Warren Buffet's Kid Show [video]

http://online.wsj.com/video/clip-warren-buffett-secret-millionaire-club/31F28D12-5EA4-4515-9CB2-62F9C0CF64CE.html

by cgherb911 • 17 years ago

40 29 17 years ago

online.wsj.com

davidw• 17 years ago

There's a bit about "buying at a fair price", which brings to mind the bit about the devil being in the details...

It's more of a meditation than a specific instruction. This works for other kinds of advice: "Do the right thing?" doesn't help much, but saying "Am I doing the right thing?" at the right moment can save you a lot of grief.

bumbledraven• 17 years ago

Actually, it is pretty specific. In essence, Buffett says you should first figure out what it would be worth to own the entire company (the "intrinsic value"; calculating this is something of a black art) then divide that by the number of shares the company has issued. Only if the current price per share is significantly lower than that (the "margin of safety") should you think about buying.

10ren• 17 years ago

You're absolutely right. The cartoon only mentions qualitative factors. If the business has been doing well, and those factors are present (and other explanations are absent), then it's a reasonable bet that those factors are the reasons for the the business's success. You can then examine each of these factors in isolation and assess how likely they are to continue in future.

With these qualitative factors settled, you can look at the numbers, especially the rate of growth of profit, and assume that they will continue (taking into account how sure you are of this), and calculate what the business is worth based on extrapolating that growth. Extrapolation is easy.

As a contrast, consider companies during a boom. Explosive growth, even in profitability, but... Another contrast is high tech companies, which can be extraordinarily profitable, but their long-term success has proven hard to predict. Buffett says he won't invest in something unless he understands it - as a programmer, this is great to hear from someone who is so incredibly successful.

Now you know the secret. When your grandkids ask you how you became so rich, you can tell them: "it was all because of 10ren".

BTW: Thanks for reminding me of all this! Now is the best time to buy stocks. They're on special.

RiderOfGiraffes• 17 years ago

Warning: Auto-starting video.

From http://ycombinator.com/newsguidelines.html

  > If you submit a link to a video or pdf,
  > please warn us by appending [video] or
  > [pdf] to the title.

cgherb911• 17 years ago

thanks for the info!

breck2• 17 years ago

I'll admit it: I will watch this cartoon.

Warren Buffett is, next to Taleb and a few others, my favorite modern thinker, and the clip seems to do him justice. It's ironic how his ideas are so simple they can be accurately presented in cartoon form. It's like reading the Intelligent Investor: business/investing isn't too complex, the hard part is executing on simple premises while keeping your emotions in check for the long term.

biohacker42• 17 years ago

What fascinates me about Warren Buffett... actually it's not him it's everyone else.

He takes 0 and 25 and the 25 only if he makes a profit beyond what a conservative investment would. Something like 8% per anum, not sure, the exact number is not important anyway.

But your typical hedge fund takes 2 and 20, that's even if they do nothing or lose money.

Now here's where it gets interesting. There are literally hundreds of those funds. Doesn't that suggest a massive pent up demand for investment?

BrentRitterbeck2• 17 years ago

It's a quarter of everything over six percent.

Source: How to Pick Stocks Like Warren Buffett, pg. 11.

mediaman4• 17 years ago

Taleb is not a good modern thinker. He takes existing, well-known mathematical principles, rewrites them without citation or reference for the layman, and then disparages the people whose work he took and other financial professionals who also understand the mathematics quite well, as if he knows something they don't.

He would be a lot less irritating if he (1) didn't claim credit for ideas that aren't his and (2) stopped falsely disparaging people.

Buffett, on the other hand, is quite a bit more humble and grounded and provides stable, sage advice. He also credits people a lot more for the work they've done.

bhewes3• 17 years ago

First what well-known mathematical principles are you talking about? Second have you read any of his academic papers? All can be found on SSRN. Two of the big ones are "Errors, Robustness, and the Fourth Quadrant" and "Finiteness of Variance is Irrelevant in the Practice of Quantitative Finance."

