{"id":1481,"date":"2023-03-05T15:29:51","date_gmt":"2023-03-05T19:29:51","guid":{"rendered":"https:\/\/parmaks.com\/Resources\/revisiting-warren-buffetts-advice-to-me-in-2008-plus-7-lessons-for-young-investors\/"},"modified":"2023-03-05T15:29:51","modified_gmt":"2023-03-05T19:29:51","slug":"revisiting-warren-buffetts-advice-to-me-in-2008-plus-7-lessons-for-young-investors","status":"publish","type":"post","link":"https:\/\/parmaks.com\/Resources\/revisiting-warren-buffetts-advice-to-me-in-2008-plus-7-lessons-for-young-investors\/","title":{"rendered":"Revisiting Warren Buffett\u2019s Advice to Me in 2008 (Plus: 7 Lessons for Young Investors)"},"content":{"rendered":"

\"Profit<\/a>
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\u201cThe four most expensive words in the English language are \u2018this time it\u2019s different.\u2019\u201d<\/em><\/strong><\/p>\n

\u2014 Sir John Marks Templeton<\/a>, dubbed \u201cthe greatest global stock picker of the century\u201d in 1999<\/cite><\/p><\/blockquote>\n

An old video recently resurfaced on social media<\/a>. It\u2019s yours truly asking Warren Buffett and Charlie Munger a question at the 2008 Berkshire Hathaway Shareholders Meeting:<\/p>\n

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\u201cHi, my name is Timothy Ferriss, and I\u2019m a Guest Lecturer at Princeton University twice a year\u2026\u201d<\/p>\n

Before @tferriss<\/a> was \u201cTim,\u201d a slightly nervous \u201cTimothy\u201d asked Charlie & Warren in 08 to advise a newly successful 30-yr old, non-investment professional how best to invest.
1\/x\ud83d\udc47\ud83e\uddf5 pic.twitter.com\/qVurnTIM8v<\/a><\/p>\n

\u2014 Compound248 \ud83d\udcb0 (@compound248) February 18, 2023<\/a><\/p><\/blockquote>\n<\/div>\n<\/figure>\n

I was intensely nervous, as the quavering voice makes clear.<\/p>\n

This clip went viral, and a number of media outlets (Wall Street Journal<\/em><\/a>, Business Insider<\/em><\/a>, <\/em>etc.) reached out to me for comment, asking questions like \u201cWhat advice would you give a 30-year-old now who\u2019d just amassed their first million?\u201d<\/p>\n

Given space constraints, my full answers couldn\u2019t be included.\u00a0<\/p>\n

I decided to write this blog post to share some expanded thoughts.<\/p>\n

First things first: how on earth did I actually get a coveted mic and ask the Oracle of Omaha a question? It took some planning. Here\u2019s the full story and strategy<\/a>. For those interested, I also shared my highlighted notes from the event<\/a>.<\/p>\n

The first headline and subhead of the recent WSJ<\/em> piece looked like this when I saw it:<\/p>\n

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Fair enough. I\u2019ve studied Warren for a long time, read nearly all of his letters<\/a>, and invested a lot according to his principles, so this made sense.\u00a0<\/p>\n

But then we have this curious development\u2026<\/p>\n

<\/p>\n

Since the above headline was used in the print edition<\/a>, I\u2019ll quickly clarify a few things.<\/p>\n

The WSJ<\/em> piece makes some great points and highlights hubris we all need to watch for in ourselves, but I do not identify as a Warren Buffett wannabe.<\/p>\n

In fairness, the piece doesn\u2019t directly describe me as such, but casual readers might conclude that based on the headline. I have indeed modeled him for a lot, and I highly recommend the books Seeking Wisdom: From Darwin to Munger<\/em><\/a> and A Few Lessons for Investors and Managers from Warren Buffett<\/em><\/a>, even if you don\u2019t consider yourself an investor. But I don\u2019t aspire to be Buffett in all things. I\u2019ve also strongly advised against anyone trying to copy my investing approach with tech, so I\u2019m more anti-cheerleader than cheerleader.<\/p>\n

But perhaps most important, the print edition stated, \u201cMr. Ferriss ignored these pearls of wisdom [to invest in low-cost index funds].\u201d The WSJ<\/em> was kind enough to update the digital version, but in case you missed it, here\u2019s the correction: I did put a decent portion of my money into low-cost index funds, as I fully accepted I was an amateur in public equities and had no competitive advantage. For me, this is true in almost all asset classes.<\/p>\n

