Updated: Apr 15
"There are no called strikes in the (investing) business”
Perhaps Warren Buffett’s most iconic interview was his very first* on National Television in 1985. This legendary seven minute clip has spawned many timeless Buffett quotes and ideas that will continue to be repeated into the future. The quote that resonated with me most was at 5m36s “There are no called strikes in the (investing) business.”
Having played baseball at the top junior level in Australia, I distinctly remember the coach telling me “When you are behind the count (ie with 2 strikes) you have to swing at everything that looks close. I rather you go down swinging than having you ‘called strike’ on!”
When it comes to investing, patience is a virtue. This philosophy is clearly illustrated by Buffett’s treatment of the tech industry, especially Apple. For decades Buffett and Berkshire Hathaway stayed away from tech stocks (apart from IBM) and successfully steered clear of the ‘dot-com’ bust at the turn of the century. Despite the constant pitches, name calling (“He’s an old relic/dinosaur”) and questionings of his business strategy over many years, Buffett remained firm until 2016 when the perfect opportunity arose and he swung for the fence. Apple is now Berkshire Hathaway’s biggest holding at ~40% and valued at over $115B.
Patience is also what Buffett practices in his personal life. Nothing is done with haste, extravagance or extreme risk. He has a $3 breakfast at McDonald's, drives a 2014 Cadillac and lives in the same house he bought for $31.5K in 1958. Although the frugal lifestyle helps, the simple compounding over time is all that’s required to generate his enormous wealth - about 90% of his current net worth (~$100B give or take a few $B).
Unlike baseball, cricket is probably a game that would suit Buffett’s temperament well. Batters often face many balls without the need to hit or run and some batters can hit for hours without getting out. The traditional game of cricket was called a “Test” – a game over 5 days that truly tested both sides, the umpire, commentators and the crowd alike. On many occasions, the matches end in a draw! No other major team sport tests you quite like a cricket test!
Similarly, investing is a game that really tests you - requiring a tremendous amount of both patience and time to succeed. This is why most people fail – most have neither, while some have one or the other but very few people have both. As a result, impatient investors “strike-out” looking for the home run while others abandon their sound investment plan before it has enough time to compound and succeed.
What make things harder is that Wall Street knows about this and is constantly and nasty habit of inventing new stuff to lure investors. Unfortunately for the inexperienced and unwary, most of these things are created with one purpose in mind – “to legally convert YOUR money into THEIR money as fast as possible!” Some recent creative products include SPACs, “smart beta” and lately, I’m seeing a lot about fractional art ownership. No doubt I suspect “beanie babies” as an investment will make a comeback shortly!
For us mere mortal investors, to succeed in the investing game, you need to think like Warren Buffett. Understand that investing is simple but not easy. Have a plan that revoles around:
Spend less than what you earn.
Regularly add your savings to a portfolio of low cost, passive index funds, and
Allow enough time for your wealth to compound.
* Buffet's first recorded interview was actually in 1962