546-8 Unusual Things I Learned From Warren Buffett

8/3/2019 546-8 Unusual Things I Learned From Warren Buffett

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8 Unusual Things I Learned from WarrenBuffett

In 2003 I really disliked Warren Buffett. Like, I personally hated him. After9/11 he stated Were going to have something in the way of a major nuclear

event in this country. It will happen. Whether it will happen in 10 years or

10 minutes, or 50 years its virtually a certainty.

Everyone on TV nodded their head. Why not. The man is bigger than Jesus.

But listen, WB (we call each other by our initials when we whisper softly to

each other) charges for insurance AGAINST NUCLEAR ATTACKS. If I were

a door to door life insurance salesman you know what I would say to you?

You can die tomorrow! Why not protect your kidsjust in case? And I dontlike when people, even Buffett, spreadnuclear panic.

But I forgave him. We hugged it out. Sort of. He never met me. And he

wouldnt pick up the phone the one time I called him. But I took a cab to his

house. Hey, wouldnt you take a cab to his house? If you could?

(my masterpiece about Buffett. And the worst cover in the history of the printing press)

I went to the 2003 annual meeting in Omaha. The Buffettpalooza. I think

20,000 people were supposedly there. No exaggeration. People got on line

at 5am to get into the meeting. Krispy Kreme donuts were served on the

line outside. Then, when it was time to go in, everyone RAN in order to get

a good seat. But since they had just cleaned the floors everyone was

slipping, falling, sliding as soon as they got into the building. It was exactly
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what would happen if everyone was running to escape, well, a nuclear

attack.

The night before the meeting there were some parties. I got invited by

pretending to be media. I got a special badge. One guy had some numberswritten on a napkin. What do you think Berkshires intrinsic value is? he

asked me. He had all the parts of Berkshire written on a napkin with

numbers written next to them. If you didnt know it, this is referred to as

back of the napkin investing.

I met another guy who told me a story. He bought 200 shares of

Berkshire in 1976. The shares doubled in a year or so and he got nervous.

So he sold 100 shares and used the proceeds to start a restaurant. The other

100 shares (assuming he still holds them because he told me he was never

going to sell them) are now worth $18,000,000. So its safe to say that this

guy I was speaking to is the worlds greatest investor ever. He bought 100

shares. Never had to even think again. About anything. He couldve

watched MTV and eaten nothing but Pringles for the next 35 years. And

now hes got $18,000,000 in the bank. But he has big regrets. Because he

sold those other 100 shares on only a double.

Oh well. We have some work to do here. Because its not easy to findunusual things about Warren Buffett. But if you didnt notice the picture

above, I wrote THE book on Warren Buffett. The one book thats not even

mentioned in the exhaustive list of books mentioned on buffetts Wikipedia

page.

1) House. I really did drive right up to his house in a cab. Heres his

house:


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Its a 5 bedroom house he bought in 1956 for $31,500. Its one house among

many on a normal suburban block. The guy next door to him might as well

be worth $0 and his next door neighbor is worth $60,000,000,000.00

To me, that shows a lot of discipline. Every time in my lifeIve ever made

moneyI would makethe mistake of buying a home. Heres a story about

Buffett. Hes playing golf with a bunch of people and they all bet a dollar on

a particular hole. Buffett wont bet. Why not, Warren? they ask him,

youre worth a gazillion.

He said, I never break my discipline.

By contrast heres the house of his bridge partner Bill Gates:
http://www.impactlab.com/wp-content/uploads/2008/05/warren-buffetts-house.jpghttp://www.jamesaltucher.com/2011/01/what-it-feels-like-to-be-rich/http://www.jamesaltucher.com/2011/01/what-it-feels-like-to-be-rich/http://www.jamesaltucher.com/2011/01/what-it-feels-like-to-be-rich/http://www.jamesaltucher.com/2011/01/what-it-feels-like-to-be-rich/http://www.jamesaltucher.com/2011/03/why-i-am-never-going-to-own-a-home-again/http://www.jamesaltucher.com/2011/03/why-i-am-never-going-to-own-a-home-again/http://www.jamesaltucher.com/2011/03/why-i-am-never-going-to-own-a-home-again/http://www.impactlab.com/wp-content/uploads/2008/05/warren-buffetts-house.jpghttp://www.jamesaltucher.com/2011/03/why-i-am-never-going-to-own-a-home-again/http://www.jamesaltucher.com/2011/01/what-it-feels-like-to-be-rich/http://www.jamesaltucher.com/2011/01/what-it-feels-like-to-be-rich/http://www.impactlab.com/wp-content/uploads/2008/05/warren-buffetts-house.jpg


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(a 9 building compound worth $150 mm)

2) His worst investment ever. I asked this question on Twitter

earlier. I said, he lost his self-esteem and 20% in that order. Everyone

came back with very smart responses: Conoco Phillips, where he lost $1 bb

(but not 20% of his net worth (not even 2% of his net worth) and certainly

not his self-esteem). The Berkshire Hathaway business itself was a bust.

But the stock zoomed and Buffett made the bulk of his net worth onBerkshire Hathaway.

No, the answer is a Sinclair gas station he bought in 1951 with a friend of

his. On the weekends hed even squeegee peoples windows. But the Texaco

station right across the street destroyed him. He lost $2000, when his

savings was about $9600 at the time. He put a lot of work and love into that

little baby and it all went down the drain. But that experience probably

gave him the desire to have a more passive management style. A style he

later mastered at Berkshire.