There is one exception. I decided to \u201cgo pro\u201d with early-stage angel investing in tech. That ended up returning far more than if I had put all of my savings in a low-cost index fund in 2008.<\/p>\n

I would highly advise against<\/em> this for 99.99% of people, but I did approach it systematically, and I\u2019ll share more on that below. It\u2019s also worth reading The Power Law: Venture Capital and the Making of the New Future<\/em><\/a>, which will give you an idea of how this world functions, how the economics work or don\u2019t work, and what assumptions are made with investment strategies. Particularly for angel investors who don\u2019t have the benefit of receiving management fees, \u201cwins\u201d generally mean that you end up with a substantial portion of your net-worth in 1\u20133 companies.<\/p>\n

Is that anti-Buffett? Nope. In the same 2008 meeting<\/a>, Buffett repeated a few things that he\u2019s said and written many times in some form, including:<\/p>\n

\u201cDiversification is for the know-nothing investor.\u201d
\u201cThere have been several times I had 75% of my net worth in one situation.\u201d
\u201cI mean, you will see things that \u2026\u2014if you\u2019re working with smaller sums\u2014it would be a mistake not to have half your net worth in.\u201d\u00a0<\/em><\/p>\n

But\u2026 these only apply if you are willing to do a lot of heavy lifting.<\/p>\n

If someone asked me to give investing advice to a 30-year-old today who had just made their first million, I would first point them somewhere else. I\u2019m not a financial advisor and don\u2019t think I\u2019m qualified to give anyone financial advice. The particulars matter too much. But if they insisted, I might say:<\/p>\n

(1)<\/strong> If you want to play in early-stage tech investing (or anything high-risk, high-reward), ensure you have a plan for developing an ENORMOUS informational advantage. Aim to develop new skills and relationships through portfolio companies so that you can win over time, even if you \u201cfail\u201d with many bets going to zero. Only bet what you are comfortable losing and what you can recoup in other ways. Though my angel investing snowballed, I began with $10K checks and advising for sweat equity<\/a>. Think of this as tuition for a real-world MBA<\/a>. Are you willing to move to the hub of activity to ensure the best possible information and deal flow, as I did when I moved to SF lifetimes ago? Or make commensurate commitments or sacrifices to ensure you are in a position to win? If not, I\u2019d suggest choosing a different game. Other people will take the initiatives that you won\u2019t, and they will beat you. Much of early-stage investing is cooperative, but let\u2019s not kid ourselves, a lot of it is competitive, and not everyone will podium finish.<\/p>\n

(2)<\/strong> For the rest\u2014which could be everything\u2014follow Buffett\u2019s advice. Keep it simple.<\/p>\n

One cautionary example of doing the opposite: I spotted the COVID curve ball early<\/a>, and I made a lot of very \u201csophisticated\u201d (complicated) decisions related to investing, and the associated research, diligence, phone calls, and so on chewed up an unbelievable amount of time and energy. Eighteen to twenty-four months later, I\u2019d done very well but decided to look at how passive S&P 500 returns would\u2019ve added up over the same period, and\u2026 they were roughly the same. Of course, you can\u2019t always bank on this outcome, but beware of seeking complexity if you\u2019ve been rewarded for problem-solving throughout your life. Looking back over the last 15+ years, the handful of investment decisions that made all the difference<\/a> have been simple and were somewhat obvious to me, no major gear-grinding required.<\/p>\n

(3) <\/strong>Knowing when to buy isn\u2019t enough. Have policies and rules for when you will sell, or the universe will punish you with very<\/em> bad and very<\/em> expensive decisions.<\/p>\n

(4) <\/strong>Don\u2019t discount luck, including lucky timing. I started angel investing seriously in 2008 and hit a golden window of converging trends, cheap valuations (by today\u2019s standards), and an uncrowded playing field. The financial crisis had culled the herd of a ton of investors and fair-weather founders. It was a target-rich environment, even for someone with very little to invest. Micro-VCs were just cracking out of their shells, and the big players hadn\u2019t started assailing the seed stage stuff. In retrospect, it was a wildly rare combo of things. I don\u2019t believe I could replicate what I did in 2008\u20132012 now.<\/p>\n

(5)<\/strong> Personally, I\u2019ve largely stepped back from angel investing<\/a> to double down on writing and the podcast (The Tim Ferriss Show<\/em><\/a>, soon to hit 1B downloads). This comes from a desire for more predictability and less stress. I love the excitement of startups, and I\u2019ve had some lucky wins, but I don\u2019t find it nearly as interesting as developing creative muscles that bring in forecastable revenue year after year. For me, that has compounded more reliably than the all-or-nothing bets. Massive ups and downs in sectors like crypto also take a toll that reduces my creative batteries. In this chapter of my life, I think simplicity is the name of the game (e.g., finding one decision that removes 100 decisions<\/a>).<\/p>\n

