Yes, Warren Buffett is a great investor. He is an even better teacher. While Buffett gains notoriety for his phenomenal track record, he is respected, admired, and has throngs of people making the annual pilgrimage to Omaha each spring to listen to him, because he willingly shares and communicates his vast sums of accumulated knowledge with anyone that puts in the time and effort to learn.
It has often been said that the best teachers in the world can take the most complex of ideas, and explain them in such a simple manner that even the most uninformed student can understand. And if this is the measure of a great teacher, then Buffett is surely one of them. Buffett primarily uses the power of analogy to convey his ideas and thoughts to his "students". A recent example of this, is when asked about the proposed remedies for the current financial crisis, Buffett related it to a patient in the ER who needed to be revived. He rightly pointed out that in time of crisis—the patient crashing—people need to act quickly and do something to revive the patient, rather than arguing about if the patient ate too much or smoked too much over his lifetime. In hearing this analogy, it was almost as if you could see a light bulb go on in people’s heads about our current economic state, as they said to themselves “Ah, I get it!” And if imitation is the best form of flattery, then Buffett is in good standing, as you began to hear this analogy preached far and wide, just shortly after Buffett made the comparison in a television interview with Charlie Rose.
When you think about it, successful investing is also about making analogies between seemingly different businesses and ideas. The person who can apply what they learned by studying the success--or perhaps more importantly the failure--of a particular business or industry, to the concepts of another business or industry will likely have a leg up on those who only understand the intricacies of one industry, no matter the depth of their knowledge. Taking this concept one step further, the practice of making analogies is essentially a method of assessing one’s opportunity costs at any one time, which--as I’ve written previously--is what investing is really all about. Perhaps one could argue that Buffett’s ability to make analogies has been (and is) better than many other investors’, which has helped contribute to his long-term investment success, as well as his enduring appeal as a teacher.
I’m often asked what will Berkshire eventually be like without Buffett. Given the investment model and brand Buffett has built in Berkshire, as well as his stated intention to separate the operating and investing roles of his job into people he has already identified to take the reins, I don’t think Berkshire’s financial results will miss a beat. What I do think Berkshire will miss, though, is the communication and teaching ability of Buffett. His successors will likely do well for the company, but I doubt they will be able to attract and inspire as many “students” as both Buffett and Munger have done over the years. In fact, while I still think Berkshire would have done well, I’m not sure it would have been as great as it has become (as a company) had it not been for Buffett’s ability to communicate and teach.
This brings me to an interesting point about the investment industry. I’d argue that it is the job of most financial professionals to teach their clients as much about investing and the financial marketplace as possible. It seems so natural to me that by effectively teaching your clients—by using terminology that they understand--will help to foster trust, and as such, this trust will compel clients to gladly pay a reasonable fee for your knowledge and advice. But what has actually happened in the financial services industry over the last several decades has been anything but the creation of a culture of teaching and trust. Rather, the culture that has been created is that of a sales culture. Unfortunately, to make a sale, most “professionals” obscure things, use esoteric terminology that not only can their clients not understand--or the professionals themselves likely--but also probably cause their clients to be fearful of asking a question at the risk of looking stupid. This type of fear can be a strong motivator in making a sale, so it has been practiced even more—often at the expense, rather than for the benefit of the client.
I’ve thought about this a lot, and frankly, the only term I can come up to describe it is sad. This “sales at any cost culture” is likely a cause of part of the financial problems we have today. And when you think of what all these other vultures were doing to--rather than for--their clients, it’s no wonder that Buffett and Berkshire (as well as those that practice what he preaches) have become so successful, as he was one of the few teaching, while everyone else was so busy selling.
I welcome dialogue with my readers, so please send me any questions and comments you have. Also, if you haven’t already done so, please be sure to sign-up for my free email alerts.
Justin
The content contained in this blog represents the opinions of Mr. Fuller. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business. This content is intended solely for the entertainment of the reader, and the author.