3) He was rejected from Harvard Business School. If you think

about it, Harvard must have a pretty bad reputation by now. Bill Gates and

Mark Zuckerberg hated it so much that they dropped out. And the one time

they couldve landed the best businessman ever, they rejected him. Like

most smart people, Buffettdidnt even really want to go to college. He

started out at Wharton but then switched back to his hometown college in

Omaha because he didnt like it. Then, after being rejected by the bestbusiness school in the country, he went to Columbia.
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The reality is that people at the genius level (Buffett, Einstein, Gates, etc)

have no use for college but some cases (Buffett) reluctantly go through the

motions.

4) He was a victim of reverse anti-Semitism. When he originally

wanted to work for his mentor Ben Graham, on Wall Street, Graham said,

no. Buffett was shocked and asked why. Graham told him it was because

he wasnt Jewish. Graham wanted to save a spot in the firm for a Jewish

person. To be fair, Graham was worried that Jews couldnt be hired

anywhere else on Gentile Wall Street so he wanted his firm to be Jewish-friendly.

The key to success though is persistence. Buffett went back to Omaha but

kept pitching ideas to Graham until Graham eventually hired him.

Persistence is the only sure-fire method for obtaining success.

5) Adam Smith. Its useful to look at the history of the field you want

to master. When I was trading for Victor Niederhoffer I saw that he had

collected just about every finance book from 1800 on. So I started readingbooks anywhere from 100 to 30 years old just to see what people were

thinking and how finance and trading had evolved.

One book, Supermoney was by the pseudonymous Adam Smith

detailing random adventures he had as a reporter in finance in the late 60s,

early 70s. On one adventure he decided to visit a retired investor (the book

was written around 1972) who was trying to figure out what to do with the

rest of his life now that he had $20 million after shutting down his hedge

fund. They drove around and had a rambling conversation. At one point
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they passed a furniture store and the investor pointed out the window, Im

going to own that one day.

Obviously, that investor was Warren Buffett. But Smith didnt know then

that he was dealing with WARREN BUFFETT because he wasnt in all-capsyet. And, in fact, many years later Buffett did buy that furniture store. I

thought Supermoney was fascinating for its predictive abilities. How could

Smith know that Buffett would be the best investor to profile? In the next

profile after Buffett , Smith wrote about a guy who was sitting in a Swiss

jail. If you screw up a bank in Switzerland you are going to jail, no get-out-

of-jail free cards. What was this guy doing while in jail? Trying to write

some fiction. Thats where the profile ends. Paul Erdmann went on to

become the bestselling finance thriller writer ever. I highly recommend hisnovels.

In any case, its a great chance to see how someone described Buffett before

he became BUFFETT. I mentioned this to Pamela van Giessen at Wiley

(seeWhy I Still Write Books Even Though Ive Lost Money on Every One of

Them) and she ended up republishing the book as a Wiley Investment

Classic. I give myself full credit on that one even if she disagrees with me.

6) The SEC investigated Buffett in 1974-1976 for manipulating

penny stocks. This was a serious charge. And Buffett takes his reputation

seriously. And the reality is (I wont get into details but Janet Lowe covers

ithere), he WAS manipulating penny stocks and he sort of admits it. But he

had a good reason. He was buying a company and he promised a
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shareholder of the company that the price wouldnt be lower than a certain

number. So he made sure the price of the penny stock never fell below that

number. Or something like that. If I got the details wrong, Warren, you can

put a gun to my head and fire the bullet. Suffice to say, the SEC didnt know

what to do with someone like Warren so they slapped him on the wrist

(some historical versions say the face) . He admitted nothing but one of

his companies paid a $115,000 fine.

Im sure he was nervous his reputation was going to go down the tubes but

he survived to live another day.

7) Zen. Its not so bad to pick up the habits of Warren Buffett for a week

and try them out:

1.No computer on his desk2. No cell phone3. He plays bridge 12 hours a week (I guess he uses a computer at

home for this). Bill Gates is often his bridge partner.

Try it for one week: no computer, no cell phone, play a game for at least 12

hours for the week.

(Buffett and Gates playing bridge)

8 ) Love.Ugh, I was going to do 10 of these but Im getting tired.

Theres a fun storyabout how he actually took over Berkshire Hathaway. It

was more ruthless than anything JR Ewing would do. And Im not going to

mention the intertwining personal relationships he had. Thats well-

documented everywhere. But I give him credit for being open,

unconventional, and living the life that best suited him with the least

amount of stress. As his daughter, Susan, says: Unconventionalis not a

bad thing. More people should haveunconventional

marriages.


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But, one thing struck me as interesting. The annual meeting is about eight

hours long. I dont recommend it to anyone. I cant remember anything he

said except one thing. Actually I remember something Charlie

Munger (Buffetts number two) said. Something to the effect that long-

term you better bury all your guns and valuables in the backyard and at that

point Buffett shut him up.

But one thing Buffett said always stuck with me. Someone asked him, How

do you measure success? And all 20,000 of us leaned forward to hear what

the magic number was. But he said this: I measure success by how many

people love me. And the best way to be loved is to be loveable.

And that, to me was the most unusual thing about Warren Buffett.

Source:http://blogs.forbes.com/jamesaltucher/2011/03/28/8-unusual-things-i-learned-from-

warren-buffett/
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546-8 Unusual Things I Learned From Warren Buffett