Another Schroeder interview

[netnet]

I don't want to glorify Schroeder or Motley Fool, but here is another interview about WEB.  It's not too bad.. (How's that for backhanded praise.)

 

http://www.fool.com/investing/general/2009/11/09/interview-with-alice-schroeder-buffetts-biggest-we.aspx

[EricSchleien]

what's the link?

[el_chieh]

http://www.businessinsider.com/business-news/nov-25-alice4-2009-11

[netnet]

Sorry about that. I put the link into the original post.

 

Here is the link:  http://www.fool.com/investing/general/2009/11/09/interview-with-alice-schroeder-buffetts-biggest-we.aspx

 

Here is what to me is the most interesting excerpt:

 

Schroeder: I don't think he would have been as successful because the two things that he did don't work today. One is, there was a lot of shoeleather involved. He would do the work that nobody else bothered to do. He would go down to some state insurance department basement and dig through records that no one else was looking for. Now everybody has access to everything, and so the diligent are no longer really rewarded the way they used to be.

 

The second thing is that Warren was uncommonly good at going around and talking to management and getting them to tell him what their business plans were. That used to be perfectly legal. In fact, the insider trading worlds have evolved, and I wrote a long footnote about it in the book, but he used to basically be able to get and trade on inside information, as did everyone in those days. He was great at finding out if there was a tender offer coming or something like that. You can't do that anymore.

 

 

What is particularly fascinating is that he would not have been as successful today, because he could not use the same methods, as if he were not what Munger calls a learning machine, as if he would not adapt to the times!  This just show Schroeder's limitations.  WEB said, and I believe him that there are people who with a million dollars can earn 40 to 50% per year.  If you believe WEB, then in all probability you would have to surmise that he could make these kind of numbers too.

[Rabbitisrich]

NetNet, I love quotes of that sort. Value investing is an opportunistic sport, and we make money not only when everyone overestimates themselves but also when they overestimate each other and over reach. We should support Alice Schroeder and her value adding misinformation project.

[netnet]

Rabbitisrich, great line:

value adding misinformation project

[valuebull]

This link has part 3 of the interview (and links to the first 2 parts)...

 

http://www.fool.com/investing/general/2009/11/10/interview-with-alice-schroeder-buffetts-cold-shoul.aspx?source=isesitlnk0000001&mrr=0.11

[Ballinvarosig Investors]

This veneration of Buffett as some kind of once in a lifetime, God-like Superman is really starting to grate on me. My mentor has compounded returns of 80% over a 12-year period. He didn't do anything different than Buffett either, he lived, breathed and drank investing for 12 years. Now I'm not saying that just anyone can do what Buffet can do, but it's nonsense to suggest only Buffett can do it.

[benhacker]

80% for 12 years... turns 100k into $100+m.

 

I'd love to know the name...

 

Ben

[Uccmal]

100 k to 100 m in 12 years

 

How about Sergey Brin/Larry Page

 

Jim Balsillie/Mike L

 

Bill Gates

 

Not exactly investors though.  Inve(n)tors.  Big difference. 

 

Since I dont believe most of what I read would you share your Mentor's name so I can check this out and invest with him/her as well. 

 

[vinod1]

This veneration of Buffett as some kind of once in a lifetime, God-like Superman is really starting to grate on me. My mentor has compounded returns of 80% over a 12-year period. He didn't do anything different than Buffett either, he lived, breathed and drank investing for 12 years. Now I'm not saying that just anyone can do what Buffet can do, but it's nonsense to suggest only Buffett can do it.

 

Minor quibbles

 

Buffett as some kind of once in a lifetime

 

"We" believe someone like Buffett happens once in mankind history.

