Between Rest and Overdrive: Are Great Investors Lazy?
Warren Buffett: "I have no stress whatsoever. Zero. You know, I mean, I get to do what I love to do every day. You know, and I’m surrounded by people that are terrific."
One of the arcs of Warren Buffett’s career is the shift from an aggressive search for opportunities to developing a reputation, network, and capital structure that unlocked a stream of inbound ideas. It is a key difference between the young entrepreneurial hustler and the market’s elder statesman. It illustrates that an active investor aspiring to a long career of compounding needs to think carefully about managing their energy and attention, their stress levels, and the structures that support or undermine each.
As a young investor, Buffett churned through “ten thousand pages in the Moody’s Manuals” in his search for attractive ideas among even the most obscure securities. But picking Ben Graham-style cigar butts created consistent churn in the portfolio. Buffett had to grind relentlessly to replace stocks that appreciated to fair value with new ideas. He explained to his partners that “we start from scratch each year” and that “the success of past methods and ideas does not transfer forward to future ones.”
Towards the end of his partnership days, Buffett was wrestling with both the market and his investment style. Already in 1967, he had admitted to being “out of step with present conditions”. It had become increasingly difficult for him to find compelling investments in an overheating market.
But more than that, the “all-out effort” required to construct the partnership’s deep value portfolio started to make “less sense”. Buffett craved time for other activities — or investment activities that were more enjoyable but not quite as profitable. This seemed impossible while running a fund and being “on stage” as he called it.
As long as I am publishing a regular record and assuming responsibility for management of what amounts to virtually 100% of the net worth of many partners, I will never be able to put sustained effort into any non-BPL activity.
Elementary self-analysis tells me that I will not be capable of less than all-out effort to achieve a publicly proclaimed goal to people who have entrusted their capital to me.
In 1969, he decided to liquidate the Buffett Partnership and “divorce” himself from the activity that had “consumed virtually all of [his] time and energies”.
I believe his decision was an example of both exceptional market timing and his struggle with an issue every active investor faces: what is the price for success? How can the effort be sustained over long periods of time?
“Intensity is the price of excellence,” as Buffett put it.
Decades later, a young Bill Miller asked Peter Lynch about how to succeed in the business.