(6)<\/strong> Over-optimizing is just as bad, if not worse, than under-optimizing. Past a certain point, buying extra Skittles just doesn\u2019t fucking matter. So, a note to self: stop fiddling around with your goddamn spreadsheets and get more interesting hobbies on the calendar<\/a>. What hobbies? Exactly.<\/p>\n

(7) <\/strong>If we assume the point of investing is ultimately to improve your quality of life and the quality of life of those you most care about, investments that consistently add stress over long periods of time probably don\u2019t make sense. Money is traded for things or experiences that catalyze certain feelings. If your investments are generating the opposite spectrum of feelings, it might be time to reassess.\u00a0<\/p>\n

It\u2019s easy to miss the forest for the trees. Money is a means, not an end.\u00a0<\/p>\n

And in the end, most things matter very, very little. Do what helps you sleep at night and wake up with a low heart rate. To me, those are the hallmarks of a world-class investor who gets the big picture.<\/p>\n

###<\/p>\n

Related posts on this blog:<\/strong>
How to Create Your Own Real-World MBA (I)<\/a>\u00a0
How to Create Your Own Real-World MBA (II)\u00a0<\/a>
How to Say No When It Matters Most (or \u201cWhy I\u2019m Taking a Long \u2018Startup Vacation’\u201d)<\/a>
Prepping for Warren Buffett: The Art of the Elevator Pitch
<\/a>Picking Warren Buffett\u2019s Brain: Notes from a Novice
<\/a>Exclusive Warren Buffett \u2014 A Few Lessons for Investors and Managers<\/a>\u00a0

Related podcast episodes:<\/strong>
Chris Sacca <\/strong>on Being Different and Making Billions (#79)
<\/a>Naval Ravikant<\/strong> \u2014 The Person I Call Most for Startup Advice (#97)<\/a>
The 5 Things I Did To Become a Better Investor (#109)
<\/a>Marc Andreessen<\/strong> \u2014 Lessons, Predictions, and Recommendations from an Icon (#163)<\/a>
Ray Dalio<\/strong>, The Steve Jobs of Investing (#264)
<\/a>Mike Maples <\/strong>\u2014 The Man Who Taught Me How to Invest (#286)
<\/a>Ann Miura-Ko <\/strong>\u2014 The Path from Shyness to World-Class Debater and Investor (#331)
<\/a>Howard Marks <\/strong>\u2014 How to Invest with Clear Thinking (#338)<\/a>
Peter Mallouk <\/strong>\u2014 Exploring the Worlds of Investing, Assets, and Quality of Life (#356)<\/a>
Graham Duncan<\/strong> \u2014 Talent Is the Best Asset Class (#362)<\/a>
Katie Haun <\/strong>on the Dark Web, Gangs, Investigating Bitcoin, and the New Magic of \u201cNifties\u201d (NFTs) (#499)
<\/a>Ramit Sethi<\/strong> \u2014 How to Play Offense with Money (#524)
<\/a>John Doerr <\/strong>on Picking Winners \u2014 From Google in 1999 to Solving the Climate Crisis Now (#543)
<\/a>Edward O. Thorp,<\/strong> A Man for All Markets \u2014 Beating Blackjack and Roulette, Beating the Stock Market, Spotting Bernie Madoff Early, and More (#596)
<\/a>Roelof Botha<\/strong> \u2014 Investing with the Best (#618)<\/a>
Jason Calacanis<\/strong> on Brooklyn Grit, Big Asks, and More (#635)
<\/a>Bill Gurley <\/strong>on Investing Rules, Finding Outliers, Insights from Jeff Bezos and Howard Marks, and More (#651)
<\/a>Michael Mauboussin<\/strong> \u2014 How Great Investors Make Decisions (#659)<\/a><\/p>\n

Related and Recommended<\/em><\/h3>\n<\/p>\n

The Tim Ferriss Show<\/strong><\/a> <\/em>is one <\/span>of the most popular podcasts in the world with more than 900 million downloads. It has been selected for “Best of Apple Podcasts” three times, it is often the #1 interview podcast across all of Apple Podcasts, and it’s been ranked #1 out of 400,000+ podcasts on many occasions. To listen to any of the past episodes for free, check out this page<\/a><\/strong>.<\/p>\n<\/p><\/div>\n