 

God-like Superman

 

Duh! Buffett is son of God (Ben Graham).  :) :) :) :)

 

Vinod

[Ballinvarosig Investors]

My mentor is a family friend from Ireland (where I live). He started off smaller than 100k, withdrew profits as he went along, so he hasn't got anywhere near the figures you're all quoting. There's no point me mentioning his name because he's never done anything in the media and only ran money for family. He was probably lucky to have been investing during the historic 90's bull market, but then again, Buffett was also investing in a similar bull market at the start of his career.

 

I'm sure there are plenty of people out there who no one has ever heard of who have even better records.

[Parsad]

My mentor is a family friend from Ireland (where I live). He started off smaller than 100k, withdrew profits as he went along, so he hasn't got anywhere near the figures you're all quoting. There's no point me mentioning his name because he's never done anything in the media and only ran money for family. He was probably lucky to have been investing during the historic 90's bull market, but then again, Buffett was also investing in a similar bull market at the start of his career.

 

Buffett's withdrawn a signficant amount of capital over the years that could have remained in the businesses...especially during his partnership days.  He's taken a meagre (relative to his wealth and what he could have received) $100K a year salary.  Yet Buffett is one of the richest men in the world.  I'm actually surprised by how much Buffett used to hand over to his wife and children over the years.  He's got a reputation as a cheapskate, yet I don't personally know anyone who was giving each of their three children $1M a year since their 30th birthdays or so, as well as their own personal foundation to do with as they wish, not to mention Berkshire shares.  And he built it with $100 of his own money. 

 

I'm sure your mentor has done very well and has a great track record, but it isn't public or audited, so we can pretty much lump it with other unconfirmed accounts of investors who've done better than Buffett.

 

I'm sure there are plenty of people out there who no one has ever heard of who have even better records.

 

Perhaps, but I've yet to hear or see one that has done it over fifty plus years.  I hope someone does it...perhaps my mentor - Prem...but it's quite unlikely.  Cheers! 

[Ballinvarosig Investors]

I'm not disputing that he's not a great investor, of course he is. What I am disputing is the "Cult of Warren" that is being built up by the likes of Schroeder. While working all the hours under the sun and having a photographic memory are rare attributes to have, I refuse to believe that they're unique. Also, from what I can see, Seth Klarman is working with the same magnitude of money as Buffett and has achieved similar returns, if not better in the last two decades. If he decides to stick at investing, he's easily on course to beat Buffett.

[Uccmal]

I think there is a long term upper limit which is probably about 23-24%.  I dont expect anyone could statistically beat that indefinitely.  There is an element of luck, timing, birth timing, market timing in all of this that will get everyone in the end.  Since no individual business will grow at 24% indefinetly you have to trade and take gains eventually so there's the taxes.  And competition. 

 

Even if you get rid of a portion of your capital and keep it small you will still get caught by a number of those factors.  And no one on earth no matter what they do will bat 100% continuously, human nature being what it is.  Eventually hubris will  take over and you'll Bill Miller for a couple of years and bring things back to Earth.  To equal Buffett over a similar time frame is no doubt possible, but to beat him - not likely.

 

There are many things where upper limits exist that cannot be broken such as car speed, boat speed, or jet speed.  The same type of factors play each time and basically amount to some type of systemic friction.  Investing has a systemic friction over the very long term of about 24% - prove me wrong!

 

 

[Matson125]

Eddie Lampert and his firm have given 29% net to investors from the various reports I have heard since 1988.  Net!  Depending on the type of agreement he is on 1 and 20 or 6 % hurrdle Im not sure but the gross returns in that time period have been massive.

 

Besides asking Eddie at an annual meeting I would be interested to see actual hard numbers.  I am actually surprised someone has not asked this question at a Sears AGM.

 

If anyone has heard of anything different please let me know!

 

Cheers

 

Michael

[twacowfca]

My mentor is a family friend from Ireland (where I live). He started off smaller than 100k, withdrew profits as he went along, so he hasn't got anywhere near the figures you're all quoting. There's no point me mentioning his name because he's never done anything in the media and only ran money for family. He was probably lucky to have been investing during the historic 90's bull market, but then again, Buffett was also investing in a similar bull market at the start of his career.

