Author Topic: Why You Are Not The Next Buffett  (Read 4824 times)

hodedofome

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Why You Are Not The Next Buffett
« on: February 01, 2015, 09:12:17 PM »
If you think you have what it takes to be the next Buffett (or have friends that do), then see how you compare to his milestones:

He started and ran legitimate businesses as a teenager and had saved up $100k (in 1950s dollars) by the time he went to college.

He had read over 100 business and investing books before he went to college.

He was bored in college because he knew more than his professors.

He studied under and worked for the guy who invented value investing.

His dad was a successful broker and congressman so Buffett's network was rich and powerful. These are the people that invested with him after college.

He reads hundreds of pages of material every day.

He's read every single annual report of every single stock you can think of.

He has a photographic memory.

He knows more about most companies than their own management.

His business partner is a certified genius who may be the youngest person ever accepted into Harvard Law School.

His wife may be the most understanding and servant-hearted person on the planet. Buffett did literally no housework or child rearing. She did it all while he stayed in his study and read all day and night.

He was a millionaire by 30 (in 1960s dollars).

While teams of investment bankers and lawyers are crunching numbers and figures on super computers to close a deal, he can do it all in his head with no help.

He has patience and resolve like you cannot imagine.

If you, or someone you know, has checked yes to all of these, let me know so I can invest with you! :)

firewalker

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Re: Why You Are Not The Next Buffett
« Reply #1 on: February 01, 2015, 09:40:40 PM »
Just give me the photographic memory and convert my money into 1950s dollars and I'll be happy. Oh, and can I have some patience and resolve on the side?

innerscorecard

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Re: Why You Are Not The Next Buffett
« Reply #2 on: February 01, 2015, 09:43:59 PM »
Good list. Just a correction. His wife now is not the same wife as his wife who did the child-rearing.

And while I agree that it's pretty much impossible to be the next Buffett (I write on my blog about some reasons you probably don't even want to be), that doesn't mean you can't be a great you. Walter Schloss could have despaired at how much objectively worse he was than Buffett. But he didn't, and instead tried to be the best Walter Schloss possible.

dividendman

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Re: Why You Are Not The Next Buffett
« Reply #3 on: February 01, 2015, 11:23:25 PM »
I think one of the big points is that he made most of his fortune from taking control of companies, either wholesale like See's Candies, GEICO and Burlington Northern or by buying a significant stake in larger companies - enough to be on the board and have influence.

This matters a lot because then he can decide how to allocate the capital these companies produce in profits to the most profitable places not just in the business that produce the profit.

Also his amazing reputation and massive funds gave him some sweet deals in every major financial crisis since the 80s, especially those insane deals he got in the 2008 crash, warrants, preferred shares at huge interest rates, it was insane!

innerscorecard

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Re: Why You Are Not The Next Buffett
« Reply #4 on: February 01, 2015, 11:48:11 PM »
I think one of the big points is that he made most of his fortune from taking control of companies, either wholesale like See's Candies, GEICO and Burlington Northern or by buying a significant stake in larger companies - enough to be on the board and have influence.

This matters a lot because then he can decide how to allocate the capital these companies produce in profits to the most profitable places not just in the business that produce the profit.

Also his amazing reputation and massive funds gave him some sweet deals in every major financial crisis since the 80s, especially those insane deals he got in the 2008 crash, warrants, preferred shares at huge interest rates, it was insane!

Most of his fortune was indeed made after 50, simply due to the nature of compounding. But he made a lot of money as a young man buying under-followed small-cap companies too, basically being an activist hedge-fund manager.
« Last Edit: February 02, 2015, 01:55:38 AM by innerscorecard »

frugaljo

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Re: Why You Are Not The Next Buffett
« Reply #5 on: February 02, 2015, 01:09:35 AM »
great list, while I might not be the next Buffett, i reading his annual reports and learning from him

he is a special guy.

forummm

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Re: Why You Are Not The Next Buffett
« Reply #6 on: February 02, 2015, 08:55:31 AM »
And in the end, what did it get him? From what I understand, he enjoyed his life, so that's great. And he amassed more money than he could possibly ever enjoy spending. I'm very glad that he's giving most of it to charity. I think every billionaire should do the same.

