Buffett Junkies Not So Daft
Posted by: Brian Dennehy
Shane Parrish (who drives the thought-provoking Farnham Street blog) tells of his decade of attending Berkshire Hathaway’s annual conference. BH is the vehicle of Warren Buffett and Charlie Munger, and a remarkable 50,000 “Buffet junkies” attend. Is there any point? Are you really going to learn anything new, year after year?
Shane’s description highlights that this is very much a social occasion, where old friends re-acquaint, and “bland questions repeat year after year” – in both respects we found our old seminars were very similar. The one trait that seemed common to what was a motley crew was a desire to learn.
There is a dichotomy. “You find the same topics year after year. The same phrases. The same patterns. The same predictable answers”.
So what is the point for these 50,000 people travelling from all around the world? In Shane’s case for nearly 10 years.
The attraction is the very fact that nothing changes.
A coherent investment strategy (Value investing in the case of BH) is set out with clarity in your first year. If you have the skills and patience to pursue such a strategy going back every year is vital reinforcement, hard wiring. Rinse and repeat. If your objective is reasonably consistent outperformance of the markets (and most fund managers), there are only so many investment rabbits that you can pull out of the hat – perhaps only Value, Momentum, Small Cap, and High Yield, as we often point out
What it also helps 50,000 people do is to focus. They can’t eliminate the totality of noise which they have consumed in the prior 11 months, but they can at least put it in context. Most investors have a strong curiosity gene, and have a burning desire to learn. But the key to successful investing is to realise that most of what you learn is noise, and of no or limited investment value – so Warren and Charlie perform the absolutely vital task of keeping attendees focussed on what has value – in their case, Value!
By attending the conference from year to year you aren’t compounding knowledge, in the sense that you add to it by listening to Warren. You are compounding the application of that same knowledge.
Rinse and repeat. You suppress those unhelpful natural traits which make the vast majority of us naturally bad at investing.
With our ratings - portfolios - stop loss alerts – reviews – performance tracking – blueprint and so on, our objective is also to keep you focussed, in our case applying a Momentum style of investing. We will cover “noise” every so often – often because there is a media obsession, and we need to tackle it, create context, and hopefully prevent us all being distracted by it – Brexit?
For example, in the last week I have read volumes about the IMF, trade wars, GDP, recession, inflation… all noise. I have read some marvellous pieces on technological advances which are in the pipeline - exciting, but not adding immediate investment insights.
China and trade wars? Rising interest rates? I will return to both over the next week.
How about Russia? You certainly must have a historical perspective, and understand the confiscation risk, as we cover here today. It is a “denial of service” attack which is much more worrying. I will return to this in next weeks teleconference, along with some tips on what you can do to limit this risk – the risk might be small, but the consequences would be very disturbing.
In the meantime: rinse and repeat.