 

I'm sure there are plenty of people out there who no one has ever heard of who have even better records.

 

 

There were plenty of bubble walkers who had extraordinary

success in the 90's, but few were smart enough to take their money

and run before the bubble popped. 

 

How did your mentor invest?  What did you learn from him?

[twacowfca]

We (probably in hundreds of thousands, if not millions) have benefited immensely by his TEACHINGS. I hope many millions will live his teachings for a better world.

 

And this is why there is such a "Cult of Warren."  Are there other investors that might beat or equal Buffett's record? Maybe.  But that's only a very small part of what Warren has given to us.  I live a better life, I am a better person and I make better personal decisions because of Warren.  There is much more to learn from Warren than how to increase our CAGR.

 

 

If I were to publish a book of "Pithies" about investing,  WEB

quotes would likely fill more than half the book.

[ubuy2wron]

Its actually Warren the non-investor I am more in awe of.  Warren has managed to  accumulate a large circle of people who truely love him while simultaneously accumulating a huge pile of dough a feat that through out history has been almost impossible.  Many of the worlds wealthiest have been feared fewer have been admired but Warren is adored by many an accomplishment that truely makes him stand out.

[bargainman]

Its actually Warren the non-investor I am more in awe of.  Warren has managed to  accumulate a large circle of people who truely love him while simultaneously accumulating a huge pile of dough a feat that through out history has been almost impossible.  Many of the worlds wealthiest have been feared fewer have been admired but Warren is adored by many an accomplishment that truely makes him stand out.

 

This is an interesting point.  That said he wasn't always loved, especially by the firms where he took an active role.  There were entire towns that loathed him at times in his life, something he found very hard to deal with. 

 

I think of Bill Gates and where he falls in this equation.  And of Mr Nobel.  Remember, 10-15 years ago everyone in software loathed Gates and everything Microsoft stood for.  He destroyed software companies left and right using monopolistic power to crush anyone in his way.  Now he's taken that cash, which some would argue was gotten through 'evil' means, and turned it around, trying to do good things for the world.  History will likely remember him more for his humanitarian doings, even though they rest on many questionable acts.  This is the story of the Nobel prize as well. 

[ubuy2wron]

Bargainman, I would put Bill Gates in the admired camp ,I am unsure on how Mr Nobel was perceived by his contemporaries.

[twacowfca]

This pattern of accumulating and giving away unnecessary "stuff" goes back

to our tribal history.

The potlatch in the Pacific Northwest is a good example.  A chief wannabe

would get his friends to give him a bunch of "stuff".  Then,

he would throw a big shindig and give it all away at the feast.

 

 

Early parliamentarians in England and the colonies were also elected this way.

When George Washington wanted to be elected to the Virginia legislature

as a young man, he was informed that he would have to throw

a big barbeque with lots of drink or no one would vote for him.

Wilberforce had to throw the biggest election feast ever to get elected in

a district that wasn't "safe".

 

Almost all the great capitalists followed this pattern of giving.  When

they started giving away all their stuff at the end of their lives,

they became magically transformed in the eye of the public

from " robber barron's" to philanthropists.  Being generous is reasonable.

After all, "you can't take it with you", and you'll get a much bigger reward.

 

 

In a free market, most people who accumulate fortunes are

decent people who achieve success with the cooperation of

others.  These business owners will generally follow a pattern of generosity if not taxed

heavily during their productive years and allowed a big charitable

deduction on estate taxes.  Those who grow wealthy consume a much

smaller percentage of resources in relation to their incomes than

most people; this is a good deal for society, probably a much better deal

than if the rich were heavily taxed because the accumulated resources

are invested productively in ways that benefit everyone

instead of being wasted in often unproductive or even counterproductive

government programs.