Taleb states "My central idea in The Black Swan is that: rare events cannot be estimated from empirical observation since they are rare. We need an a priori model representation for that; the rarer the event, the more the dependence on aprorism. Further, we do not care about probability (if an event happens or does not happen); we worry about consequences (how much total wealth or total destruction will come from it). Given that the less frequent the event, the more severe the consequence (just consider that the 100 year flood is more severe, and less frequent, than the 10 year flood), our estimation of the CONTRIBUTION of the rare event is going to be massively faulty (contribution is probability times effect; multiply that by estimation error) ; and nothing can remedy it. So the rarer the event, the less we know about its role --and the more we need to make it up with an extrapolative, generalizing theory. Hence model error is more consequential in the tails and some representations ARE MORE FRAGILE than others..... Nobody before has examined my problem in the history of thought, let alone systematize the idea of decision-making under certain classes of ignorance."

I am sure he would be excited if someone could show him that his idea is not original.

breck2• 17 years ago

One of the things I love about Taleb is he doesn't cite lots of thinkers and have lots of quotes and references.

He writes from his head. He doesn't go digging through books looking for choice quotes to sprinkle throughout the text and make it appear more intelligent. I don't care if his ideas come from a lot of different sources. He synthesizes them very well.

The alternative way of writing really irritates me now. For instance, I was just reading "Poverty in America". The book literally starts by saying something like:

-In 1979 the government official in charge of fighting poverty in America stated, "Poverty will be extinct in 10 years." But it hasn't happened...blah blah

The whole book starts with some quote that is so shaky. Who is this guy who said it? Was he sober or drunk when he said it? What was the context? What did he mean by "extinct" and "poverty".

I love Taleb because he doesn't just snatch things out of context to help bolster his arguments. He thinks up his own stuff. He puts everything in his words. If you don't understand something enough that you can't fluidly describe it in your own words, you shouldn't be writing about it. I think PG's essays also are almost entirely in his own words, which is one of the reasons why they are generally so logical and clear.

Also, the disparaging is well deserved IMO. I think it's more than warranted to disparage people who don't understand statistics who are supposed to. At the very least, people who understand stat/prob should take themselves much less seriously than they do. I know it is very hard to always speak with correct probabilistic language, humans are programmed to speak in stories and not probability, but there should be a greater acknowledgement of this by financial, media, and other professionals. Until that happens disparage all you want.

vaksel2• 17 years ago

am I the only one who thinks this is pretty stupid? Kids won't watch something like that(horrible acting/irrelevant topic), and adults gain nothing from the cartoon format.

As long as they are getting Buffet, why not create a more concrete series. I dunno, how about each episode he'd take a company to examine for investment, and talk about all the pros and cons that he sees, while teaching the rest of us about what to look for in our own investments

jakarta• 17 years ago

Did you actually watch the video? He showed a pretty decent way to analyze a candy business. Omaha Candy may be a fictional company, but it's easy to see he's discussing See's Candies (which Berkshire owns).

In the video he even mentions that the candy business is good because the maintenance capex is relatively low (he didnt phrase it like that, but that's what it is) and that profits really only need to be plunged into advertising (basically an example of a high ROIC business since its not very capital intensive).

He's mentioned all of this before in the Berkshire Hathaway shareholder letters -- this is kind of the same thing but in cartoon form. So as a teaching tool, it's pretty good. If you really want more, dig up his partnership letters.

vaksel2• 17 years ago

yes I watched the video, do you honestly see kids sitting down and watching that? And if the show will be watched almost exclusively by adults, why use the cartoon format?

andreyf2• 17 years ago

You're not the only one. But I suppose not many around here have kids, so your point about how utterly boring this is for them isn't going to stick.

aaronsw• 17 years ago

More at http://www.youtube.com/watch?v=kVvyVVoLH8U for those who just can't look away.

goodkarma• 17 years ago

I doubt I would have watched that when I was a kid, but I will DEFINITELY watch it now. The cartoon format makes it kind of goofy, but the content is great.

Warren Buffet's Kid Show [video]

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