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Warren Buffett on living in Omaha:
(from the book Supermoney)
"You can think here. You don't hear so many stories. You can just sit and look at the stock on the desk in front of you."
John Templeton on living in Nassau, Bahamas:
(from the book Sir John Templeton by Robert Herrman)
“If you’re going to have a superior record, you have to do something different from what the other security analysts are doing. And when you’re a thousand miles away from Wall Street in a different nation, it’s easier to be independent and buy the things that other people are selling, and sell the things that other people are buying. So that independence has proved to be a valuable help in our long-range performance. Then, the other factor is that so much of my time in New York was taken up with administration and in serving hundreds of clients that I didn’t have the time for the study and research that are essential for a chartered financial analyst. And that was the area in which God had given me some talents. So now in the Bahamas I had more time to search for the best bargains.”
Reading these quotes, I feel a temptation to flee New York. An urge to retreat to a chalet in the Alps or a cottage on a hidden beach in the Caribbean. Unplug from the internet and read, think, and write all day.
Comedian Lewis Black captured New York’s noisy insanity best:
“I love New York City. The reason I live in New York City is because it’s the loudest city on the planet Earth. It’s so loud I never have to listen to any of the shit that’s going on in my own head. It’s really loud. They literally have guys come with jackhammers and they drill the streets and just leave cones in front of your apartment; you don’t even know why. Garbage men come; they don’t pick up the garbage, they just bang the cans together.”
After years of living here, I crave quietude.
Living in any financial hub, you have to deal with another kind of noise. You are surrounded by people who are “in the business.” They are driven, ambitious, competitive. Always looking for the next insight or idea. Always pitching, selling, connecting. There is a constant conversation, an energy driven by market volatility and the hunger for growth.
Will this market hold the support? What do you think of European equities into 2019? Are the homebuilders a buy here? Did you see that Insert Name Capital just went activist on Random Corp of America? And what about China? Hey, let’s set up a meeting with Yet Another Fund LP. Trust me, you’ll like those guys.
You get bombarded with information and sales pitches. The days are never quite long enough to deal with it all. Just one more meeting, just one more presentation. Being plugged in can leave you exhausted and distracted.
No wonder that Buffett removed himself from the circus:
"The difference between successful people and really successful people is that really successful people say no to almost everything."
In “Good to Great” Jim Collins suggests making a “stop doing” list. From his “Best New Year’s Resolution”:
“In cataloguing the key steps that ignited the transformations, my research team and I were struck by how many of the big decisions were not what to do, but what to stop doing.”
“The start of the New Year is a perfect time to start a stop doing list.”
If you want to do fewer things, being exposed to fewer things seems like a sensible first step.
So, should investors all pack up their Bloombergs and run their portfolios from a trailer in the Rockies?
Let’s look at a couple of other quotes:
Julian Robertson (Institutional Investor, 1986):
“It’s not that Robertson does anything dramatically different from other money managers; it’s just that he does it so well. Throughout the day, he’s continually in touch with a dozen or so Wall Street and money management contacts to get ideas or discuss his own thoughts on the market and the various stocks he is interested in at the moment”
Michael Steinhardt (WSJ, 1986):
“All through the day, phone calls bring Mr. Steinhardt the news he needs. Other investors study annual reports, read trade journals or visit companies to get investment ideas. Not Mr. Steinhardt. He thinks the last time he visited a company was in 1973. Instead, he munches on bran muffins and hears daily from Wall Street personalities.”
These great money managers practiced a seemingly opposite approach. They plugged themselves into the flow of information at the heart of the market. They built their businesses around their networks. Not only to source new ideas, but also to get valuable feedback on their own thoughts.
From the book “Julian Robertson: A Tiger in the Land of Bulls and Bears” (Daniel A. Strachman):
“From the beginning of his career he had worked very hard at establishing a network of people around the world who he could turn to for information about potential investments and who he could use as a sounding board before he made investment decisions.
His use of the phones to gather information is legendary. A reporter once commented after watching him in action that speed dial must have been invented for Robertson, in that he is constantly finishing up one call and dialing anther. At Tiger, Robertson spent most of his time either on the phone, looking at charts, or reviewing information. He constantly developed networks in order to make sure that when Tiger got information it had the right people available to process it.”
I think the best quote on this topic belongs to the legendary investor Bob Wilson:
George Goodman: Some of the great investors do better out of New York. John Templeton lives in his flower garden in the Bahamas and Warren Buffett lives in Omaha, Nebraska. And both of them say that living out of New York keeps them out of everyday gossip and the hurly-burly of flow and overload of information. How do you survive in New York?
Robert Wilson: Well, in the first place, I would be bored to death simply living in either the Bahamas or Omaha. And so the most important thing is to enjoy life. But secondly, I never really did all that well in the market until I came to New York. Unlike these other distinguished gentlemen, I am not an original thinker. I tend to rely on other people to feed me, if you will, ideas. And I’m very interested in what a lot of other people are thinking. And more bright people are in New York, in this business, than anywhere else. I think the difference really is that they are original thinkers and I am not. I am a derivative thinker.”
I think that is a very self-aware statement. It all comes back to this: “you have to know who you are.”
Are you an original thinker or a derivative thinker? I think most of us are both, but with one side being dominant.
Think of your brain as a research firm and yourself as the CEO. This is from David Ogilvy:
“I have come to the conclusion that the top man has one principal responsibility: to provide an atmosphere in which creative mavericks can do useful work.”
That is your job. To create the conditions in which you can do useful work. You have to be thoughtful about choosing an environment that supports good habits and suits your personality. What environment makes you happy and productive?
In my mind, that means balance. I may feel like retreating to the mountains for solemn reading and contemplation. But if I spent my entire year there, I would leave myself isolated and lonely.
What I would like to balance:
Time to read and think. Balanced with engaging discussion and feedback
Sourcing your own ideas. Balanced with tapping into a network of likeminded investors
Reading primary sources. Balanced with the knowledge of those who pondered the question before you
Meditation and focus. Balanced with the chaotic optionality of life surrounded by type-A people
Quietude balanced with conversation
Solitude balanced with connection
And let’s remember that even though Buffett physically removed himself from Wall Street, he worked hard to build and maintain a valuable network of friends and contacts. From Alice Schroeder’s Snowball: staying in touch with his friends in New York and elephant-bumping (at the annual Sun Valley conference and at Kay Graham’s Washington DC parties).
In March 1959, Warren took one of his regular trips to New York, staying out on Long Island at Anne Gottschaldt’s little white colonial house. By now she and her sister had adopted him as a sort of surrogate son, as if to replace the long-dead Fred. Warren kept spare sets of underwear and pajamas at her house, and Gottschaldt made him hamburgers for breakfast. On these journeys, he always set out with a list of between ten and thirty things he wanted to accomplish. He would go to the Standard & Poor’s library to look up some information. He would visit some companies, visit some brokers, and always spend time with Brandt, Cowin, Schloss, Knapp, and Ruane, his New York City network.
Buffett’s friend Tom Murphy referred to this kind of event as “elephant-bumping.” “Anytime a bunch of big shots get together,” says Buffett, “you can get people to come, because it reassures them if they’re at an elephant-bumping that they’re an elephant too.”
He developed a network of people who—for the sake of his friendship as well as his sagacity—not only helped him but also stayed out of his way when he wanted them to.
I will close with the full quote from Supermoney.
Omaha: “You can think here.”
But also: “I probably have more friends in New York and California than here.”
Buffett very deliberately chose his environment and built a balance in his life that worked well for him.
Go and do likewise.