Warren Buffet has been in the news recently as people are critical of his recent sale of all his airline stocks when he had lost 50% of his initial investment. It is fortuitous that I had seen this movie on his life and written this review. It certainly makes this review timely and relevant, plus I think the movie gives us some insight into his mind.
Now I will share with you my impressions of the movie and those things I learned, which I think are good foundational habits for investors to incorporate into their personality and habits. I truly believe you should learn wherever possible from the successful, and Warren Buffet is certainly successful.
Warren Buffet thought he was more lucky, then smart. He felt he was lucky enough to be born in America, lucky to be male and lucky to have his parents. Both smart, loving and supportive.
His dad worked for an investment firm, lived modestly, saved money and when the great depression of the 1920’s hit, he lost his job, took his savings and started his own investment business with his friends and family as his first customers and never worked for anyone again.
Love of Numbers
Warren Buffet loves to read, loves math and read all his dads investing books. Soon he was selling soft drinks door to door and delivering newspapers to earn enough money to invest in the stock market. At a young age he was studying investing, honing his stick evaluation skills and learning to focus on his strengths and develop them.
He commented once that his sisters were just as smart as he, and his parents loved them equally, but there were many societal clues that while Warren would be able to develop his dreams. Their role in life was to support a man all their life to achieve his dreams and reach his full potential. He once commented that the true testament to the greatness of America is that it has become possibly the richest and most technologically advanced nation on the earth with more then half its talent and brain power on the side lines, unused.
His love of numbers
He relates he always loved math, and he was particularly enamored by the power of compounding. He agreed with the famous genius Albert Einstein, that compound interest was truly the 8th wonder of the world. I also love all types of math, both fir the rational and logical way it functions and because of the way it explains natural phenomena which otherwise look like magic.
The other thing about this movie becoming warren Buffett that I enjoy was his character trait: focus. Both he and the narrator talked about his ability to focus on an issue; to think, to ponder about it for hours, while reading and gathering information about it. He used this focus to learn how to pick stocks to invest in, using the same deliberate manner of reading, pondering and studying them from many viewpoints.
The other thing besides this focus on math and trading, his focus on reading 4-5 hours per day, which represents constant learning.
Evolve and Change
Warren started with a basic principles of buy low and sell high, as in buy “fair companies” at “wonderful prices” and he made a lot of money, for a long time. But he evolved away from that and started buying only companies he could be proud of, wonderful companies at cheap prices. This propelled him to even greater success and he credits this change for his greatest increase in wealth.
A castle is frequently surrounded by a big ditch, which is deep and wide, so an invading army can’t ride right up to the castle and tear dune it’s walls. A moat protects a castle. Warren Buffett focuses his attention and investment dollars on famous American brand names that had built up a reputation making good products and selling them at a premium. He called this reputation and fame a “moat” which protected the companies profits like a moat protects a castle. He was proud to own these companies and he held them longterm because they were profitable longterm. Most of them also paid a dividend.
He often compared himself to a good hitter in baseball. The hitter lets all the pitches outside his strike zone go by, as he patient waits for the pitch he can hit very far, maybe even score a hone run. He patiently looks at companies looking for the great companies at cheap prices, just like the baseball hitter looking for pitches in his strike zone. He will wait and only do the best deals. He explained his patience by saying that the stock market was a very efficient tool for the transfer of dollars from the inpatient to the patient. This is very cute, very eloquent and very meaningful.
In this movie that Charlie Munger and Warren Buffett both speak of reputation being something that takes years to earn, but minutes to lose. They both say it isn’t right to make money by cheating people. They also felt that if they had a good reputation for being honest and fair that people would be willing to to make deals with them that otherwise wouldn’t happen, if they had a bad reputation. He says his first customers didn’t understand the stock market, but they understood and trusted him. And that has made all the difference.
Charity begins at home
Warren lived a simple life with no apparent luxuries in the first home he bought after he married and still drives himself to work each day, in a domestic a domestic car. His wife had the ability to strike out on her own after the children finished college. She then both built and ran her own charitable foundation as she, who spent the first part of her life supporting Warren in his quest to achieve his dreams, devoted her time and energy to achieving her dreams. Warren comments that she balanced him out and helped him become the huge success that he was and that without her, his success would not have been possible. His children grew up to each create different types of charitable foundations reflecting their interests in healthcare, sustainable agriculture and education. The desire to take their accumulated wealth and help the less fortunate in the world was a strong driving characteristic of each of them, as they mirrored the career efforts of their mother.
The movie contained a surprising amount of insight into the personal traits of Warren Buffett, that made him so successful. It was a candid and humble appraisal of how through a combination of luck at birth, hard work, raw talent and stubborn adherence to ethics, specific investment guidelines and a patience to allow the magic of compound interest work. He slowly built one of the largest investment companies and largest personal fortunes of all time. And in the end a fortune which he felt was derived from the people was freely given back to the people through a charitable gift.
It was truly inspirational movie and reaffirmed the importance of values, hard work and family.
Title: Lessons from the life of Warren Buffet for the investors.