“Common denominator of investors like Buffett, Munger, Howard Marks is to value a business asset and see what it is worth and then let me try to buy if that is less than its worth. This to me was a total revelation. Once I figured out that is what they are doing, it was incredibly liberating. One can say to oneself that one does not need to play this game of pretending that we can predict the future which all of us know is impossible,” says William Green , Author of Richer, Wiser, Happier, in conversation with ET Now.
The outcome of inflation print, recession or no recession, is outside the control of an investor. How much credence can let us say Warren Buffett or John Templeton give to these external, uncontrollable macro data points?
You have raised such an important point there because if you look at the greatest investors, almost without exception the ones I have interviewed do not pay that much attention to macro questions because what they are saying is actually all this stuff is unknowable. Think of somebody like Howard Marks, one of the most powerful, most influential investors of our time. And Howard says, “look, I belong to the I do not know school, I do not know what is going to happen with inflation, I do not know what is going to happen with economic growth. I do not know what is going to happen with unemployment.” He says it is all too complicated, there are too many factors and that makes total sense if you think about it.
Just think about the midterm elections that we just went through here in the US. Nobody predicted what was going to happen. Everybody was saying well there is going to be a Republican wave and the Democrats are going to be crushed and in fact it has not turned out like that at all.
Think about Covid, nobody was predicting that we would all end up having to stay at home and the economy would be turned on its head because of some virus that appears to have come from bats infecting humans in China and then spread across the world. We do not even know if that is really what happened. The world is such a confusing and complex place and in a sense once you understand that, it is not that helpful actually to make predictions about macroeconomics.
One can actually focus on the micro, on what is knowable. And so the common denominator of investors like Buffett, Munger, Howard Marks is that let me value a business, let me value an asset and see what it is worth and then let me try to buy if that is less than its worth. This to me was a total revelation. Once I figured out that is what they are doing, it was incredibly liberating. One can say to one self that one does not need to play this game of pretending that we can predict the future which all of us know is impossible.
And this frees us up to focus on what is really important, which is find a value asset, try and figure out whether this is a good business, whether it is cheap, whether it is going to generate great cash flows in the future. So it is a difficult thing for a regular investor to figure out because there is no much noise, there is so much prediction around it. Suddenly you realise that it is nonsense and you have to tune it out. But it takes a degree of discernment and education to get to a point where you realise most of what people are talking about investing is nonsense, it is a waste of time. Forget about the macro, it is not that it is irrelevant, it is very important but the problem is it is not knowable, at least not to the greatest investors I have interviewed.
I figure if Buffett cannot see what is going to happen with the economy or inflation or growth rates, why on earth would I delude myself into thinking that I could figure it out.
George Soros famously said I do not like working, I do the absolute minimum that is necessary to reach a decision because there are people who amass an inordinate amount of information, much more than is necessary to reach a conclusion and then they become attached to these investment decisions. Is this a common trait that you […]
source William Green on simplicity of greatest investors, macro vs micro and need for diverification
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