Celebrating the Oracle of Omaha
The financial world was caught off guard this week with the announcement that the Oracle of Omaha, Mr. Warren Buffett himself, would retire as CEO of Berkshire Hathaway at the spry age of 96. Mr. Buffett is perhaps the most famous investor in history and has served as an inspiration for countless individual investors and business leaders over his roughly 75-year career as America's favorite investor.
I love to quote Mr. Buffett in columns and conversations. I find his folksy wisdom provides volumes of material not only to ponder, but also to guide me as an investor myself. While there are so many of Buffett's one-liners to pull from, perhaps my three favorites are these.
"Only when the tide goes out, do you find out who's been swimming naked." This one is as hilarious as it is also wise when it comes to risk management. The quote in essence refers to investor behavior during strong bull market trends and economic booms, when investors tend to overpay for the stocks and bonds of companies which can only function during times of abundant prosperity. Once the economy turns -- aka the tide goes out -- financial markets tend to reveal the weaknesses in balance sheets and business habits and capital is destroyed. It can of course also apply to other areas of life as well when public image does not coincide with real world results.
On the power of patience and time, Buffett also opined, "Someone's sitting in the shade today because someone planted a tree a long time ago." I find this one useful not only from an investing perspective, but maybe even more so from a small business perspective. Buffett certainly believes in investing in well-researched companies and owning them while they create shareholder value over time, and the same logic can be applied to investments and initiatives in the small business setting. I have found people in general tend to view the world through current circumstances, giving far too much credence to the present without a full understanding and appreciation for the sacrifices and lessons learned by those who were present before them. As I get older myself, I realize frames of reference can change dramatically over time, and sometimes the solutions for the complexity of today are found in a more simple period of the past.
Buffett's wisdom has not only helped me as an investor and business person, but also as a parent and mentor. This quote in some form has helped me many times: "You only have to do a very few things right in your life so long as you don't do too many things wrong." We all make mistakes, no one is perfect, but mistakes can also require substantial amounts of time and money to fix. In my experience, the less effort spent fixing mistakes the more emotional and mental energy can be applied to creating value, growth and prosperity. Sure, we can learn from mistakes, but it's far more productive to learn from not making mistakes in the first place. So come prepared, do the reading before the meeting, and avoid impetuous and poorly informed decisions when possible.
Warren Buffett is not only a man of great wisdom and investing skill, but he is also a product of a unique period of time. During his early career in the 1950s, financial markets were modernizing and democratizing, enabling this young prodigy from Omaha to use his distinctive skill set to build incredible value for his investors. Mr. Buffett's insatiable appetite for information, driven by an obsessive yet productive curiosity, enabled him to find and create value by doing the deep dive on the business models and habits of American entrepreneurs. This curiosity, which led to a unique understanding of how to identify investment opportunity and business success, coupled with his love of the American free market system, combined to create results which will likely not be repeated.
As access to information has proliferated and technology has accelerated the process of investing, the next potential Warren Buffett is likely to be overly influenced by the intense, never-quiet noise surrounding the financial markets of today.
As Mr. Buffett takes a step toward the next stage of his long life, he deserves to be celebrated not just for being our favorite folksy billionaire, but perhaps more so for being a true American treasure.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. No investment strategy can guarantee a profit or preserve against loss. Past performance is not a guarantee of future results. Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.
