Watched the CNBC special Warren Buffett: The Billionaire Next Door last night. For die hard Buffett fans (i.e. those who have read the gazillion books on Warren Buffett out there), there won’t be much new in the interview. But for the newbie (or those of us with bad memories), it is a great introduction to the man (heavy on the man, lighter on the investing).
Liz Claman covers the basic rules for the world’s most famous buy and hold investor. Don’t lose money, invest within your circle of competence (why tech inept me doesn’t invest in technology stocks), buy solidly run businesses with a moat (i.e. a defendable advantage) around them.
When discussing Buffett missing the dot com boom (and bust), he quips “I can’t play the other guy’s game” and “I know what I know what to do.” In other words, find a corner of the investing universe to play in and stay there. You and I don’t have enough hours in the day to learn everything about every part of investing. Luckily, we don’t have to. Learning one small part well is good enough to build wealth.
Buffett also touches on personal finance. Stay away from credit cards (notice he doesn’t say all debt as Buffett does use leverage) and invest in yourself (learning, learning, learning).
His hands off management style appeals to the lazy woman in me (what the hubby refers to as the princess). Buffett admits to not being a manager. He doesn’t have to be. He picks businesses with great managers already in place and requires a letter detailing succession from each CEO (this letter is not read until the CEO goes to the great beyond). Buffett then sends out annual goals and if the companies make their goals, there’s no additional interaction necessary.
My favorite part of the interview is when Claman brings up the fact that every single report to shareholders Buffett writes contains references to the mistakes he made during the year (he points out that a report without admitted mistakes is merely a sales document). You see the best investor in the world still makes mistakes every single year so you and I shouldn’t beat ourselves up for doing the same.
This one hour program will be repeated (it is CNBC after all) and is well worth a watch (there’s even a cameo by the Gates).