There’s an article about the best investors in the world, written by the best investor of all time.
“The Superinvestors of Graham and Doddsville.“
Written by Warren Buffett
In it, he explains how and why these Superinvestors beat the market year over year for decades.
“The Superinvestors of Graham and Doddsville.“
Written by Warren Buffett
In it, he explains how and why these Superinvestors beat the market year over year for decades.
The article was written in 1984.
A time in which the efficient market theory was dominant.
Economic professors were certain that everyone who beats the market over the long term is just lucky.
Buffett disagrees and makes his case by explaining the best investors in the world.
A time in which the efficient market theory was dominant.
Economic professors were certain that everyone who beats the market over the long term is just lucky.
Buffett disagrees and makes his case by explaining the best investors in the world.
The Coin Flipping Contest
Buffet uses a metaphor of a coin-flipping contest
The rules:
- Every American (225m in 1984) bets on themselves in a coin flip
- Everyone bets $1
- If you lose, you’re out
- If you win, you continue playing the next day betting the money you won
Buffet uses a metaphor of a coin-flipping contest
The rules:
- Every American (225m in 1984) bets on themselves in a coin flip
- Everyone bets $1
- If you lose, you’re out
- If you win, you continue playing the next day betting the money you won
Example:
Person A: Bets on heads and wins.
Now he receives $1 from a person who lost
The next day, he bets his $2 and so on.
Due to the 50/50 chance, stakes double every day.
Person A: Bets on heads and wins.
Now he receives $1 from a person who lost
The next day, he bets his $2 and so on.
Due to the 50/50 chance, stakes double every day.
After ten days, there’ll be approximately 220,000 people left—all of them with $1000.
Now, after winning ten rounds in a row, chances are that the winners feel like they’re good at this.
After another 10 days, only 215 people will be left.
Each of them with over $1m.
Now, after winning ten rounds in a row, chances are that the winners feel like they’re good at this.
After another 10 days, only 215 people will be left.
Each of them with over $1m.
Those 215 people will be sure they have a unique technique or just coin-flipping talent.
They will write books and hold lectures about how they did it.
And people will listen to them because they think there has to be something. Something that made them win.
They will write books and hold lectures about how they did it.
And people will listen to them because they think there has to be something. Something that made them win.
Economic professors in 1984 argued that this was the case for the Superinvestors.
They might believe in having superior talent or techniques, but they’re just investment coin flippers who got lucky.
They might believe in having superior talent or techniques, but they’re just investment coin flippers who got lucky.
Buffett does not think so. Why? Because a significant amount of these Superinvestors have what Buffett calls the same intellectual origin.
They aren’t connected by geographics or other non-important factors.
What they have in common is their Graham and Dodd education.
They aren’t connected by geographics or other non-important factors.
What they have in common is their Graham and Dodd education.
They’ve all learned a specific approach to investing.
And became very successful using it.
Although, they invest in entirely different stocks or sectors.
Everything but their investing approach is uncorrelated.
And became very successful using it.
Although, they invest in entirely different stocks or sectors.
Everything but their investing approach is uncorrelated.
Thus, luck is a highly improbable explanation for their successes.
What makes them outperform for decades is how they invest.
And today, we know those rules very well.
At least you, as my followers😉
Here’s a list of things they do 👇🏼
What makes them outperform for decades is how they invest.
And today, we know those rules very well.
At least you, as my followers😉
Here’s a list of things they do 👇🏼
- Searching for discrepancies between Price and Value
- Paying no attention to macroeconomics
- Mentally buying the business, not the stock
- Operating with a margin of safety
- Being Risk-Averse by nature
- Paying no attention to macroeconomics
- Mentally buying the business, not the stock
- Operating with a margin of safety
- Being Risk-Averse by nature
Something that is not so important to get the message but still interesting, here are the names of some of the Superinvestors of Graham and Doddsville:
- Walter Schloss
- Tom Knapp
- Stan Perlmeter
- Charlie Munger
- Bill Ruane
All names that deserve a closer look.
- Walter Schloss
- Tom Knapp
- Stan Perlmeter
- Charlie Munger
- Bill Ruane
All names that deserve a closer look.
Now, thanks for reading! I hope you liked this thread.
If so, please retweet the first tweet of this thread so more people can see it.
For more content about Investing, Finance, and Psychology, follow me @MnkeDaniel
If so, please retweet the first tweet of this thread so more people can see it.
For more content about Investing, Finance, and Psychology, follow me @MnkeDaniel
People who might be interested in this:
@honam
@heymaxkoh
@ValueInvestorAc
@DennisHong17
@TomGardnerFool
@BusinessFamous
@EugeneNg_VCap
@daniel_toloko
@10kdiver
@GSpier
@williamgreen72
@parkcassady
@yliownyc
@dmuthuk
@michael2017l
@HaydenCapital
@honam
@heymaxkoh
@ValueInvestorAc
@DennisHong17
@TomGardnerFool
@BusinessFamous
@EugeneNg_VCap
@daniel_toloko
@10kdiver
@GSpier
@williamgreen72
@parkcassady
@yliownyc
@dmuthuk
@michael2017l
@HaydenCapital
• • •
Missing some Tweet in this thread? You can try to
force a refresh
