Day4: Warren Buffett

The reason: He runs through American Capitalism from the beginning to the future.

I don’t think I need to write much here about his biography. He is the most successful investor of 20^th century. He is the CEO of Berkshire Hathaway and he was ranked as 2^nd wealthiest person. He went to Colombia Business School and was educated by Benjamin Graham (the author of “the intelligent investor”). I learned from him about how I should earn money and how I should use it. There is good book from Alice Schroeder “The Snow Ball”. You might read this.

• The life is like snow ball

Life is like a snowball. The important thing is finding wet snow and a really long hill.

What I learned most is this concept of snow ball. I believe, as long as we are using the stable system of capitalism, our effort, education, money, trust, credit, and so on are accumulating. We need to do right things and keep doing them and gave them to our next generation. The snow ball will keep growing. Firstly, it looks grow slow but then we can’t stop keep growing and will grow faster and faster later on. We have to start rolling the hill as earliest as possible otherwise we can’t get grow large. He says,

I packed my little snowball very early, and if I had packed it then ten years later, I would have been way different than where it stand on the hill right now, So I recommend to students that if you start out a little ahead of the game —- it doesn’t have to a lot, but it’s so much better than starting out behind the game. And credit card really gets you behind the game.

• The rule of money.

The rule no.1: don’t lose money, the rule no.2: don’t forget the rule no.1, the rule no.3:don’t go into debt.

That’s it? But it is very thoughtful. We should use our money very wisely, should not waste money, and should not buy what we could not afford. And we can never emphasize too much not to forget this rule to be rich.

• The style of investment

Graham: Devotion to diversification vs Warren: Belief in concentration

I cannot write much here about his investment style though, two of most important investors have different style, Graham believed the diversification and Warren believed the concentration. I believe you should be very careful if you are going to be like Warren, because Burton G. Malkiel “the random walk down wall street” already showed only chosen few can keep wining without diversification the risk on the market.

Warren also said,

Be greedy when others are fearful, and fearful when others are greedy, but don’t think you can outsmart the market.

This is intuitive conclusion from the best investor and also this has been proven by science.

• Are you right?

You can’t do well in investing unless you think independently. And the truth is, you are neither right nor wrong because people agree with you. You’re right because your fact and reasoning are right.

This is the truth I have to face with as a scientist, also as an investor. We become very lazy by borrowing someone’s idea because we don’t have much time and it looks easy. But the truth is, if we don’t devote to get the truth by ourselves, we can’t know what is true or false.

• We should treat our body and mind well

You only get one mind and one body. And it’s got to last a lifetime. Now it’s very easy to let them ride for many years. But if you don’t take care of that mind and that body, they’ll be a wreck forty years, just like the car would be.

But, I heard that he drinks coke 2 litter every day. Could you please explain to me? But, anyways this quote is very thoughtful.

• The future of capitalism

I don’t know how much Warren Buffett earned money and will earn though, but he decided to donate 99 percent of his wealth said “It could not be better”. By seeing this, I could see the future of capitalism. The capitalism is one of systems, it is different from communism. In the 20^th century, (I have not have conclusion yet because Chinese is coming) it looks the capitalism had worked better. But, the capitalism could not the accumulation and inequality of wealth. How can we fix this? Maybe we could have some sort of hints from what he will do by using his wealth.  I believe that being rich is neither good nor bad. The point should be focused on how the one uses the richness.