Hi.
That's fantastic Luu. Thanks for continuing to share your fabulous thoughts.
I am curious for your views on hard work and investment outcomes.
Berkshire Hathaway, prior to transition concerns for Buffett and Munger, only has a small staff and an investment team consisting largely of Buffett who checked his thinking against Munger. Both guys get 24 hours in a day like everyone else. Lots of other people in investments pull monster hours and work alone, in duos or larger teams.
The two newer portfolio managers work as loners, each being responsible for a separate pool of money and they are doing better than Buffett himself (who manages a much larger portfolio and may be more constrained in other ways).
So:
1. Does hard work link to investment outcomes? How and why?
2. If it does, what do you think makes Buffett/Munger so special that they can overcome time limitations to produce such outstanding results?
Best.
I'm way too young, have too few experiences, to be preaching anything original and useful. Though that hasn't stopped me before, hehe... or now... but pretty much all I've been saying are from reading and a bit of thinking or just digesting so here it is.
1. Like most things, investment outcome results from hard work and opportunity. Not hard work alone.
What is hard work? While it relates to the hours we put into our efforts, if our methods are illogical, if our work are inconsistent and haphazard, long hours simply mean unproductive hours, not hard work. That's a long way of saying, work smarter not harder.
How do we work smarter? First by learning from others, select what we think are rational, sensible, practicable lessons and advices... then apply them and constantly retest and rethink if these are right or wrong, should they be updated or modified or adapted to our resources, our ability, our situation. Then keep learning and refining as we go along.
Once this foundation, which, unlike a building's foundation, can be strengthen and reworked once built... the hard work comes in applying it.
Without a strong foundation to frame our thinking, we could spend all our efforts on the wrong thing, or worst, be swayed whichever way the wind blows, and devote our hours towards something fruit-less, chasing whatever it is that is popular.
Then what really matter will be the opportunities. In other words, luck. You could be a genius at stock valuation, could do it in seconds and get it all right... but if no opportunities come to you, if no stocks are selling at 'a reasonable price' or none worth owning, your outcome will be very poor.
This is assuming that we're all in a position to work hard applying our trade, have the opportunities, and are in a position (have enough cash) to take advantage of it as it come.
Given the nature of the stock market, where there are literally millions of buyers and sellers in thousands of businesses around the country/world. Luck and opportunities are widely available - sometimes more freely than others, but supply is always quite good.
I believe that with hardwork, a good supply of opportunities, a person's position (capital base) will take care of itself... Some starts at a better position than others, but in the end, as Thomas Edison said - the harder you work the luckier you get.
-----
2. The traits that make Buffett and Munger so successful (defined here as rich) is no different from the traits that make any one who's successful at what they do. That is, they start out making mistakes, learn from those mistakes, know what they know and what they do not know, constantly practice and apply their understanding... starts out working countless hours to gain knowledge and understanding, slowly reduce those to certain short hands, mental framework and just apply and find opportunities.
A student once asked Buffett how he pick good stocks... he said to start reading from company A to Z - research.
What stock to buy? 'Buy a good business, with able and honest management, selling at a reasonable price.'
What is a good business? among other factors, will include something like... ones with good return on equity, requiring little capital expenditure, has a strong competitive position like market share, brand names; good profit with little debt etc.
Management: don't pay themselves too much, think like an owner, treat people right... these are shown by such things as options, making intelligent investment decisions with shareholder's money etc. etc.
Price... once you know its earnings, real earnings... don't over pay, pay at value or lower than value.
How do you know its value? By knowing its business like you know your own business.
Of course i don't know that's what or how Buffett does it. But that's what i would do.
I mean i've only ever really studied 1 company to that amount of detail... but already i found i got a bit smarter about it. Still no reference library in my head, but there's a page or two there.
And with enough practice and experience, you don't need to be a genius to know a good company when you see one. With a sensible approach to pricing, you don't need to do cash flow analysis or dividend policies and industry growth rate and all that to know a good price when you hear one.
I honestly doubt if a company's CFO could tell you how much his company is worth or could grow by, let alone an analyst with a few spreadsheets and dozens of companies to look at.
-----
As Fisher said, once your requirements are to that extend, opportunities doesn't come every day. And once you've work hard enough to understand your business and its environment... it doesn't need that much time to think or decide, much like a good butcher not needing to use a scale to cut you 1 kg of beef.