I consider myself a student of Buffett and like all the good arts, the more you study the subject, the more you try to refine the art the more you feel you are just scratching the surface of something bigger and deeper. The more you know the more you feel you don’t know. And, like in the study of music for example, it’s something that you enjoy. You don’t feel resentful about this process. It’s not frustrating, because at the same time you know that you are playing the game this year better than the last year and the year before. It’s a knowledge that accumulates just like Mr. B says. It’s fun to learn, it’s fun to discover what you don’t know. There can be failure and Buffet knows that, even when you have been put in practice everything that you should. Because some businesses are just tough, But you enjoy the journey anyway.
So, what surprises me the most, is that many students of Buffett are just talking about him in the same usual way using the same concepts and rules, all the time. All true and appropriate, no arguing with that. But it strikes me that almost everybody forgets to mention the never-ending process that underpins all the beautiful and valid rules you can learn from our man in Omaha: learn to evaluate a business.
How to do that is not perfect science, and it doesn’t lead to a precise figure. And it doesn’t have to. At least not so precisely (remember our beloved margin of safety?)
But it’s a long process because it has a little bit more of an art than a science. And that’s exactly the giant leap of Buffett starting from Graham. And it takes a lot of both anyway. It takes skills, experience, knowledge, time. I will consider it like the rule number zero. Something you can not avoid to be successful and to serve our investing purpose: to get our famous two birds in the bush tomorrow givin’up our bird in the hands we have today.
When will I get these birds in the future? And a what risk, or how sure am I? And how much I have to invest today for those birds in the bush ( a net present value) discounted at the appropriate rate.
As you see, this is not so popular among all the simple concepts of investing by Buffett because it’s a little bit more difficult to apply and even to understand. No tons of IQ, no rocket-science but a lot of experience, practice, good reasoning, and temperament. So easy, but that difficult! The “Super-Investor of Graham and Doddsville”, and many other words from the Oracle tell us that is doable, especially in a small scale. So again you can be yourself and you can be like Buffett. You can be successful in investing being like Buffett if you agree and understand that being like Buffett means to be able to evaluate a business. If you don’t get this, you will be ready to use a lot of other strategies available, that will be much better than common sense to your mind, but will lead you to so much poorer and mediocre results…. (to be continued…)