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Collection: Warren Buffett - #245 'Does Experience Matter For Investors?'


Video Link: https://youtu.be/hOX2Dzt21Zg


In this episode, Warren Buffett was asked which person will perform better; a person with 2 years of experience with the right mind about investing versus a person with 10 years of investing experience?


In this episode, you’ll learn:

  • Why having a right mind about investing is important?

  • How Warren Buffett improved on investing as he age?

To check out all Collection: Warren Buffett <click here>

 

[Transcript]

(Source: https://buffett.cnbc.com/2001-berkshire-hathaway-annual-meeting/)

~ Please visit the site above for full video of Berkshire Hathaway Annual Meeting.

AUDIENCE MEMBER 00:00

Good afternoon. My name is Pavel Begun. I am from Minsk, Belarus. And I have two questions.


And the second question is, how important is nominal experience in the business of investing? And by saying nominal, I mean the number of — the actual time you’ve been in the business, as opposed to real experience that also includes experience you acquire from, say, Ben Graham, or you, or Peter Lynch, when you read books?


WARREN BUFFETT 00:30

Second question — (laughs) — I gather is, sort of, how much does our actual business experience versus book experience help us?


AUDIENCE MEMBER 00:41

Well, it’s, you know, if you look at a person who has just made two years of being in the business of investing, and versus a person who has been for 10 years in the business of investing.


And say the person who has been for two years, you know, has read a lot about, you know, Ben Graham’s techniques, and your techniques, and, say, Peter Lynch’s techniques. So would you say that the person who has only two years of experience may do much better than the second person?


WARREN BUFFETT 01:08

Well, if everything else is equal, I mean, everything else is equal, except the amount of experience you have, I think the experience is probably useful. But it isn’t going to be equal. And I don’t think that — I don’t think that the —


I think it’s way more important what you’ve thought about for two years than what you’ve practiced for 10 years. So if you’re — if the direction — if there’s a divergence in techniques applied, I would rather be with the one that I’m philosophically in sync with.


If I’m philosophically in sync with both and one’s had 10 years of experience, the chances are they will know a little bit more about more businesses if they’ve been around for 10 years, looking at them, than if they’ve been around for two years.


But the biggest thing is that, you know, basically they’ve got their head screwed on right in the first place, in terms of how they value businesses and how they look at stocks.


Whether they look at them as pieces of businesses or whether they look at them as little things that move around, and that you can tell a lot by looking at charts or listening to strategists on or something of the sort.


We have — Charlie and I have learned a lot about a lot of businesses over 40 or 50 years. But I would say that, in terms of the new things that would come to us, at the end of the second year, we were probably about as good judges of them as we would be today.


But I think there’s a little plus to having seen — more in terms of human behavior and that sort of thing — than knowing about the specifics of a given business model.


Charlie?


CHARLIE MUNGER 02:56

Yeah, I think that — I’ve watched Warren for a long time now, and I would say he’s actually getting better as he gets older. Not at golf or — (Buffett laughs) — many other activities, but —


WARREN BUFFETT 03:12

Stay with generalities.


CHARLIE MUNGER 03:13

— as an investor, he’s better — (laughter) — which I think’s remarkable. It shows that scale of experience matters.


WARREN BUFFETT 03:28

Yeah, it helps somewhat to have seen a lot of business situation — I mean, Charlie talks about models and you construct your models as you go along based on observation.


And your models will — if you’re paying attention, your models will be somewhat better the more years you’ve spent really observing and not just trying to make everything fit into what you saw the first few years.


Area 3.

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