one drum, what might be right for you, may not be right for some".
Then try looking for evidence to suggest that you're wrong. Munger has a name for this. An iron prescription, I think.
In my view, what you're saying is akin to the following: I don't see how someone else's checklist could be of any help in one's flying. There is no right way to fly a plane. The primary goal is to protect your safety and thus put yourself in the best possible position to get from Point A to B. How you go about that is an individual, not a group, decision. As a wise man once said, "now the world don't move to the beat of just one drum, what might be right for you, may not be right for some".
Of course, plenty of pilots would be dead today had they not totally relied on someone else's checklist.
I agree there is no "right way" to invest. That the goal is to limit downside and to maximize upside. And I agree decisions come down to the individual. But it does not follow from these premises that using someone else's checklist cannot be helpful. As an investor my returns would be half what they are had I not totally relied on someone else's checklist.
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In 1991, speaking with students from the University of Notre Dame, Buffett said,
"In that book Father, Son & Co. [subtitle: My Life at IBM and Beyond] you may have read, that Tom Watson Junior recently wrote, he quoted his father as saying “I’m no genius. I’m smart in spots but I stay around those spots.” And that’s all there is to it in investments – and business. I always tell the students in business school they’d be better off when they got out of business school to have a punch card with 20 punches on it. And every time they made an investment decision they used up one of those punches, because they aren’t going to get 20 great ideas in their lifetime. They’re going to get five, or three, or sever, and you can get rich off five, or three, or seven. But what you can’t get rich doing is trying to get one every day. The very fact that you have, in effect, an unlimited punch card, because that’s the way the system works, you can change your mind every hour or every minute in this business, and it’s kind of cheap and easy to do because we have markets with a lot of liquidity – you can’t do that if you own farms or [real estate] – and that very availability, that huge liquidity which people prize so much is, for most people, a curse, because it tends to make them want to do more things than they can intelligently do."
Thanks Jbird. What website did you find that on?
My pleasure.
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In 1991, speaking with students from the University of Notre Dame, Buffett said,
"In that book Father, Son & Co. [subtitle: My Life at IBM and Beyond] you may have read, that Tom Watson Junior recently wrote, he quoted his father as saying “I’m no genius. I’m smart in spots but I stay around those spots.” And that’s all there is to it in investments – and business. I always tell the students in business school they’d be better off when they got out of business school to have a punch card with 20 punches on it. And every time they made an investment decision they used up one of those punches, because they aren’t going to get 20 great ideas in their lifetime. They’re going to get five, or three, or sever, and you can get rich off five, or three, or seven. But what you can’t get rich doing is trying to get one every day. The very fact that you have, in effect, an unlimited punch card, because that’s the way the system works, you can change your mind every hour or every minute in this business, and it’s kind of cheap and easy to do because we have markets with a lot of liquidity – you can’t do that if you own farms or [real estate] – and that very availability, that huge liquidity which people prize so much is, for most people, a curse, because it tends to make them want to do more things than they can intelligently do."
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Does anyone know when/where Buffett originally said this? The twenty punch card quote that is?
Thanks. I can only find references to it but I'd like to know exactly when and where he said it. Maybe it's from an annual, not sure...
He's said it many times. I don't have a source for the very first time he said it, but here's one instance:
http://buffettspeaks.blogspot.com/2007/01/permanent-value-teachings-of-warren.html
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When I asked his partner Ben Raybould where Allen learned accounting, he simply said that overall, Allen is 90% self-taught.
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Munger:
(Part 1 of 5) -
Great posts, thanks.
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Very cool. Thanks for posting.
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Just to echo LC, is there anything Bitcoin can do as a currency that dollars cannot do?
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OP should have posted this in "What do you want for Christmas" thread.
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Palantir Asset Management is up 20% for the year.
Do you run this firm?
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Great post. I think I remember discussing this with you before-- I agree with your conclusion for the same reasons.
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Thanks for the input. And thanks to JBird for putting the Buffett statement into context. I found this link that aggregates some of his statements about the 50% return … http://valuevista.blogspot.com/2007/06/warren-buffett-50-returns.html
What I thought was interesting was that he researched every company in Moody’s early on in his career. He would recommend the same to any manager starting out with a small amount of capital, saying that the “bank of knowledge” would do him or her terrific good over time.
Just goes to show that, although 50% returns with small sums is possible, few will do the work required to uncover the opportunities. It's probably less about being smarter than the competition and more about outworking them.
"If you are managing only $1 million, then you should be able to beat the S&P 500 by 10 percentage points with no risk or leverage." - WEB. Dec. 8, 2013 at University of Maryland
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That is a wise man.
