From “Investing Lessons of Warren Buffett,” we investigate what the “Sage of Omaha” has to say about women.
Stockpicking isn’t a hobby.
Everyone should be an investor. But not everyone should choose their (sic) own investments. To be a successful investor requires thousands of hours of deliberate effortful study to master the necessary skills, and then thousands more (or in Buffett’s case, tens of thousands) to use those skills to find worthwhile investments. Buffett read every investing book in his local library, many of them multiple times… by the time he was eleven years old. If you aren’t willing to put in the time and effort that stockpicking requires, the person on the other side of your trades is likely to know more than you, which is a recipe for underperformance.
Now, if we used the word “Spousepicking” would we have to change a word of that? And is there any better explanation for why women were better off under an arranged marriage system, when they could take advantage of the “thousands of hours” of lifetime experience that their elders possessed?
It’s human nature to be emotional, and life is richer for it. But it reduces investment returns. Many people make systematic errors in their investment thinking, due to their emotions, egos and innate cognitive biases. They suffer from confirmation bias, tending to seek out and find evidence to support their position rather than evidence that might refute it. They think about risk more when things are already going badly and less when prices are already up. They resist admitting mistakes and hold their losers too long. They think about how they’ll spend the money they’re expecting to make from investing, and this can cloud their judgment and encourage excessive risk-taking. They’re overly optimistic and overly confident about their investment abilities, which is dangerous.
Perhaps we can substitute the word “court” where we see “invest,” and “courting” for investment. Excellent advice.
Invest in what you understand.
Buffett stresses the importance of having a circle of competence, a clearly defined industry, business model, asset class, investment style, or other area that you are an expert at, and investing only within that circle. You should continue to learn and thereby expand your circle of competence, but until you do, you shouldn’t invest where you aren’t yet skilled. Buffett has said that an investor needs to do very few things right as long as he or she avoids big mistakes, and staying within your circle of competence is one of them.
Ah, the masculine focus on self-improvement. “Don’t wish the game were easier; wish you were better.”
This is closely related to Buffett’s suggestion of investing only in what you understand. He has three mailboxes on his desk, labelled “In”, “Out”, and “Too Hard”. Every business has factors which are knowable, unknowable, important, and unimportant; he recommends investing in businesses for which the important factors are knowable. He wants understandable businesses because he intends to hold long-term and wants to be able to predict roughly what the business will look like in five or ten years. He puts most technology companies in the too-hard pile. Tech changes so fast that there are only a handful of people in the world with the expertise to tell which will be spectacular successes and which will be spectacular failures. If you aren’t in that elite group, it’s best to look elsewhere. Buffett has said that investing isn’t like Olympic diving, where you get more points for a difficult dive than a simple one. Or to use another sports analogy, he doesn’t try to jump over seven-foot bars, he looks around for one-foot bars he can step over.
Now this is marriage advice for every man! In the marriage market, women are either a buy, or a sell, or “too hard.” Dalrock has an early post on determining who is a buy. For “sell,” well, there are any number of indicators. We do not encourage divorce here, and we don’t mean for people to “sell” a “stock” they’ve already bought; Buffett’s ideal holding period for a buy is “forever.”
But it’s Buffett’s concept of “too hard” that really informs the problem for women who want to get married. As women pass the age of prime desireability as sexual and marriage partners, they accumulate increasing expectations that conflict with their declining sexual and marriage market value. Their SMV might in fact rise, leading them to undertake more “dates,” but this rise causes a plummet in MMV. They acquire what Roissy first called the “463 Bullet Point Checklist” for a mate; they ignore most men. As Jim once wrote: “My observation is once women stay on the carous(e)l past a certain age, they can’t get off until they are kicked off;” they become Alpha Widows, meaning they will pine forever for the highest-status man who had them.
Now, this does not mean that they cannot be made into decent wives by a man with the social dominance to be even more “alpha” than the man whose alpha widow they are. But here’s the problem: the man with the ability to do that also has the ability to pursue and capture the best of the women that Buffett might term a “buy.” Despite attractiveness, the woman has now become “too hard.” Like Trinity, she can expect a delivery soon, but it won’t be her husband’s child,and her future is grim.
The market is there to serve you, not to inform you.
Ben Graham had a thought experiment that Buffett frequently used. Imagine the stock market as a single person, Mr. Market, who’s willing and able to buy any stock from you or sell any stock to you. Mr. Market is often rational and the prices he sets are often reasonable, but occasionally he gets emotional or irrational and the prices swing wildly in one direction or the other. When he’s rational and offers no great deals, you are free to ignore him.
Now, if we only imagine the metaphor as “Mrs. Market” and “she,” we can take a lot away from this.
In the end, building long-term value can follow some simple, basic rules. Read the rest of Buffett’s ideas, and see what else is an obvious application.