I did a video back in May 2009 called that delineated what my thoughts were about Warren Buffett. As you’ll see in the video, I have much admiration for the man, but I’ve always believed that blind love for him and Value Investing can get you killed in the markets.
Say he has a 50% drawdown in the markets and his net worth drops to $20 billion. You, with your $2 MM investment, follow his investment stewardship by owning either his A or B shares, and get nailed for a 50% hit too.
Warren Buffett: loses 50% or $20 billion – no change in quality of life. There is no difference between $40 B and $20 B.
You: lose 50% or $1MM – massive hit to quality of life. Where’s the Value in that?
Nassim Taleb has a great take on all things random. I’ve read both his books and loved them. I have a friend named Fat Tony too. Taleb contends, like I did in May, that Buffett’s returns and performance may be due more to randomness and luck than skill, and that there is not enough data to say it is pure skill alone.
Taleb believes that there is much more evidence that his hero George Soros is more likely skillful than lucky.