Buffet the Making of an American Capitalist

¶ … Roger Lowenstein's Buffett: The Making of an American Capitalist which is the biography of Warren Buffett. In addition to the actuarial math (of which Buffett is a master), the book is unique among biographies because it spells out the various qualities that have made Buffett such an adroit investor.

However, in the opinion of this author, the best quality that he manifested is the quality any good investor must have, which is to go long. While Buffett has a number of remarkable abilities, including a veritable inexhaustible appetite for numbers and a photographic memory, many people do not have these and still become rich. The thing that Buffett shares with so many investors is this ability to invest for the long-term. In short, he is not a day trader. Rather, he is investing in businesses that he has made a commitment to. He wants to see them grow and is putting his own finances behind them in this endeavor. Day traders and junk bond merchants do not do this. Only investors that are willing to go the long route are capable of the patience needed for such an action.

The Buffett patience and the ability to go long is best illustrated in an example. Buffett was and is quite willing to wait until all of the odds or virtually all of the odds are lined up absolutely in his favor. Then (and only then) will he proceed to make a significant bet in the form of an investment on the anticipated outcome. This innate ability to prepare and execute business coups such as he did with the bailouts of Geico and also American Express shares during the scandal of 1963 have a number of components inside. They also hinged on his patience to wait for the precise opportunity, a mastery of the subject matter and the motivation to move forward when common wisdom seems to be against the (Lowenstein, 79-82 and 195-196). All of this flows from a patient and methodical analysis of a market and its dynamics. From this patient comes an ability to know good companies like American Express or Geico and see that they have been simply headed by bad leadership that has put it in dire straits. He then breathes life back into them and sets them back on the right path.

Another example of Buffett and his patience and values can be found in his handling of Berkishire stock when he said that "Fund managers who had been eager to buy the nifty fifty at eighty times earnings were unwilling to buy Affiliated at five times. To Buffett, this was madness.

He tartly observed, 'I have never been able to figure out why it's riskier to buy something at $40 million than at $80 million. By early 1986, over the last twenty-one years, Berkshire

stock had multiplied 167 times, while the Dow had merely doubled (ibid, 156, 275, 316). This proves that going long is the best policy. Markets go up and down, but the good investor can predict when and where the ups and downs will be.