How to get rich like Warren Buffett

How to get rich like Warren Buffett

Photo: Reuters

Simple. He’s got it all figured out. You got to do nothing. Use him where you think appropriate. Sound wise. And hope somebody bites.

Charles Assisi

First Published: Sat, Mar 25 2017. 11 30 PM IST

Now that the stock markets are at a peak and everybody else seem to be richer, may I propose something for those of us who missed the boom? Happens to us folks all the time—or at least to me. If only I had listened in to the wisdom of people like the legendary Warren Buffett and Charlie Munger, perhaps the smartest investors on Earth, founders of Berkshire Hathaway. And I wonder, what if I could learn to invest like them?
But here’s a thought: Instead of learning to invest like them—which most of us never will in our lifetimes—why not sucker those who believe they still can if they get the right advice?
Some poking around later, I figured I’m not the only one thinking along these lines. There is a thriving industry that comprises “contrarian investors” who apparently “live” and “breathe” Buffett and Munger. They offer assurances all you need to offer them is patience and time. If you like what you hear they say and are convinced, part with your money.
The modus operandi is both simple and ingenious.
Step 1: Offer an invaluable report free
Like a lot many people, I started to watch the markets begin to go up a few months ago. Everybody seemed to earning money hand over fist. Except me. And there were advisers of all kinds telling me I still have time on hand if I listen to them. And that they have it all figured out. All I must do is take some time out to patiently go over a horribly expensive report, for free, just that I may see how good they are at what they do.
To cite but one instance, a sample report came my way after I parted with my email address. It suggested I buy stock in an entity called VST Tillers. Until now, my only exposure to stock markets is what exists in a in dud public sector bank that has gone no place since the time it was listed. I have it is because when it went public, staffers were mandated by their seniors to call up customers to plead they subscribe. I was one among their clients.
Anyway, to get back to the point, in this report, VST Tillers sounded good for all the right reasons. By way of evidence, a year ago, when it was first recommended the stock was trading at Rs1,300. It now trades above Rs1,800. Those who heeded their advice then, earned a lot of money. I almost bit the bait.
A moment of sanity prevailed though and I thought I might as well look around some more before placing my money on the table. Turns out, everybody had a “Buy” recommendation on the stock. And everybody described themselves as “contrarian investors”. Not just that, all of them argued they put a “Buy” recommendation on it over a year ago.
This raised two questions in my mind. What was the stock price five years ago? Turns out it was Rs450. Oh!
So, why didn’t anyone suggest I buy it then? And if all of them suggest I buy it now, what makes all of them “contrarian investors”? I always thought “contrarians” are the ones who bet against conventional thinking.
Like I said, I’d almost bitten the bait and these questions emerged in a moment of sanity. I’m reasonably sure a lot many people would have been suckered. And it’s easy to do that if that one moment of epiphany escapes you. There’s a template to it that follows from Step 1 after the free report is sent out.
Step 2: Create a story
This is easier still and a clichéd one. Every report these blokes send out carries a long note from the promoter of the firm about having come up the hard way and why his firm believes in what it does. “I came up the hard way... blah blah blah blah...”
Essentially, some cock and bull story around one of two themes—of how poor they were as kids and came up the hard way; or they were to the manor born, but spurned it, made a heck of a lot of mistakes, and have come up the hard way. In either which case, their real motive is not money, but to get wiser.
Step 3: Be online all the time
Every idiot know the best investors in the world are Buffett and Munger. Keep screaming how you’re seeped in their school of thought from every platform that matters. Twitter, Facebook, blog posts, Quora, email digests, etc. Not tough. Here’s how.
1. Stay at it and describe yourself as a “contrarian”, a “value investor”, and believe only in Charlie Munger and Warren Buffett.
2. Ensure your feeds are regularly updated with posts and excerpts from Poor Charlie’s Almanack by Munger, The Snowball, a biography of Warren Buffett, and Intelligent Investor by Benjamin Graham, Buffett’s investment guru.
Commit these books to rote. Quote liberally. The so-called wisdom in these books are, to put it bluntly, common sense nobody can argue against. For instance;
• Read everything you can—the earlier the better.
• Credit cards aren’t your friend.
• Invest in yourself.
• Most people would be better off not trading stocks.
• Know what you don’t know.
• Don’t follow the pack.
Then there are “Munger-isms” that ought to be strategically deployed as well.
• Virtually every investment expert’s public assessment is that he is above average, no matter what is the evidence to the contrary.
• Investing is where you find a few great companies and then sit on your ass.
• People calculate too much and think too little.
• There are always people who will be better at some things than you are. You have to learn to be a follower before you become a leader.
• A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.
Add to this reading repertoire the annual report of Berkshire Hathaway. It contains a letter to shareholders, a much-awaited publicly available document. Read it to sound contemporary and relevant. They’ve done the hard work. Why do the grunt? Repeat what they say to sound like them and attribute it to them.
