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Once Again, Take It With A Grain of Salt
on March 27, 2004
I am not Warren Edward Buffett. Unlike Mr. Buffett, who has the delightful headache of trying to figure out where to put his steadily growing billions, I am a non-investor, sitting on the sidelines, wondering what all the fuss is about. Like most readers of this book, I have been told incessantly to invest for retirement, and not knowing exactly how I should do so, I figured it might be a good idea to glean a few secrets from a proven successful investor. Hence, I read The Warren Buffett Way from cover to cover, hoping to learn a few things.
And what did I learn? I learned that I am not Warren Edward Buffett. Unlike Mr. Buffett, whose circle of associates includes all of the Beautiful People of Corporate America, I am surrounded by ordinary people, more than a few of whom are looking for a way to get rich quick. Whereas Mr. Buffett is patient and thoughtful with his investments, most of the people I encounter are thoughtless and reckless with their gambles. These two things, which I increasingly began to ponder as I read this book, distinguish me from the Oracle of Omaha, and quite possibly from most readers of this book.
The book consists of nine chapters, and is mostly historical in nature. It details many of Buffett's past exploits in the stock market, mostly the good moves but also some bad ones, and offers some of the principles guiding Mr. Buffett's stock investing strategy, grouped into three classes called Management, Financial and Market Tenets. The first four chapters of the book delve into the early history of Berkshire Hathaway, the key influences on Mr. Buffett which helped to shape his investment philosophy, Mr. Buffett's perspective on the financial markets, and the principles by which he goes about purchasing a business. The last five chapters of the book give example after example of some of Mr. Buffett's past stock moves, and tries to show his Tenets in action.
The style of the book is mostly active until the fifth chapter, whereupon it becomes plodding. The book is extremely repetitive at points, and as other reviewers have pointed out, key concepts are not fully explained up front, suggesting that the possible target audience for this book are those having a strong background in the general principles of economics and business.
In all honesty, I have previously encountered most of the content of this book in coursework or self-study. I previously read Mr. Hagstrom's The Warren Buffett Portfolio, and found the two books to be similar in some respects. That said, I still found this book to be very interesting and useful, primarily because it exposed me to an investment approach which utilizes these concepts in ways I had not previously considered. I also found it highly interesting on an anecdotal level, given that Mr. Buffett's investment career spans The Go-Go Years, The Nifty Fifty Stocks and the 80s and 90s Tech Stock Boom, and yet he never once participated in these tech-stock manias but handily outperformed tech stock investors nonetheless.
Like I said, I am not Warren Edward Buffett and I can not expect or even hope to do what he does, but that does not mean that I can not think like him. Even Mr. Buffett cautions the small investor in this regard, as there are things that he can do that none of little guys can do. Yet, he also has said that there are things the little guy can do that he can not do. That said, the book deserves to be read by any one lacking the ability to reason through the process of investing. However, readers at all levels should not stop with this book. Others have pointed out that one could get even more information straight from the horse's mouth- the Berkshire Hathaway website.
On the other hand, as this information details past moves for which the conditions surrounding them are most unlikely to come around again, I believe that the more astute reader looking to learn more should consult The Money Game by Adam Smith for a brief historical look at financial foolishness (albeit the late sixties but the resemblance to Right Now is striking), The Theory of Investment Value by John Burr Williams for Buffett's original basis for valuation, and The Intelligent Investor by Benjamin Graham for a more detailed explanation of the concepts of margin of safety, intrinsic value, and the benefits associated with ignoring the market noise. These three books will help one learn how to reason through the investment problem, as this is the most important step, aside from finding smart people (as Mr. Smith admonishes forcefully in The Money Game and Buffett has consistently done) and thinking more but acting less (as Buffett has said- do a few things right and screw everything else).