"Buffet" of Wisdom
Lessons I learnt from his writings
“The only thing worse than being blind is having sight but no vision.” - Helen Keller
How would it feel being surrounded by ample opportunities but not seeing any? It’ll be embarrassing to admit the lack of clarity and very frustrating, to keep hunting for greener pastures somewhere further and beyond.
I am talking about myself here 🤐 and intending to come clean in this post.
I completed my MBA in Finance in 2003 and immediately cleared the first 2 levels of CFA. Since 2003, I have worked with SCB, Citibank, BNP Paribas, ADCB, and even as an Independent Financial Advisor with Clariden Leu (acquired by Credit Suisse in 2012). My Banking career was centered around advising clients on Portfolios, Asset Allocation, Buy/Sell decisions, Diversification, and more.
Inspite of being in the center of a business model which has a reputation of creating enormous wealth for the participants, I missed out on the bull run from 2003 - 2007 and the mega bull run from 2009 till 2018. Don’t get me wrong in case I gave an impression that I wasn’t investing at all. I was, just in the wrong assets, at the wrong time, and in a horribly wrong manner.
That’s what happens when ‘overconfidence’ and ‘confirmation’ biases take over. I invested in Dubai Real Estate with leverage in 2007, only to get hurt to the point of total loss one year later. The property had no value for many years but the leverage had to be paid and did cost me a lot. I invested in stocks in 2009 only to encash all of it in 2012 for my wedding. I invested in Bitcoin at USD 11,000 + in 2017 and sold it all when it crashed to USD 3,500 in 2018. This also was levered, which means I lost almost 90% of the investment there. I even invested a decent sum (actually a lot for me in 2012) in a Private Equity Investment and I haven’t seen any returns on it to date.
When I look back at the way I handled money and my career up to 2018, it was akin to being a child in a room full of toys but still crying for the new shiny cycle advertised on TV. I recently was discussing my income in 2009 and 2010 with a colleague and he was surprised about it, shocked rather. But to me, it felt less because I knew many others were making more than me, and I wanted to be one of them. Hence I tried many paths to attain more and more, only to learn what flirting with risks feels like, especially when the downside is a complete ruin.
It sounds like a comedy of errors when I write it all. I have so many stories to share that I can’t stop considering giving stand-up gig a shot. My wife also feels that I have a treasure chest of experiences to share from 😃 Maybe someday I will. 15 years of faux pas with Money, post my M.B.A. in Finance and 2 levels of CFA does make for some epic content.
2019, everything will come together in a manner that surprises me to date.
I cannot recollect the name of the Podcast but I vividly remember being advised by the host/interviewee to read all annual letters from Warren Buffet if one was serious about creating wealth from the stock markets. Most would balk at the idea of reading 50+ years of annual letters since 1965 i.e. since Warren Buffet took over the management and control of Berkshire Hathaway. But I loved reading and hence didn’t mind giving these letters a shot. I had read so many books by then, and reading one more (with all annual letters in there) seemed just the right thing to do.
I dived into these letters only as an experiment. But with every letter, my understanding of often spoken concepts became much better. I started realizing the flaws in my thought process that led to consistent losses on my investments. I could sense the frameworks and guard rails I needed to put in place to make better choices, inspite of operating in an environment where all information still was unknown or unknowable. It was like the 26 English alphabets coming together in the mind of a kid who is just beginning to read sentences. Or like the first time you got the balance right while riding a cycle, without anyone holding onto it.
It was the beginning of a new journey for me, inspite of the resources or the industry being the same. I had got my bearings right and it was time to execute the lessons learned. And last 3 years, I exactly did that, wisely and profitably. Today, My finances are in the best shape ever, my career is headed in the right direction, my relationships are richer than before, and personally, I am emotionally and mentally sharper and happier.
I cannot exactly describe how these letters could change the very fabric of my mental construct around Money. All I can urge you to do is to choose your heroes well and dive deep into their writings or interviews with an intensity that leaves no room for not being influenced for the better by their ingenuity and moral standards.
I have read many books on Warren Buffet in the last 3 years, watched umpteen interviews and documentaries, live-streamed the annual shareholder’s meeting on Yahoo Live, and have learned a lot from this remarkable investor. But his biggest influence upon me hasn’t been about Investing, as much as it’s been about the ‘Quality of Life’ one could lead.
And hence, I will spare you the lessons learned about Stock Picking, Valuations, Portfolio Management, Asset Allocation, Risk Management, Recruitment, Corporate Governance, Taxation, Inflation, and other hard-core subjects. I will rather focus on the wisdom I have gained around improving the quality of my life immensely.
Lesson # 1
(Our prototype for occupational fervor is the Catholic tailor who used his small savings of many years to finance a pilgrimage to the Vatican. When he returned, his parish held a special meeting to get his first-hand account of the Pope. “Tell us,” said the eager faithful, “just what sort of fellow is he?” Our hero wasted no words: “He's a forty-four medium.”)
