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Wit, Wisdom, Warren: Lessons from the World’s Best Investor

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I have nothing but utmost respect for Warren Buffett, the only man who became the world’s wealthiest by picking stocks.

My fondness for Buffett has its roots in a chance email forwarded by a friend in 2006, which contained link to one of his letters to shareholders. Till then, I had known Buffett as a successful investor, but never bothered to read the philosophy that made him an investing great.

Anyways, as soon as I finished reading this letter my friend sent me, I was hooked! The hook was so strong that I printed every single one of Buffett’s annual letters to shareholders of Berkshire Hathaway (and also his Partnership letters) and read them page by page.

In his recent interview with Safal Niveshak, Prof. Sanjay Bakshi termed these letters as “the most valuable source for learning about finance and investing in the whole world.”

He also added that since these are available for “free”, investors don’t give much importance to them, like I did, i.e., not give them much importance when I read them for the first time.

So while I was hooked on to the “beautiful words” of investing wisdom Buffett shared through his letters, most of my reading was casual.

I never sat with a pen and paper to make proper notes on what I read in these letters. This was, I believe, a mistake on my part because note-taking makes the entire exercise of reading something brilliant more worthwhile.

I’ve made notes from most investing books I’ve read over the past few years, but never did it for Buffett’s “free” letters…which I’ve started doing off late.

Anyways, I’ve read most of Buffett’s letters several times over the past few years, and for me, these remain the single greatest education I’ve ever received in investing and in life.

So I highly recommend it for anyone who hasn’t done so.

Buffett isn’t what I thought he was
In digging deeper into his letters over the years, I have come to realize that the phenomenon called “Warren Buffett” isn’t as simple as he seems to be.

In fact, the business and investment philosophy that he has built over the years is far more complex than it seems. It’s only that he has made them utterly simple for his investors and readers.

So the fact that many investors think (or are made to believe by investment advisors) that they can invest like Warren Buffett is plain myth and nothing else.

You or I can never become the “next Warren Buffett” by copying his techniques or those of Graham and Dodd. It’s next to impossible.

Buffett’s investment philosophy is NOT about earnings power, good quality business, high return on equity, great management, or cheap valuations. These are just some of the “hygiene factors” that Buffett looks for in stocks.

His real philosophy is about how an investor must conduct himself while dealing with the ever-so-eccentric Mr. Market, the imaginary man brought to life by Buffett’s mentor Benjamin Graham.

So you can’t copy Buffett kind of returns by simply copying his hygiene factors for picking stocks. A “Buffett screen” can only take you so far in your stock picking.

There’s a long road to cover after that, if you are to ever come close to achieving a “satisfactory” (inflation-beating) rate of return from your stock investments over the next 15-20 years.

As Prof. Bakshi said, “As far as applying Buffett principles over here is concerned, I think those principles…make a lot of sense. These are universal principles. But you have to adapt them to local conditions. You cannot blindly copy-paste!”

The great thing is that you can always learn to paint your own canvas borrowing colours from the best investment artist the world has ever seen.

And know this – he is offering all his colours for free to you!

Knock-knock…Buffett’s here!
In order to bring Buffett’s learning to you (in my own, original way :-)), I’m starting a long-long series on reviewing each and every letter he has written to his partners and shareholders over the last 55 years…

…right from 1957 (when he started writing letters to partners of Buffett Partnerships) till 2011 (when he wrote a letter to shareholders of Berkshire Hathaway).

This will be a weekly series called “Wit, Wisdom, Warren”. I will post review of a letter every Friday.

This entire initiative will provide a greater benefit to you if and only if you read in advance the letter that I’m going to review in the forthcoming week, and then share your own learning in the Comments to that post carrying my review of that letter.

Simply put, if I’m going to review his letter for 2010 in next Friday’s post (and I will duly inform about this in advance), I would expect you to also read the 2010 letter, make your own notes, and then participate in the discussion on that post.

This would make the entire initiative much more meaningful for you and me.