Then it’s a matter of extrapolating all of what they’ve said to what is the flavour of the season. For instance, right now, everybody seems to be working at the intersection of neurosciences, biotech and social media. Because Berkshire Hathaway researches so many themes, Buffett and Munger have an opinion on pretty much all these themes.
Take neurosciences. Use Buffett tactically. Deploy a quote like “Be fearful when others are greedy and be greedy when others are fearful.” Sounds nice. And it came on the back of a study by researchers in the neurosciences at Caltech around the relationship between irrational exuberance and market crashes basis Buffett’s advice. Much the same thing can be said about artificial intelligence. “It will be the computer that makes the decision in a nanosecond.”
Step 5: Scream the mainstream is worthless
The significance of this cannot be understated. Continually articulate you do not read mainstream business newspapers or listen to stock market reports on television. Why? Because there is too much noise and everybody says and reports on the same companies.
So, as an investor, if you were to go by the news and follow stock indices, you’d be following the pack. But contrarians “don’t follow the pack”. You go “value-hunting” instead. Because you trained to be entrepreneurial from your early years, you know how to hunt for “multi-baggers” others haven’t spotted yet.
Once this template is in place, all you’ve got to do is look at what the other firms are doing. Who are the others placing their bets on? So, if it’s VST Tillers everyone is betting on, bet on them. And spin a yarn basis the template. Or if you want to, even create your own story.
Assume now for a moment that Mint on Sunday is a listed entity and we create a fancy sounding newsletter with an equally fancy title like say, “Socratic Investing”.
Step A: Recommend a “Buy Mint on Sunday”
Send out a mass mailer and write on your blog why Mint on Sunday is a stock you must buy now and right now. This note must sound self-deprecatory. “I have made mistakes in the past and lost money as well.” That’s how Buffett sounds. But deploy him to back you up in this long note of yours with just the right quotes at the right times. “I buy expensive suits. But it looks cheap on me.” The point being, that you put your money where you out is and that you’re not just recommending it, you’re buying it as well. What you’re sharing is precious wisdom.
Step B: Insert more Warren Buffett quotes
As articulated above, Berkshire Hathway is so big and it has investments across so many sectors it is practically impossible to find a place where they don’t have any—including a Sunday newspaper. I came across one from a Berkshire Hathaway letter written by Warren Buffet in 2012.
“Charlie and I believe that papers delivering comprehensive and reliable information to tightly bound communities and having a sensible Internet strategy will remain viable for a long time... Our goal is to keep our papers loaded with content of interest to our readers and to be paid appropriately by those who find us useful, whether the product they view is in their hands or on the Internet.”
“...Charlie and I acquired the News in April 1977. It was an evening paper, dominant on weekdays but lacking a Sunday edition. Throughout the country, the circulation trend was toward morning papers. Moreover, Sunday was becoming ever more critical to the profitability of metropolitan dailies. Without a Sunday paper, the News was destined to lose out to its morning competitor, which had a fat and entrenched Sunday product.”
“...So when I was in big trouble at the News, I asked Stan to leave his comfortable way of life in Omaha to take over in Buffalo. He never hesitated. Along with Murray Light, our editor, Stan persevered through four years of very dark days until the News won the competitive struggle in 1982. Ever since, despite a difficult Buffalo economy, the performance of the News has been exceptional.”
Step C: Generate gibberish
This done, it’s time to confuse the hell out a potential victim. Reports like these can be tailor-made at many fun places and configured to meet any requirement. I can go on and on. Here’s a short sample of what is possible:
Mint on Sunday has revamped the theory of e-business, wireless, client-focused experiences. It may seem terrific, but it’s true! The power to actualize efficiently leads to the capacity to upgrade dynamically. Think enterprise. Think 60/24/7/365. Think plug-and-play. But don’t think all at the same time. We apply the proverb “He who hesitates is lost” not only to our re-sizing, but our power to enhance. We think that most short-term splash pages use far too much FOAF, and not enough Rails. Your budget for leveraging should be at least one-tenth of your budget for innovating. We will revalue our capability to implement without devaluing our capacity to productize. Without plug-and-play content, you will lack development. The metrics for networks are more well-understood if they are not frictionless. The convergence factor is extensible, e-business. The viral C2C2C, transparent, killer models factor is reality-based. Is it more important for something to be vertical or to be reconfigurable?
Step D: Bring Buffett on
Time now to step on the pedal and deploy Buffett again. The man has worked all his life. Use him, damn it. “Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’”
Sign out with: “What you just read is a is a complimentary, condensed version of a report made available as an exclusive preview. The unabridged version of this report is available at an introductory price of Rs50,000 until 1 April 2017. Post that, it will revert to its original price of Rs1,50,000. For the detailed version and to build a personalized portfolio, send me a DM on my Twitter handle with Coupon Code IAMASUCKER.”
Move now to replicate story method for another entity. Then wait.
Charles Assisi is co-founder of Founding Fuel Publishing.
His Twitter handle is @c_assisi
Comments are welcome at feedback@livemint.com