For the better part of my journalistic career, as I wrote on markets and investing, I was told by many a Warren Buffett convert that the world’s greatest investor has a simple, easy-to-follow approach. My experience says otherwise. Over the years, my belief has only grown stronger that replicating Buffett is not only difficult but also impossible.
There are a few investors who have adopted some key Buffett tenets and produced great results — some of them are profiled in this special issue — but Buffett himself has evolved over the years as an investor, expanding his circle of competence and adapting to the changing investment landscape.
The multitude of successful calls made by Buffett over his investment career demonstrates not only his financial genius but also his intuitive ability and mental flexibility. Buffett has also displayed perfectly rational behaviour at all times — an assumption you read about in economics textbooks, but seldom see in real life.
So, as we dedicate this collector’s edition to Buffett, here’s a disclaimer: He is multi-dimensional and can’t be copied. He has elevated investing to an art form and his approach goes far beyond opening a balance sheet and saying it is looking good. Yet, the cardinal principle — and this, to my mind, is the bedrock of Buffett and his partner Charlie Munger’s success — is their attempt to eliminate risk. Good investing, as we are often told, is about risk minimisation. Buffett and Munger go one step further and try to eliminate the chances of a loss through rigorous analysis and anticipation of all possible outcomes juxtaposed with a keen sense of business history. However, the rigour of the game is such that even they have been right only 60% of the time.
Investing aside, there is also Buffett’s legendary approach to philanthropy. In a few years from now, when his substantial wealth has been deployed for improving the lives of the underprivileged, it is all too likely that what he made will be overshadowed by what he gave away. And Buffett’s epithet as the “greatest investor of our time” will have to give way to the “greatest philanthropist of our time.”