The Winning Investment Habits of Warren Buffett and George Soros

 

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I finally got around to finishing the The Winning Investment Habits of Warren Buffett and George Soros as recommended by Ryan Allis way back when.  It’s an interesting and fairly simple read (despite being huge) with a lot of fantastic insights for anyone looking to spend a little more time managing their investments (it’s a really hard time to do that, I know).  There are a lot of practical tips in the book, and Ryan did an excellent job covering them in his post above, but I found some core life lessons in their winning habits as well.  I’ve re-posted them below (these are my personal notes, so I apologize if they don’t make sense).

  • the reminder that my path is MY path: both Soros and Buffett went their own way.  They never worried that they were entering the exit doors.  They never did or do what they are “supposed to do.”  They created a set of beliefs, and they stick to them, which has served them extremely well.  There is no “right” path for me that someone else took.  My path is mine.  My belief and life criteria will define that path for me, and those are also MINE.  They are borrowed and pulled from others, but I ultimately get to decide what ends up in there.
  • conventional wisdom gets you conventional results:  I realized while reading their habits neither one of them follows any of the investment habits you often hear about on CNBC or read in Money magazine as the “right ones.”  You would never hear Suzie Orman preaching these guy’s habits.  For example neither one of them believes in diversification.  Diversification is of course a way to manage risk, but they both feel they can adequately remove risk from a situation by spending time thinking and researching.  They say if you spend enough time BEFORE buying you can remove the risk greatly, and if you remove the risk why wouldn’t you put all of your resources behind it?  Soros put his entire fund’s assets ($7B + $3B on margin) into his trade against the Bank of England.  He KNEW his downside was 5% or less but his upside was huge (he was right…$2B in net on that trade).
  • skip to work:  Buffett has been quoted many times as saying that he literally skips to work.  He says even that he has instructed Berkshire to hold seances for him after he dies, so that he can continue to actively invest.  He simply loves it.  It is clear $$$ has nothing to do with his drive.  The same is true for Soros.  Although they both hit their strides when they realized which sides of their businesses they wanted to be involved in day in and day out, and which parts to delegate. It seems pursuing something that makes you feel this good is ultimately the safest investment.
  • Happiness in the details:  It’s clear these two both enjoy the process instead of the results.  For Buffett it is pouring over annual reports and balance sheets.  He LOVES that.  He literally does it all the time.  In fact he has often said he feels like he should pay to have his job (he does in many ways…a $100k salary for the last 30 years is absolute steal for shareholders).  Soros is the same.  He sees himself as a philosopher and investing is just a playground where he can test and prove or disprove his ideas.  The $$$ is merely the vote tally on whether or not his hypothesis were correct.
  • thinking and just sitting are crucial:  Soros says his favorite time is down time, his “thinking time.”  He says times when you do nothing are just as, if not more, important than when you do something.  Spending the time to think and process your thoughts is key to success he says.  They say that some of the biggest mistakes people can make is thinking that they HAVE to do something everyday.  There’s a great quote in the book that says something along the lines of “Why do people on wall street feel like they have to come and do SOMETHING everyday?…I find that there is very little I HAVE to do on a day to day basis.  I’d much rather spend my time reading and researching on the beach, and only come in when I have to buy or sell something.”  Buffett has a little less of a work / life balance than Soros it seems according to the book.
  • focus. Both of these guys have focused in on a few core competencies and an investment approach in which they specialize in.  They rarely stray from these.  This allows them to really hone their skills. I realized that I constantly jump from one space / field to the next based on stories I hear / read.  The focus needs to be on a field with a criteria that fits uniquely me.  This weekend while in cincy I helped Ethan (my little brother) practice basketball.  His friend is very good at layups and I was showing ethan some techniques.  He got frustrated when I told him that kid probably practices everyday and that is why he is so good.  I was naturally a good basketball player but I also LOVED to play, so I played every single day for hours after school.  These two things made me very good.  I of course wanted to be good, but I didn’t practice because of that.  I practiced because I liked to play.  The same is true for why I read business books and magazines.  I love the stories.  I love the trends. I love hearing about the people.  How can I find my basketball feeling again?

These guys stay within themselves.  The book talks about the “loser” investor as one who is constantly adjusting their techniques based on the last story they heard.  I’ve realized that when you don’t take the time to think about and find what you enjoy and are good at analyzing in the investment world, you tend to jump from one person’s ideas to another. The same is true in life I believe.  I think it is why so many of those get rich infomercials work so well.  It’s hitting people who have no idea what their core strengths and passions are, and aren’t seeing any good results in their current approach (most likely based on something someone else told them) so they are so willing to buy another idea, especially when it is presented so well.  These guys (Buffett an Soros) have found the shoes they are comfortable in and they STICK to them, knowing that is where they are happiest, most comfortable and ultimately most successful.  I will say though that the personal criteria for living for everyone always borrows from others ideas, the key is to borrow from those that you can truly make your own and not from those you hope you can absorb.

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