Be fearful when others are greedy and greedy when others are fearful.
That’s one of my favourite Warren Buffett quotes. I’ve learned a lot from him (indirectly, of course), not just about investing but about business and life in general. For those of you who don’t know him, he’s the richest man in the world, and has made his money from finding and investing in great companies.
I subscribe to the Motley Fool and read many of their great articles. They’re champions of the Buffett style of investing. It’s not all “buy buy buy, sell sell sell!” Charlie Sheen style trading. It’s about owning great companies, with great business models, that care about their customers. It’s about being in it for the long run and the big win, not the quick buck. As Mr. Buffet himself remarked about his company Berkshire Hathaway “Our favourite holding period is forever. “
One recent Motley Fool article that I liked was called Learn From Buffet’s Patience – in reference to his billion dollar investments in Goldman Sachs and General Electric and his Op-ed piece in the NY Times saying that he was personally buying American stocks & shares last October (read: as the world Economy headed into a depression). An excerpt from the Fool article:
On the other hand, this is Warren Buffett, and he’s made these sorts of predictions before. The years 1973 and 1974 were two very bad ones for the market. Over those two years, the S&P 500 plunged by 42%. It was then, on Nov. 1, 1974, at the height of the pessimism, that Buffett made his first well-publicized bullish market call : “Now is the time to invest and get rich.”Buffett himself was buying shares of The Washington Post. He paid just $11 million for an investment worth nearly $1.4 billion at the end of 2007 — a 127-bagger! Of all the stocks listed, Washington Post is the biggest gainer — by a factor of 12. While relatively small in dollar terms, it’ll certainly go down as one of Buffett’s greatest investments.But do you know what happened to the stock right after Buffett began buying shares in 1973? Shares plunged 20% and stayed there, not for a few months, but for three years. It was 1976 before Buffett was in the black, and it was 1981 before WaPo traded at Buffett’s estimate of its 1973 intrinsic value.
Think about that: What ultimately became one of Buffett’s greatest investments began with three years of double-digit losses and mind-numbing stagnation. Patience pays, Fools.
It encapsulates the two of my favourite meme’s I’ve learned from him: Bucking the trend, and ‘being in it for the long run’ are two vital ingredients for success.
And this doesn’t just hold true for investing. When I look, I see it in all the great advice I get about business, about how marketing is about building relationships with customers, how successful business appreciate the life time value of a customer, how the best executives think past the next bonus check or year-end KPI.
Where I see this as very applicable right now is in recruitment. In an environment when every day there’s a new headline about head-count reductions and redundancies left, right and centre, who has the courage to zig when everyone else zags? If you’re in HR, or in the position to hire staff, are you brave enough?
Uncertainty is the friend of the buyer of long-term values.
I’m 24. I was out for drinks with friends over christmas and we got to talking about job hunting. 1 has a PHD, 2 have masters in marketing, 2 have degrees, none can get jobs. Think about it, there is a pool of young, enthusiastic, well educated people yearning for a job in your company. The labour market is saturated with talent. Uncertainty has crippled the jobs market, and “long-term values” (people) abound, are you a buyer?
The company that seizes on this opportunity will be the one that emerges from this recession stronger (in leaps and bounds) than when it entered. People are the core of your business, that’s true of every business. So are you bucking the trend, are you willing to take advantage of opportunity to lay the foundations for you success over the next 10, 20 years? Are you ready to forsake the quick win of saving small costs and go for the big win?
Are you ready to be greedy when others are fearful?
If not, why not?