But if he only had $200M (which many on this forum could do if we wanted to keep working and living frugally into our 80's), he'd probably still be living about the same life. Much less notoriety and personal satisfaction perhaps. I'm glad he made all the money to give to charity. My only personal motivation to get insanely wealthy are to do good with that money. But from a personal standpoint, the marginal returns of being insanely wealthy are small.

innerscorecard

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Re: Why You Are Not The Next Buffett
« Reply #7 on: February 02, 2015, 09:10:46 AM »
Buffett wanted to be really rich. He enjoys capital allocation more than anything. It cost him a lot personally, too. I really recommend Alice Schroeder's The Snowball (Buffett's definitive biography), which I talk about a bit on my blog (will probably write a full review soon). What Alice said to me on reddit rang really true, that it's a book about life and love (or the lack of it), not just money or investing.

RapmasterD

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Re: Why You Are Not The Next Buffett
« Reply #8 on: February 02, 2015, 01:22:30 PM »
And while I agree that it's pretty much impossible to be the next Buffett (I write on my blog about some reasons you probably don't even want to be), that doesn't mean you can't be a great you.

Boom! In how many areas can we all challenge ourselves to improve? Maybe most of us don't have and cannot attain a photographic memory, but I see a common thread of "reading" in so many of these, backed up, of course, by a huge amount of passion.

forummm

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Re: Why You Are Not The Next Buffett
« Reply #9 on: February 03, 2015, 06:02:53 AM »
He started and ran legitimate businesses as a teenager and had saved up $100k (in 1950s dollars) by the time he went to college.

....

He was a millionaire by 30 (in 1960s dollars).



$100k in 1950 -> ~$1M today
$1M in 1960 -> ~$8M today

hodedofome

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Re: Why You Are Not The Next Buffett
« Reply #10 on: February 03, 2015, 08:46:38 AM »
He started and ran legitimate businesses as a teenager and had saved up $100k (in 1950s dollars) by the time he went to college.

....

He was a millionaire by 30 (in 1960s dollars).



$100k in 1950 -> ~$1M today
$1M in 1960 -> ~$8M today

Yeah after looking at that again I need to double check those numbers. It could be $100k in today's dollars he entered college with, not '50s dollars.

goodrookie

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Re: Why You Are Not The Next Buffett
« Reply #11 on: February 03, 2015, 06:52:45 PM »
1) I didn't have a rich parent who gave me nearly $900,000 in today's dollar when I graduated from College.
1B) I do not have a rich parent; so, my risk tolerance is low.

2) My college tuition fee is much higher than what Buffett had paid. Feel free to blame Democrats or Republicans based on your political orientation.

3) Less competition. When almost everyone is clueless, it is easy to beat the market.

4) Less computers (Google algorithm based high frequency trading if you are clueless)

5) Much less utilization of modern financial tools (e.g. future derivative, CMO, etc) which related to my point #3

FINALLY, THE MOST IMPORTANT REASON BUFFETT IS BUFFETT IS BECAUSE SURVIVAL BY LUCK.
 

hodedofome

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Why You Are Not The Next Buffett
« Reply #12 on: February 03, 2015, 08:50:51 PM »
Buffett's parents didn't give him the money, he made it on his own. He's started and ran businesses since he was 11. He's certainly a freak as far as his determination to make money goes.

What his parents did probably provide him was a network of wealthy people who would invest with him once he struck out on his own.

innerscorecard

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Re: Why You Are Not The Next Buffett
« Reply #13 on: February 03, 2015, 09:14:18 PM »
Buffett has said many times that if he were managing a small amount of money today he could get 50% a year, no problem, and that if he were starting again today he would do it exactly the same way he did it before.

I agree. The US market is a lot more efficient than it was in Buffett's day, but there's opportunity there still. And there are net-nets galore if you are willing to look abroad.

Grigory

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Re: Why You Are Not The Next Buffett
« Reply #14 on: May 27, 2015, 08:05:52 PM »
Buffett has stated on many occasions that he was very lucky: he was born into a fairly rich family in the United States, his father was a stockbroker and he got good genes from his parents. (No chronic health issues, photographic memory, high IQ, etc.) In his own words, he "won the ovarian lottery."

That said, you don't need to have all that to become rich. Others have already mentioned Walter Schloss. He started with absolutely nothing, put all of his (meager) net worth into his hedge fund when he finally put it together, and he managed to become wealthy by following Benjamin Graham's lessons of value investing to the letter.

As someone above already said, don't aim to be the next Buffett - aim to be the best you.