I often refer to my admiration for Warren Buffett and the way he invests. I have always enjoyed studying, reading and listening to his and his Berkshire partner Charlie Munger’s views and practices on investing. This year, I had the opportunity to go with a couple friends to the annual meeting in Omaha. I went not just for the experience but also to be reminded in person of the timeless advice they both offer. My goal was to recap a couple key points to be more cognizant in the way I invest and also help my clients.
Buffet explained that we live in a disruptive world where we become more and more productive, displacing industries and reallocating resources more efficiently. He used a farm analogy in this lesson and spoke about the very high percentage of working farmers in the 1800s. Back then, if someone said in 100 years farming would become much more efficient, disrupting the number of jobs in this industry significantly, our society probably would have been nervous. Very few would have thought this disruption would lead to the extraordinary standard of living our society enjoys today.
These resources were reallocated to other means, which helped grow and shape the productivity of our country. Buffett’s point was this will continue to happen. It should be welcomed, not resisted. Investing, our society and businesses all evolve through this disruption. We should be aware of this, accepting of it, allowing us to be better positioned for the future.
The next takeaway from the meeting focused on managing expectations. As advisors, our role is to help manage human behavior. Buffett and Munger have always done a great job exploring this in their annual letters. Through reading and studying them, I have always respected how honest they are with their assessments of their company and future performance.
Each year, they downplay future expectations compared to the past and get their shareholders more focused on how wonderful the business of Berkshire is today. They do this for many reasons, and honesty and integrity are at the center of it. They also present their thoughts in a way that secures partners, as they call their shareholders, with whom they want to associate. As this relates to an advisor-client connection, it boils down to the same principles. Managing expectations on the front end of a relationship and continuing to do so along the way with honesty and integrity will help to find the clients that are in sync with the advisor.
When I played golf, I believed there were certain fundamentals that were universal. These fundamentals took shape differently in each player’s golf swing. I had one of the top golf instructors that instilled these basics in me for many years, which he called “The Good Stuff.” I believe what Buffett and Munger teach to be the equivalent of that in investing. I am thankful for their wisdom, and also thankful to those who have helped in my learning of investing’s good stuff.
~ Lee Williams offers products and services through Nowlin and Associates. He also offers securities and investment advisory services through Ameritas Investment Corp. (Member FINRA/SIPC), which is not affiliated with Nowlin and Associates. Contact him at 334-703-3454.