It’s easy to work enough that justifies the pay or just enough that it gets noticed and rewarded. This is automatic as our survival instincts take over and make us do just enough. But work ethic is going beyond what’s expected, delivering more than average, going all out to add value, putting in the time to get better at the game even if other’s ain’t doing so, and uplifting the standards of the game even if no one cares. And doing so, even if it wasn’t recognized, rewarded, or appreciated.
One of the most important lessons I learned from his experiences is to always operate from higher standards, irrespective of the pain or discomfort it causes, and it will. This attitude need not be limited to work, it can be demonstrated in my fitness regime, my relationships, side hustles, hobbies, and passion projects.
The surprising element of operating with higher standards is that it does get noticed eventually. It may take time but the people of similar standards will be able to spot you, from your works or demeanor. And it might happen at the most unexpected place or time, but it will. Hence it serves to uphold values of ‘Quality’ all the time.
My newsletter is a passion project and it takes more than 10 hours of commitment per week. It almost takes away my entire Saturday (weekend) so that I can ship out the post by 4 pm Dubai time. There is no financial need for me to write or even invest any time or energy in this project. There is no psychological or emotional need for validation or recognition either. But it helps me go deeper into topics I write about, and that makes me a better Investor compared to yesterday.
And since I have taken on the task of learning and sharing my lessons with people who care to read what I write, I will do my best to provide value instead of being another average joe on substack.
Lesson # 2
The first thing to realize is that it takes a long time. I started when I was eleven. Accumulating money is a little like having a snowball going downhill; it’s important to have a very long hill. I’ve had a fifty-six-year hill. It’s important to work in sticky snow and you need a little snowball to start with, which I got from delivering the Post actually. It’s better if you’re not in too much of a hurry and keep doing sound things
I come from a middle-class family in Mumbai and have seen a lot of money-related issues inflict pain onto my family. I assume that it’s this past that has made me chase quick profits instead of being patient and thinking long term. I was always insecure about money and feared losing it all due to job loss or redundancy or emergencies. That also had a role in me valuing what I didn’t have and risking everything I had in hand.
I started thinking long-term only in 2019. My own decisions taught me this lesson but somehow it was still vague. Buffet’s examples and experiences just cemented the idea in mind with much more clarity and intensity. The fact that he has been investing for more than 3 quarters of a century is a remarkable testimony to the power of compounding. It’s slow but sure. It’s volatile but not risking ruin. It’s boring but works. It’s not the only way, but one possible way for someone who values peace of mind.
I started investing as a speculator, though deluding myself to be an investor all this while. But after 15 + years of speculating, I have finally figured out a path that suits my personality and psyche. It took time to understand myself and it helps to have someone teach effectively through his writings and videos.
Lesson # 3
Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
I am an individual and vulnerable to be influenced, depending on the people I am surrounded by. It is impossible to escape the grasp of a strong personality’s energy and before you realize it, someone else has shaped your mindset, habits, and value system. Many a time I would give into late nights, socializing, drinks, sheesha, partying, and being around people I thought was important for my career growth and success. But I was not happy doing so and was even blind to my unhappiness around people. Everyone was doing it and so was I.
Coincidentally, I was prepping for CFA Level 3 in 2019 and COVID lockdowns followed in 2020. Both these events forced me to change my lifestyle by cutting down most of the socializing, sleeping max by 9 pm, waking up around 4 am, spending time studying or reading or personal development, and spending time only on the most important relationships to me.
Following these lifestyle changes for 2 years has transformed my emotional and mental well-being. I feel at ease, well-rested, sharp, productive, and happy. Even after lockdowns were removed and my +ve CFA results, I continued with my routine and it has served me very well. I had a lot of time at hand now and invested it all in building my newsletter, starting a podcast with my friend Jai, learning to write professionally from On Deck, learning ‘The Art of Stock Picking’ from SOIC, Stephen Clapham, and Gautam Baid.
Today, I protect my energy as the most sacred treasure of mine. I don’t entertain any relationship, activity, or event that I don’t feel excited or stimulated about. If Warren Buffet can live miles away from New York to cut the unnecessary noise and humdrum of a busy life, I could do the same in my own way. He spends 10+ hours reading, playing Bridge in the evening, and spending time on relationships he cherishes the most. I am aspiring to do the same in time to come, just replace Bridge with Snooker 😉
Lesson # 4
We can afford to lose money—even a lot of money. But we can't afford to lose reputation—even a shred of reputation.”
Warren Buffet was at his critical best during the Salomon Brothers debacle where few bankers almost brought the firm on its knees in 1991-92. If not for Warren Buffet’s reputation, SEC would have banned the firm from bidding for Treasury Securities, signing a death warrant for Salomon. The firm eventually got out of the mess and was sold to Travelers Group for USD 9 billion in 1997.