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I am with you on market valuations, tombgrt. I also have a couple quotes rolling around in my head. One is from Buffett in '99 when the market was at 40x earnings and he said that if he was running a small portfolio he'd be fully invested. The other is from Walter Schloss who said he had been fully invested his entire career.
Where are these gems from?
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I'm not hostile to the arts. To be fair, it admits it's a complementary therapy to medical treatment. "As a complementary therapy to medical treatment, art therapy has shown to reduce negative effects of cancer diagnosis and treatment."
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Hahaha damn you
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Incentives determine behavior. Yes.
That's why artists are not working on Wall Street. They are incentivized by what they love doing, and it obviously isn't about making money, it's about making art.
You never disappoint. I think you're right, but I'm not certain.
Indulge me. Let's say there's a situation where nobody is changing jobs. Let's say that the most beneficial advancement we can make as a society is to cure cancer. Would you agree that committing money towards cancer research helps further the goal of curing cancer? Would you agree that committing money instead towards art projects will not help further the goal of curing cancer? If so, is it true then that society is better off when the money goes towards cancer research instead of art projects?
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Isn't that what Buffett himself did? He became a useless allocator of capital, getting paid more than $10m a year. How many cures has he found? Would we have a cure for cancer if Buffett made less money?
I agree that Buffett's work as a capital allocator hasn't much benefited the wider world.
What if lawyers were paid less. Would they be curing cancer? Perhaps they'd slap spreading cancers with a trespass suit? We haven't yet used their outside the box thinking to approach the cure, I'm sure that's what the problem is. Damn it.
Straw-man arguments are funny, but don't help me change my mind. I'm not arguing that if a group of laborers is given a pay-cut they'll suddenly become cancer-researchers. I'm just saying that incentives determine behavior. Laborers go where the money goes. If a profession offers very high pay, over time more people will enter/ stay in the profession. If a profession offers terrible pay, over time fewer people will enter/ stay in the profession.
Maybe... we already have a lot of bright scientists working on the cancer problem already, and the true problem isn't that a groovy looking UCSB dude is teaching guitar to my daughter on Sunday afternoons (he is) instead of joining the fray. Just maybe.
Of course we do. And of course people choosing to teach guitar is not a problem.
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+1 Buffett's argument, like everyone else who makes that argument, is seriously flawed. I've heard it in many different contexts and it's almost always wrong. The assumption that if someone wasn't doing something unproductive or sub-productive that they would be doing something wonderful is nice in theory, but not realistic. People do what they do. Someone painting Buffett's picture, as Eric said, isn't going to be finding the cure for cancer if they weren't.
Buffett could offer 1,000 cancer-researchers $10 million a year to skip stones across a lake. You don't think those researchers would pick up a stone?
Instead they'll be sitting around in their living room watching soaps and attempting to figure out how to make it through life.
In 1980 there were 6 million farmers in the US. By 1990 there were 3 million. Is it more likely those 3 million ex-farmers spent the 90's watching soaps, or found another line of work? People do what they do until the economics either force them to move on or incentivize them enough to move on.
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Trust me on this one and ignore Buffett's jibber jabber -- we are not going to lose our talented scientists to art school. Can Bill Gates sketch my child for a trillion dollars? Highly unlikely! More likely to spin straw into gold.
But yes, a scientist can run a hedge fund. He cannot, however, be an artist unless he has the talent.
An employment offer at the right price is going to attract laborers. And a huge sum of capital can command a huge amount of labor. The labor can be used to skip stones across a lake, or perhaps engage in cancer research. The quality of work is irrelevant to my point. I'm only saying people will sign up at the right price.
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True, but as with everything I think there's a line. Buffett said something to the effect of how he could pay thousands of people to sit and paint portraits of him all day for years on end, but it would take away from productive uses in society: those people could be researching diseases, etc. and so he's not going to do that.
Now if he said that, I think it's a silly comment. He knows that artists are artists, and scientists are scientists.
For what it's worth, here's what LC was quoting: http://youtu.be/VdYxVx3PHxk?t=2m39s
Artists are artists until it doesn't pay to be an artist. Generally speaking, laborers follow the money.
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How does society benefit from people who are compounding capital in secondary markets? ::) Investment is just reallocation of wealth.
One of the great benefits for society comes when a donation is made to further a cause that benefits society-- one that's not already being sufficiently funded. For example, Polio vaccination.
Before you wail about which causes are beneficial to society, let's be clear-- that is a hugely gray area. And it's not the point.
Checklist questions
in General Discussion
Posted
Yes, I agree flying isn't like investing. The analogy was meant to illustrate the benefit of using a checklist to meet a goal. I suppose it wasn't a good one.
I didn't quote Munger.