 

 

 

 

[bargainman]

Bargainman, I would put Bill Gates in the admired camp ,I am unsure on how Mr Nobel was perceived by his contemporaries.

 

Amazing considering his monopolistic deeds a decade and a half ago.  Nobel invented smokeless gunpowder enabling the death of many.  Here's a write up I found:

 

http://www3.telus.net/st_simons/cr9802.htm

 

"When Alfred’s older brother Ludwig died, one newspaper accidentally printed Alfred’s obituary instead.  The obituary described Alfred as a man who became rich by enabling people to kill each other in unprecedented numbers.  Deeply shaken by this assessment, Alfred Nobel resolved, from then on, to use his fortune in awarding accomplishments that benefited humanity.  In his will, Alfred designated five annual awards to benefit leaders in physics, chemistry,medicine, literature, and peace.  The Nobel Peace award was for ‘the person who shall have done the most or the best work to promote fraternity between nations, for the abolition of standing armies and for the holding and promotion of peace congresses...’"

[RichardGibbons]

Those who grow wealthy consume a much

smaller percentage of resources in relation to their incomes than

most people; this is a good deal for society, probably a much better deal

than if the rich were heavily taxed because the accumulated resources

are invested productively in ways that benefit everyone

instead of being wasted in often unproductive or even counterproductive

government programs.

 

According to economists cited by Ken Fisher, when someone takes out a loan, that money typically changes hands six times over the course of the next twelve months.  That makes the wealthy not spending their money a terrible deal for society since they're blocking the other 5 transactions.

 

The government could spend the money on booze and hookers, and the money would still be spent productively five times in the next 12 months.

 

(There are many reasons why the wealthy are good for our society.  But hoarding resources really isn't one of them.  This is another reason why, when you look at the numbers, government spending is much more efficient than tax cuts for creating jobs.  The money gets spent rather than hoarded.)

[benhacker]

Richard,

 

According to economists cited by Ken Fisher, when someone takes out a loan, that money typically changes hands six times over the course of the next twelve months.  That makes the wealthy not spending their money a terrible deal for society since they're blocking the other 5 transactions.

 

The government could spend the money on booze and hookers, and the money would still be spent productively five times in the next 12 months.

 

(There are many reasons why the wealthy are good for our society.  But hoarding resources really isn't one of them.  This is another reason why, when you look at the numbers, government spending is much more efficient than tax cuts for creating jobs.  The money gets spent rather than hoarded.)

 

What?  

 

First, what does Ken Fisher know about anything?  He's a total sales job guy with no economic sense or saavy (I know a guy who worked at his house as an analyst... not a real inspiring financier).

 

Second, just because money changes hands, doesn't mean it creates any long term sustainable positive value... how citing the US mortgage machine as a productive use of money is beyond me... certainly it creates jobs, but there are those of us (myself) who believe that in the short run inefficient allocation of capital can create quite a growth engine for jobs and perceived wealth, but it may not (always) be good for us long term.  Has this crisis taught us nothing?  We can't all just trade stocks and real estate and mortgages back and forth... somebody has to be productive (not that each of those tasks isn't needed, it's just that 25% of the country doens' need to be involved).

 

Third, hoarding has negative connotations, but what about 'saving'?  Is saving bad, should we all just blow our money and "create jobs"?

 

Maybe I'm just tired, but your post and point of view captured most of the problems America has nicely in one post... short term, forest for the trees, totally inverted thinking.  I'm not a libartarian, negligible government advocate, but implying that government spending is more efficient because it has a short term boost on jobs ignores the entire "capital allocation" aspect of capitalism and why our economy creates wealth.  You can create as many jobs as you want, simply define cashing welfare checks as a "job"... done, we're all employed.  But where does the real wealth creation come from???

 

Sorry if your post was meant as a joke and I just missed it... by disagreeing with you, I'm not agreeing with TWA, but your comments were crazy to me so I thought I would say so.

 

Ben