This example and many others in his life are a testimony to the perks of building one’s reputation and guarding it for as long as one possibly can. It takes years to build it and eventually becomes a magnet attracting opportunities, deals, relationships, and economic benefits. It happens as people can count on you to deliver upon your word and the intent. It’s a privilege in a world blinded by short-term incentives where morals and integrity have taken a back seat.
My habit of eating healthy and working out 6 days a week has created a reputation of its own. You might think that this habit has no tangible benefit but let me clear your misconception. Just the very fact that I am disciplined enough to take time out for my health makes me credible in people’s eyes. It could be because of my priorities being clear or will power being higher or some other reason. These are perceptions people have, none created by me.
But it’s the perception (a.k.a. reputation) that precedes your spoken word or activity. People listen to me when I share an idea or an opinion instead of dismissing me as a nobody. And that itself is a job half done, the rest depending on the merit of the idea or opinion. For many, the battle is lost in gaining enough attention due to a lack of reputation. I ain’t referring to the presence of a bad reputation, just lack of a good one.
Lesson # 5
Having a large amount of leverage is like driving a car with a dagger on the steering wheel pointed at your heart. If you do that, you will be a better driver. There will be fewer accidents but when they happen, they will be fatal .
A few years back, I would envy others when they would purchase a nice home or buy a powerful german machine or travel internationally. Other’s Instagram profiles did bother me and make me want more of what others had. It didn’t matter if it was part of my game plan or if it was even important. It just was unnecessary desires piling up in my head and making me restless. As I said, I am coming clean here and hence don’t mind sharing my mental construct just some time back.
In the last couple of years, I have started living with an inner scorecard instead of the one that considers you successful only if you are relatively richer than others. Warren Buffet espouses the benefits that come from an inner scorecard and I have heard about it so many times, that it has got etched in my tool kit.
Now I only indulge in activities and relationships that are a part of my game plan. I am playing my own game and am absolutely comfortable with misconceptions some may have about me or my choices. Some want me to own my own property, some suggest on having kids, some hint at migrating to Australia/Canada and some suggest on switching careers/jobs. I listen to them all and I know they care, but I will move on my own rhythm, in the direction of my goals, in the game I am playing. Not the one others are playing.
And the biggest advantage of an inner scorecard is that you don’t need leverage to get rich quickly or use credit card debt for a fancy lifestyle today. Every dollar invested today contributes to a comfortable life tomorrow, and that works for me. I can wait. Till then, I invest time on getting better at the game and spotting opportunities to profit handsomely.
Lesson # 6
If you are in the luckiest 1 percent of humanity, you owe it to the rest of humanity to think about the other 99 percent. —Warren Buffett
For the first time in 2019, I started saving 10% of all my income for charitable purposes. Every time my salary, commission, or bonuses would hit my account, 10% of it was sent to MAD (Making a Difference) A/c first. Only then would I use it for any other purpose.
In the last 3 years, I have contributed to many causes -
My barber’s marriage in Pakistan
A friends hospitalization expenses in Kerala
Mohnish Pabrai’s Dakshana Foundation
Khan Academy in US
Feeding the Poor
COVID Relief across many organizations
Kerala Flood Relief Programmes
There was a need for charitable contributions even earlier but I was focused on me and my family alone. Not anymore. I do realize that I got extremely lucky with the breaks I got in Career, Business, Marriage, and Friendships. Everyone may not be that lucky and the least I can do is contribute my time and money in adding value to others.
The projects mentioned above were related to my monetary contributions. But my newsletter, podcast, and teaching assignments (in the future) will be my non-monetary contributions to influencing people in living better lives and making wiser choices. Everyone may not like reading for umpteen hours or get a great mentor, but I could read and translate those lessons in a palatable format in a classroom or a youtube video, or a webinar.
I am committed to the effort. I’m leaving the results to the all supreme.
It was Warren Buffet’s birthday on 30th August and this post was my token of appreciation for his contribution to my life. He may not have guided me personally or created a course for me to benefit from, but he has the gift to inspire anyone with just his words. It’s his integrity, authenticity, and clarity of purpose that makes the message impregnate a seeking mind, just like a seed would in fertile soil.
I had 15 more lessons to share in detail but I will leave that for his next birthday. Till then, Happy Birthday Warren 🎉, and I wish you many more decades of compounding and abundance ahead. Thank You a million times for expressing yourself in all forums possible and ensuring that the message reaches out far and wide. From me and millions of other Investment Professionals, Thank You again 🤗
Recommendations for the Week #
ARM Story in China - This is a potboiler of sorts and will keep you at the edge of your seat. Must Read in case you are keen to understand how Franchisees/Subsidiaries can go rogue.
RV Capital released their H1 Letter for the Investors and it was an insightful read on what’s exactly going on in China and Why.
Aswath Damodaran is an NYU Professor and is considered one of the best in Accounting & Finance. He recently bought Tencent and has released an objective Youtube video on the same. He does a fantastic job of teaching how an analyst should think of an opportunity before making investments.
We released Episode 9 of our Better Bets Podcast and we cover inflation in its various forms.