Warren Buffett
“Never ask a barber if you need a haircut.”
Charlie Munger (left), who died in 2023, was Warren Buffett’s (right) trusted partner for over 60 years. He helped transform Berkshire Hathaway Inc. from a struggling textile manufacturer into a global powerhouse.
Warren Buffett seems to have some serious trust issues. At least when it comes to investing, and more specifically the information used to assess certain investment opportunities. He stays clear of 3rd party forecasts or projections, especially from anyone with a financial stake in making those projections. “I do not understand why any buyer of a business looks at a bunch of projections put together by a seller … or his agent.” Buffett consistently advises to do your own research – don’t trust the “experts” – whether you are buying a house, business, or stock.
Charlie Munger, Buffett’s longtime partner, recalls a moment when they were offered a book of $2 million worth of projections during the process of buying a business. Obtaining information or trusting analysis from someone who has an interest in a particular deal is detrimental due to its innate bias. Munger referred to those projections as “intrinsically dangerous.” Buffett agrees and prefers to review annual reports and other filings himself so that he can come to his own conclusions. He believes that sticking with businesses you can understand and evaluate yourself is the way to go!
Warren also says to try not to listen to macroeconomic calls when making individual stock decisions: “You cannot get rich with a weather vane.” Even though Buffett first gave this advice many decades ago, it remains valid to this day in light of the onslaught of social media and the rapid pace of technology. This only gives rise to even more opinions and forms of news information that all investors have to sort through and make sense of. Warren Buffett tells us not to get bogged down in this information overflow by sticking with companies you know and understand and those you have evaluated yourself!
Following this advice has paid off for Buffett and should for you too.
Links to Further Reading:
Library of Berkshire Hathaway Annual Letters: https://www.berkshirehathaway.com/letters/letters.html
Wealthmanagement.com – The (In)accuracy of Market Forecasts: https://www.wealthmanagement.com/equities/the-in-accuracy-of-market-forecasts
