Am in two states of emotions, I am so thrilled to start my journey of blogging and at the same time, I am really saddened with passing away of Charlie. So I decided to club these two emotions together and pay tribute to Charlie – an Investment Genie!!!
After completing his law studies at Harvard, Charlie started his professional career in a legal firm, but his art of making money dragged him to start business of managing investments for others. Rest is all history. At some stage, Charlie and Warren Buffett came together to create massive wealth, based on investment philosophies, which are so simple and yet so powerful. There could be other systematic ways to create wealth, which I will categorise as “one-in-a-million chance” or “lottery”.
It will be my humble attempt to use his select statements or quips to make your investment journey more assuring. Moreover there are few aspects of Charlie that we common people can incorporate in our daily lives, which will primarily help us evolve as a better human and consequentially help us to be a better investor. I promise to keep it simple and concise.
Open your mind and develop the habit to learn new things
Learning from any discipline will equip you to apply yourself better. You may not reap the benefit from the learning very next moment, but whenever the chance arrives, you will be better prepared. As he also said, that the opportunity will not knock often on your door, but when it does, don’t miss that opportunity.
“Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Systematically you get ahead, but not necessarily in fast spurts. Nevertheless, you build discipline by preparing for fast spurts.”
“Slug it out one inch at a time, day by day. At the end of the day – if you live long enough – most people get what they deserve.”
It’s essential that one should know owns strength’s and weaknesses. It’s equally important that you should surround yourself with wide network of informed people around yourself, to supplement your knowledge. Don’t be afraid of having people around you who would not agree with you. Be humble enough to accept that you could be wrong and unlearn. Equally he was quick to spot and get rid of people around him who advised him very confidently without having real knowledge on the subject matter.
“I think Warren and I know the edge of our competency better than other people do.”
Respect the people who are not shy to demonstrate an ability to “disagree” or say “no” gracefully when it does not sense from the position based on knowledge and humility and not on “ego”. More importantly, follow it yourself too. Although Warren was Charlie’s employer and boss, but Charlie was forthright in presenting his views and had strength to disagree with Warren in public.
Earn, save and invest – set this into a loop for financial independence
If you need to create massive wealth legally in current world, you can do so broadly in two ways: (a) build a business based on proprietary knowledge; or (b) invest wisely. Principally, your money (and other people) should be working for you even when you are sleeping.
Whatever you earn, develop the habit of “saving” a larger part of your income and channelizing it into investments. A subset of the earlier statement is – at the least postpone your desire to own depreciating assets, if you are not able to resist the desire to own it. Even though Charlie and Warren collectively owned and managed obscene amount of wealth, their lifestyle was modest and devoid of any glitter.
Finally, respect the power of compounding. Simple and yet very powerful concept and often undermined. Simple mantra – start investing wisely, early and regularly. These were well established investing concepts, even before Charlie started their career in investments. What he extended to this insight was the concept of “Prudence”.
“It takes character to sit with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities.”
More importantly, safeguarding your hard earned investments is very essential. It’s not prudent to destroy your wealth with carelessness and undue risk or investing into businesses / products, which you don’t understand. Generating sustained earnings will become difficult day by day, therefore need of the hour is to conserve the wealth too. You need not invest in all the fancy opportunities which arises in the market.
“Warren and I don’t feel like we have any great advantage in the high-tech sector. In fact, we feel like we’re at a big disadvantage in trying to understand the nature of technical developments in software, computer chips or what have you. So we tend to avoid that stuff, based on our personal inadequacies.”
Berkshire had all the resources to tap into to ride the technology bandwagon. But they resisted the same, since they (Charlie & Warren) could not understand technology. They had great understanding of brand, product, distribution and marketing. When they saw those attributes in Apple Inc. They jumped in with all their might and made their biggest fortune.
“Every person is going to have a circle of competence. And it’s going to be very hard to advance that circle. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence.”
To summarise, if we can leverage 10% of Charlie’s insight into principles of investment, discipline and modesty, surely we will be set in right direction. By doing so if we are able to muster wealth up to 1% of his total wealth (monetarily and knowledge base) that will be an objective well achieved. That’s my assurance (not insurance).
For non-finance people (like Charlie himself) while you develop financial skill and aptitude to undertake investments, it’s also equally important to develop attitude and psychology for investments.
As a tribute to a well-lived 99-years, you can start by reading his speeches.
Sukumar Jain, a Mumbai-based finance professional with global experience, is also a passionate traveler, wildlife enthusiast, and an aficionado of Indian culture. Alongside his career, which includes diverse roles in international banking and finance, he's working on a wildlife coffee table book and enjoys sculpture and pottery. His interests span reading non-fiction to engaging in social and global networking.
