Warren Buffet Mania Needs a Break

Carl Icahn is worth $16 billion. Carl Studied at the Princeton University, married twice and has three kids.Some of you who might have heard about Carl Icahn may have a hint or two as to why I am opening an article titled Warren Buffet with introduction of Carl. For those who couldn’t connect, Carl is an American Businessman and also an investor.

Couple of minutes before I started writing this blog, I googled “greatest investors” and I was not really surprised to see around 50 plus suggestions given by Google. I was sure these were successful gentlemen with their unique investing philosophies and wondered how come I was not aware about 90% of such luminaries(also wondered why there was no woman in the list). And again not to my surprise the list began with our quintessential maestro ; Warren Buffet.

As I write this, Warren Buffet is worth $84 billion. He has given $30 billion to charity. He lives a modest life in a small town and drives his own car. He has married once. You might have even shelved his book for the day you might think of investing and follow his footsteps. He believes in Value Investing and doesn’t buy stocks with the intention of selling them. Buffet likes to play the ukulele at investor meetings and enjoys Bridge with Bill Gates.

I can write 20 pages on Buffet or perhaps a small book.The volume of space which Buffet occupies in minds of aspiring investors is not only mesmerizing but at the same time very disturbing and dangerous. And we really cant blame Buffet for the phenomenon he is. The poor guy is just being himself.

I will explain the “disturbing and dangerous” part later, but before that I will try to put down a causality for such skewed top of the mind awareness about Warren Buffet with contrast to his contemporary counterparts.

Buffets wisdom is omnipresent: You might find a friend yapping about it or a half page Mutual Fund advertisements suggesting you to think far . Buffet’s ideology also serves as a free marketing content for the following businesses.

  1. The multi-billion dollar publishing business: I believe there are more than 10000 books out there selling millions of copies of Buffet’s wisdom at $2.99 dollars a piece. These books promise to give you more than what Buffet knows about himself. Anyone can take a shot at writing an investment book by referring to 10 existing books and vast amount of data available online. There is no doubt that Buffet’s wisdom in books lays the foundation for a $100 million dollar Industry on Investment strategies.
  2. Financial services Industry :Mutual funds yap about Buffet’ way in their marketing communications. The idea is to convince people not to fiddle with their investment once they commit. A stable and growing asset size wins even more investors.
  3. Investment Guru’s (Investment Education Industry) : Buffet is a 87 year old god fearing man and an ideal who drives his own car. Discounting his love for coke (drink) it is easy to make him a role model rather than a 34 year old successful hedge fund manager who is an atheist and drives a Mustang.

Here is an exception and a trivia :It will be very tough to find a brokerage firm living by the Buffet philosophy because they simply want more transactions to happen. The more you buy and sell, the more they earn on brokerage fee.

The above factors make it impossible for other great investors like Carl Icahn and James Altucher to have a strong top of the mind impact on aspiring investors. But publishers are thriving on the content which Buffet inadvertently provides them. The quantum of Buffet’s wisdom floating around far exceeds and supersedes research on other good investment ideas. There is no incentive to study Icahn because his ideologies will be difficult to market or pull crowd.

Why it is Dangerous and Disturbing?

Stock markets work on information disparity. For a trade to happen the buyer and the seller needs to have different set of information , motives, beliefs and understanding of the market. Stock markets cant feed on one holy book. Imagine a hypothetical situation: if everyone holds on to their stocks forever (Buffets core philosophy), there won’t be any trade happening.Furthermore, it is too much of a risk for an individual to follow a single philosophy of holding an asset forever.

Buffet is an oddity. Buffet has evolved in different time and different place under starkly different circumstances. Replicating Buffet’s success is impossible. Buffet can hold on to his stocks till eternity and still earn billions through stable dividends. If Buffet writes his own book on investing , I am sure he wont even follow it. Buffet’s recent love for Tech Stocks like Apple proves that. Buffet Shunned tech stocks before he invested in Apple.Likewise, Buffet shunned airline stocks but changed his mind last year. But his evolved wisdom has not been factored into the publishing and marketing content which floats around us.

But an aspiring investor should take the overdose of Buffet’s wisdom with a handful of salt.Investing cant be rule based. Investment principles cant be built on the foundation of universal and popular ideas. Having said that, it would be still wise to borrow a page or two from Buffet’s book but borrowing the whole book wont be so wise, simply because it is not written by Buffet.