We start next Friday with Buffett’s 1957 letter to his partners, which you can read here.

So take out your pencil, eraser, and notebook…get comfortable in your creaky chair…and pay attention. This is going to be a long class of sharing the wit and wisdom of Warren Buffett.

Don’t expect me to tell you 10 or 20 ways to get rich like Warren Buffett, for there is just one and only one way to get rich like Warren Buffett – turn the clock back to 1930, and tell the genie that appears before your birth to make you Warren Buffett. 🙂

Anyways, I am already imagining this exercise as an amazing journey of seeing the world of stock market investing through the glasses of the phenomenon you know as Warren Buffett.

I hope you will walk with me throughout this journey. Whatsay?

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.

Comments

  1. Wonderful Initiative Vishal…:) We really admire it…:):) So let us start the Buffet session..:)

  2. As you said if we simply copy the things from Buffett we can not achieve great heights. You made a wonderful statement there. For Buffett picking stocks is just not making money, instead it is his way of life.
    To cite one more example, If we see Dr.Vijay Mallya, he always tried to copy Sir. Richard Branson. Indeed Mallya did everything in India whatever Branson did in U.K but he could not copy Branson’s generosity, his simplicity, his evergreen smile..
    That’s what makes huge difference at the end of the day..!

    • I believe value investors should start first by studying letters from WB and follow Professor Bakshi’s teachings to adjust to the Indian market.

      I don’t think anything wrong in coat tailing successful investors.

  3. Good initiative…

    Yes you are right.The fact that these letters are free makes many aspiring investors stay away from them.

    One of the important lessons I learned from reading these letters that You cant copy Mr.Buffet because he keeps on evolving (even until today and in the future also).

  4. I think people can be very successful if one learns to copy someone and also have the patience to stick with that for 7-10 years. Here is a excellent speech by Mohnish Pabrai who talks about this copying in detail at UC Davis 🙂

    Btw people claim that they should be copying RJ in the indian context but i dont think it is comparable since buffet is very transparent about why he picked up something most of the times 🙂

    Just my 2 cents.

    Cheers
    Arun

  5. Great, Waiting eagerly for next Friday. Thanks a lot for making available copies of Buffet letters from 1957-70.

  6. Excellent initiative, Vishal…this will help lazy people like me who have downloaded but never read these gems 🙁

    Can we make it more frequent after an initial trial? At one letter a week, we’ll take over an year to finish them, or you think this is such a vast knowledge that we should spend time to assimilate it properly 🙂

  7. sanjeevbhatia says:

    Was waiting for this one.

    Well, had read them way back, but unfortunately, way more casually than you. All I remember is the awe and respect his letters generated in me, his humility, and the excellent ability to drive home the point using his trademark simplicity, wit and humour.

    It would be great to revisit the hitherto unappreciated treasure trove one again, much more seriously this time :D, and try to pick up the nuances that make WB, WB.

    Bring it on.

  8. Looking forward and hope to partner you.
    Am sure other also will.
    Will read the letters in parallel as per the schedule you put out.
    So 1957 is the one to start with. Great

  9. Also to take care of plagiarism issue, a suggestion, if you are planning to make your notes and send them out, maybe that can be done by email instead of posting them here or through a link in an email.
    This is just a suggestion since it makes copying by others a little more difficult and these notes would surely be your content.

    • Hi Sudhir, the idea of sending content by email-only is good, but then it would hinder the invaluable discussion that currently happens under each post…and which remains there for new website visitors to see.

      So what I have done is disable text-selection and right-click from my website. This way, if someone wants to plagiarize, he would have to type out the material. So while I can’t stop plagiarism, the work for the “I-love-plagiarism” guy gets a lot more difficult! 🙂

      Let me know your feedback on this disabling of text-selection and right-click features. Is it a hindrance/irritation to you while reading?

      Other tribesmen – please let me know your views on this new “copy protection” feature on Safal Niveshak. Regards.

