Everywhere I turn it feels like I’m inundated with thousands upon thousands of mindless investing quotes that seem profound but don’t actually tell us anything.
Warren Buffett quotes are by far the worst. I love Buffett. I’ve read his biography many times and I follow him on Twitter despite him tweeting about as often as I visit LinkedIn. No, I don’t care that my friend from high school has endorsed me for underage drinking.
Buffett is the master of saying quotable things that don’t actually say anything. Don’t believe me? These are considered to be some of his top investing quotes:
“I don’t look to jump over seven-foot bars: I look around for one-foot bars that I can step over.”
“Diversification is a protection against ignorance.”
“Only when the tide goes out do you discover who’s been swimming naked.”
“Never invest in a business you cannot understand.”
And so on.
It’s not that these are that bad, it’s that they really don’t go beyond anything the average investor doesn’t already know. Diversification protects against risk. Great opportunities are better than mediocre ones. And bull markets make everyone look good.
Well, duh. This is all pretty basic stuff.
Let’s face it. If somebody worth $10 million was sitting in an office somewhere and saying this stuff nobody would care. A few people would enjoy it, but there sure wouldn’t be thousands of people slobbering all over themselves in a race to talk about how smart the guy is.
Besides, Buffett breaks his own rules all the time.
Buffett’s favorite holding period is forever, yet he’s bought and sold big positions in stocks like Exxon Mobil, Suncor, and Tesco.
He’s a famous advocate for concentrated portfolios, yet Berkshire Hathaway has 62 operating divisions and owns 48 stocks. In what world is a portfolio with 110 different businesses considered concentrated?
And he’s staunchly anti-leverage despite using insurance float as a form of free leverage for decades.
There are a million other examples of this, but you get the point. Why should we take these quotes overly seriously when the guy who utters them changes his mind when it’s convenient to him?
They’re not going to make you rich
Investing quotes are like Doritos. They’re light, tasty, and hugely addictive. But if you’re not careful you’ll eat the whole bag and just feel bad about yourself after.
Let’s go back to the Buffett example. Warren Buffett did not get rich because he understands the difference between a concentrated and diverse portfolio. Warren Buffett got rich because he put his nose inside of annual reports for 40 years. Kids? Screw my kids. I gots reading to do.
This comes down to the real problem I have with investing quotes. They’re no substitute to actually doing the work. Yet we believe they are.
It’s much easier to go on Twitter and see what a certain superinvestor thinks about value than it is to crack open an annual report and make it through all of the accounting footnotes. And then read the previous annual report. And the one before that.
No, we’d much rather argue about the state of value investing today or creating mental models or the importance of inverting our thinking. Don’t get me wrong; those are all important things to understand. But then you’ve got to do the work, and that’s where most people drop the ball. It isn’t just about getting the concepts right. It’s figuring out the fine print, too.
Some of that stuff can come from a pithy investing quote. But a lot of people won’t actually learn the lesson without experiencing it themselves.
They don’t work for everyone
The basic rules of getting rich are simple. Save money. Then take risks. Do it right and that capital eventually grows into something much larger.
The details also matter, however. Investors like Walter Schloss and Benj Gallander have done well investing in the trashiest stocks. Buffett, Munger, and John Templeton have done well buying great businesses. Thousands more have gotten rich buying real estate, or starting their own business, or investing in private mortgages.
The point is there are plenty of people who forge their own path and still end up doing very well for themselves. They regularly ignore advice from the greatest investors in history because it doesn’t apply to them.
That’s the lesson here. There’s no reason to copy Buffett 100% of the time. Besides, that route is already pretty crowded. At the end of the day, reading investing quotes will only get you so far. To really understand more than the next guy, you’ve got to do the work. Which is far harder than scrolling through a bunch of one liners.