When Warren Buffett’s annual letter to shareholders goes out, my son Adam is among the first to devour every word and send me highlights. As the Blum family prepares to leave next week for our annual pilgrimage to the Berkshire-Hathaway Annual Meeting, I want to share some of “Warren’s Wisdom” with you. We all make investment mistakes along the way. In Buffett’s annual letter, he owns up to his mistakes. I learned an important lesson: Don’t be hard on yourself.
Berkshire fans glorify the investment acumen of Buffett (92) and his partner Charlie Munger (now 99!). If only we had their investment skills! But Buffett humbly shares the reality in his annual letter: “Over the years, I have made many mistakes… In 58 years of Berkshire management, most of my capital-allocation decisions have been no better than 50-50.” The key is to be resilient. Stay the course, and continue taking measured risks. Don’t retreat to a “disappointing investment” like a “high-grade 30-year bond.”
Buffett modestly confesses that in those 58 years, he’s made only “about a dozen truly good decisions—that would be about one every five years.” So, for those of you (like me) who have made some bad investments over the years, don’t beat yourself up. Buffett concludes: “The lesson for investors: The weeds wither away in significance as the flowers bloom. Over time, it takes just a few minutes to work wonders. And, yes, it helps to start early and live into your 90’s as well.”
Consistent with this lesson, I learned that investment guru Richard Rainwater (the pride of Fort Worth, may he rest in peace) had a similar track record. Rainwater’s management of the Bass family money got off to a rocky start. Sid Bass revealed: “For the first two years, every single deal I did with them, I lost every single penny.” (Skip Hollandsworth, “Richard Rainwater—The Invisible Man Behind One of the Year’s Biggest Deals,” Texas Monthly, September 1996).
Rainwater ultimately grew the Bass’s $50 million oil inheritance into a $5 billion fortune (Hui-yong Yu, “Richard Rainwater, Billionaire Texas Investor with Foresight, Dies at 71,” The Washington Post, Sept. 28, 2015.) Yu discloses that those early losses ate up $20 million of the $50 million inheritance.
At this year’s TIGER 21 annual conference, real estate mogul Sam Zell added further support to this thesis. Not every deal will be a home run, or even a triple, double, or single. “Baseball players get paid $25 million if they get a hit one out of every three at bats.” Just being right on a portion of deals will more than offset the losers.
For those like me who have missed plenty of at-bats over the years, I hope this makes you feel better. We’re in good company. And remember, as I’ve quoted my mentor Jay Hughes in past posts, financial capital is only one of five sources of wealth. Don’t minimize the importance of human, intellectual, social, and spiritual capitals. I’ll punctuate that message with the brilliance of my wife of 44 years, Laurie: “In measuring your success in life, dollars and cents isn’t the right way to keep score.” Now I really feel better!
Marvin E. Blum
Marvin Blum’s son Adam Blum, pictured here with Warren Buffett, as the Blum family prepares for its annual pilgrimage to attend the 2023 Berkshire-Hathaway Annual Meeting.