"I Got RICH When I Understood THIS" — Warren Buffett

Summary

In this candid reflection, the speaker shares their journey from an 11-year-old intrigued by stock trading to a mature investor who focuses on owning businesses rather than predicting stock movements. They emphasize the importance of a long-term mindset, seeing stocks as pieces of American business. The speaker also highlights the progress of the U.S. economy, the role of government, and how capitalism has evolved. With a focus on investing for the future, they advocate for index investing, particularly in the S&P 500, and offer insights into the broader economic system and its growth.

Takeaways

• 😀 At the age of 11, the speaker mistakenly believed stock movements were all about predicting short-term price fluctuations, influenced by technical analysis and market charts.
• 😀 Upon reading Benjamin Graham's 'The Intelligent Investor' at age 19 or 20, the speaker shifted from trying to predict stock movements to understanding stocks as ownership in businesses.
• 😀 The key to successful investing, according to the speaker, lies in viewing stocks not as short-term assets but as long-term investments in businesses.
• 😀 A strong orientation and mindset matter more than intelligence when it comes to investing. One doesn't need a genius-level IQ to succeed.
• 😀 Most people view stocks with the hope they will go up in value soon, but the speaker's approach is to focus on long-term business growth, regardless of short-term stock movements.
• 😀 The speaker focuses on investing in American businesses, and has kept at least 80% of their wealth invested in U.S. businesses since March 11, 1942.
• 😀 True happiness comes from doing what the speaker enjoys, which is making smart investment decisions, rather than short-term wealth accumulation.
• 😀 When prices of stocks or assets drop, the speaker feels happier because it provides an opportunity to buy more at a lower price, similar to buying more land if its price decreases.
• 😀 The speaker emphasizes the importance of trust in business partnerships and prefers to work with trusted partners rather than working alone for greater financial gain.
• 😀 The speaker believes that the U.S. has seen unprecedented economic prosperity over the years, with living standards improving dramatically for even the bottom income groups compared to previous generations.
• 😀 Capitalism, while not perfect, has evolved over time, increasing productivity and improving lives. Government should regulate capitalism, but it should not disrupt it.
• 😀 Despite challenges like war and economic crises, the speaker is confident in the long-term forward progress of both business and government in the United States.

Q & A

What was the speaker's initial approach to stock investing at the age of 11?

The speaker's initial approach to investing was based on watching stock movements, charting them, and relying on technical analysis. He studied books on stock prediction, including 'Edwards and McGee,' and believed that predicting stock movements was crucial to success.

What did the speaker realize after reading Ben Graham's book, 'The Intelligent Investor'?

After reading 'The Intelligent Investor,' the speaker realized that his previous approach to investing was wrong. He shifted his mindset from predicting stock movements to buying businesses that were publicly traded, focusing on owning a piece of a business rather than worrying about daily market fluctuations.

What does the speaker believe is the most important factor for success in investing?

The speaker believes that the key to success in investing is having the right orientation and mindset. It's not about having extraordinary intelligence but understanding the right way to think about investments—specifically, owning businesses, not just stocks.

Why does the speaker prefer to buy more stocks when the prices go down?

The speaker prefers to buy more stocks when the prices go down because he views stock investments as owning pieces of businesses. A price drop allows him to buy more of these businesses at a better value, which aligns with his long-term investment strategy.

What is the speaker's view on owning physical assets, such as homes?

The speaker does not place much value on owning multiple physical assets, like homes. He believes that owning several homes only increases his problems without increasing his happiness. His focus is on owning businesses, which he finds more fulfilling.

What does the speaker believe is the true source of wealth in America?

The speaker believes that the true source of wealth in America is the ownership of businesses, particularly publicly traded companies. He points out that a greater percentage of the population is wealthier today than ever before, largely due to access to investments in American businesses.

How does the speaker compare modern living standards to those of historical figures like John D. Rockefeller?

The speaker compares modern living standards to those of John D. Rockefeller, highlighting that people today, even those in the bottom income brackets, live better than Rockefeller did. This is due to improvements in medicine, education, entertainment, and technology, which make life more comfortable and accessible.

What is the speaker's perspective on capitalism and the role of government?

The speaker views capitalism as a powerful system that benefits everyone over time, but he acknowledges that the government plays a critical role in regulating it. He emphasizes that the government should not interfere with capitalism in harmful ways, but rather provide guidance to ensure its positive evolution.

What is the speaker's stance on investing in individual stocks versus index funds?

The speaker recommends investing in index funds, particularly the S&P 500, for long-term success. He believes that most people don't have enough knowledge to pick individual stocks or countries effectively, making index investing a safer and more practical approach.

How does the speaker feel about competition and winning in the investment game?

The speaker does not focus on beating others in the investment game but rather on ensuring his own success over time. He finds satisfaction in knowing that, with the right knowledge, he will win in the long run by buying businesses and holding them for the future.