Why Don't More Buffett Devotees Actually Copy Him?

Sometimes I wonder if Warren Buffett has any idea of just how many man hours are spent analyzing and reanalyzing every word he’s ever uttered.

He’s aware people idolize him, of course. How can he not be? Some 40,000 devotees show up in Omaha each year to stare and him and Munger, mouths agape, as the two nonagenarians prattle on about the same stuff they’ve been saying for decades now.

Every serious investor ends up going to Berkshire annual meeting at least once. I went in 2015 and I had a great time — including accidentally getting drunk at the Borsheim’s party. I then proceeded to absolutely CRUSH a bag of jalapeno cheddar Cheetos in bed and fell asleep covered in nacho cheese dust.

Overall not my best night. Please don’t judge me.

To be completely honest, the meeting itself was the worst part of the whole Berkshire experience. Buffett talked for hours and didn’t say much of anything. Thank God for Charlie Munger who saved the day by calling Valeant “a toilet.” There’s a reason why the stadium really starts to thin out in the afternoon.

Now I’m not saying a beginner investor shouldn’t study Buffett and Munger. Of course they should. But for experienced investors, I’d argue taking the time to go through old quotes from Berkshire meetings in like 1994 or something is a giant waste. You’d be far better off reading an annual report or six. The challenge isn’t understanding the concepts of quality or moats. The challenge is actually identifying which stocks meet that criteria.

But never mind all that. My question is simple - why do Buffett devotees ignore the first 10-15 years of their Oracle’s career, the time when he arguably posted his best results?

Buffett of the 1960s

The most interesting parts of The Snowball (to me, at least) were the Buffett Partnership days.

I loved those stories about Sanborn Maps, Dempster Mills, Genesee Valley Gas, and Union Railway Company, among others. Hell, even Berkshire Hathaway was originally a special situations investment — Buffett bought around $7.50 to take advantage of the consistent $11.50 tender offers.

If Seabury Stanton hadn’t screwed a young Warren — he originally offered $11.50 for Buffett’s shares and then reneged and instead insisted on $11.375 — Buffett’s legacy would be linked to a different vehicle.

The results during that period speak for themselves. Buffett ran his partnerships for 11 years from 1957 to 1968. He gained 31.6% per year. The Dow Jones Industrial Average increased by 9.1% per year.

To further put those results into perspective, a $10,000 original investment with Buffett was worth a little over $205,000 in just 11 years. The same amount invested in the Dow would be worth a hair over $26,000.

We all know why Buffett abandoned the partnerships. He used them to get rich; by 1968 he was a millionaire. It was stressful managing money for his family and friends. And he was a victim of his own success. By the time he wrapped up the partnerships Buffett had something in the neighborhood of $50M under management, an amount that was approaching big money.

Besides, Buffett had been influenced by Charlie Munger at that point, who rightly pointed out the current method would never scale as assets under management got bigger. He was eager to take the next step, even though Buffett wouldn’t really grasp the concept until the late 1970s.

Buffett Followers of the 2020s

Despite Buffett having his greatest success early in his career, most of his followers choose to mimic his current strategy. They put their capital into what they view as wonderful companies trading at fair prices.

Some don’t even get that far. They either clone Buffett and put large amounts into his largest holdings or they get even lazier and simply buy Berkshire shares.

Buffett, meanwhile, pines for the good ol’ days. In 1999 he was asked about a claim he made that he’d be able to earn 50% per year on a million dollar portfolio. His response:

Perhaps mere mortals like you and I can never dream of 50% per year. Hell, I’m not even sure I could compound $1,000 per year at 50% annually, never mind $1 million. But most of Buffett’s followers don’t have portfolios of $1M+. Most are in the five or six-figure range. Shouldn’t they be comparatively easier to earn excess returns with? You only need a handful of ideas if you’re investing $100k.

There are a number of reasons why people don’t invest like a young Buffett, of course. It’s a lot easier to scroll Twitter for ideas than to start at A in the Moody’s Manual. Hell, the Moody’s Manual might not even exist anymore. Most of these guys have day jobs. They don’t have time to analyze thousands of different stocks. And naysayers are quick to point out the arbitrage situations of the 1960s have gone away as more people pay attention to illiquid small caps and as stock screeners make security selection all the easier.

But Buffett said those things in 1999, when there was a small army of people already searching for these ideas. If anything, many of the value investors of that era have moved onto other strategies like passive investing or putting their cash into compounders.

Need proof? A surefire way to gain followers on Twitter is to throw out slightly less obvious facts about stocks like Google, Amazon, Microsoft, Spotify, Adobe, or Nvidia. Meanwhile the guy tweeting about microcaps trading at a 5x PE is basically typing his thoughts into the ether, never to be heard again.

But who’s more likely to beat the market — the guy who follows the crowd or the guy who has his own ideas? Or as I put it pretty eloquently on Twitter the other day:

24 likes. Look Ma, I made it!

There’s also no reason to focus squarely on the 50% number. Perhaps 20% annually is more realistic. That still compounds into some pretty serious money if you can keep it up for 5-10 years.

This is where personal finance enters the equation. How much do you need to never work again? $1M? $2M? A few years of compounding $100k at 20-25% per year would go a long way to achieving the average FIRE goal.

Anyway, I’m going to open it up to the commenters. Why do you think more investors don’t follow a young Buffett?