      • Manish Sharma says:

        It seems to be a good way to tackle this problem.
        I haven’t tried to copy anything from your site..so it’s not a problem for me 🙂
        But, yeah while posting a reply the cursor is not moving freely like earlier. I would like to know if only i am the one who is facing this problem :s

      • Yes Vishal, it looks better for me as well to avoid plagiarism(to some extent!!).

  10. well vishal… an excellent initiative…
    sure we will be ready with the notes for discussion…..

  11. Great work Vishal. Really admire your efforts. I have been following your writings since past few days and they are really helping me in my quest to learn. Thanks a lot.

  12. Abhishek Jain says:

    Great initiative Vishal…Looking forward to it..

  13. Hi Vishal. This is a great initiative.

    I’ve been following Prof. Sanjay Bakshi’s blog for almost couple of years and got to know about you through his blog post. I am still a learner at value investing but a strong believer in the “process” and very impressed by the articles and course you’ve put up.

    In the last 4-5 yrs, I would have printed Warren’s letters (all in one go), two-three times but could never read it. With your initiative, I finally hope to do this systematically.

    I think along with your analysis, it will be useful to add two-three bullet points of what you think are relevant/different points in the Indian context.

    Looking forward,
    Ashish

  14. This is really a wonderful initiative. Thanks Vishal for your efforts.

    This would be a great addition to my notes which I was taking from my reading of the book Intelligent Investor :-).

  15. Dear Vishal,
    Every time I visit your blog feel like taking formal University Education on Value Investing . Almost completed first year of Value Investing course today, well I learn all the basic required to be good value investor including patience & tough mental model .
    Now started second year & you introduced subject called Warren Buffet Wit & Wisdom . Hope everyone including me will get immense benefited & educated by this subject in long journey of value investing.
    Keenly waiting for next Friday post .

    Regards,
    KIRAN

  16. Manish Sharma says:

    Very good idea, and i am glad this has finally begun!

    In fact, i think this is the right approach to read his letters rather than rushing through to them. Even Prof. Bakshi suggested that the best way to read Buffett is to download them and read them over 3-4 days. One can then make some notes and then compare it with the rest after a week.

    Also, in the ‘Safal Niveshak Vicarious School of Learning’ this could be like enrolling for one-year diploma course on Buffett. As it will take almost 45 weeks to cover all his letters. But, i am sure it will be a time worth spent for each of us 🙂

  17. Hey Vishal
    I think this initiative would eventually become the best initiative that SN has taken (After Stock Talk – Which in itself is a great one). 🙂
    Like almost everyone, even I have read a few of sir’s letters. But unfortunately, it was done in a very casual manner. I think this series on his writings would go a long way in helping (learning) investors like us.
    Looking forward to Friday(s)

  18. Great idea, looking forward to it, thank you!

  19. Hi Vishal,
    I would like to improve my knowledge on different sectors..i.e would like to improve my circle of competence. do you have any thoughts of writing articles on how a particular industry works. like pharma, FMCG or any other small industry. It would be great if you can suggest me how can i improve my knowledge on the sectors.

    thanks
    sravani

  20. Great initiative Vishal. This will be a good systematic approach and while reading alone is not enough, discussion helps in getting to look at the same thing from multiple perspectives.

    So in effect, a prior read and subsequent weekly discussion will go forward a long way in gathering collective wisdom from multiple reads over a period of time.

    Thanks again, for this wonderful initiative, looking forward to this.

    Regards,
    Rudra

  21. I am really excited about this. Really commend your efforts to educate individual investors.

  22. Vishal,

    Thank for acting on my request to enable the right-click option on your website.

  23. Thanks for the initiative Vishal. I feel really fortunate to have stepped into your website from Prof Bakshi’s blog.

    Vishal, other Tribesmen – YOu suggest to print out WB letters and make notes on the physical copy? Or can we go ahead with word excel mode? What additional benefit we have in taking up the paper and pencil method?

    Thank you,
    George

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