Buffett and me (weekend thoughts)

Earlier this month, Buffett announced he was handing over the CEO role at Berkshire.

Like a ton of kids, I was a huge Michael Jordan fan growing up. I was ~10 when he retired from the NBA, and I remember thinking, “wait, I’m supposed to watch basketball without MJ next year?”

Seeing Buffett step down kind of makes investing right now feel like basketball post-MJ in 1999. Sure, basketball was still a ton of fun to watch; in fact, it might have been more exciting because the field felt so open (to a kid, it seemed inevitable that the Bulls would win every year in the same way the Globetrotters won every time you saw them play or the Road Runner would always get the best of the Coyote). Investing today is still just as interesting as it was yesterday…. but a little piece of the magic is gone without Buffett.

Buffett served as the industry’s shining light for ~50 years. Every investor who “turned pro” started their career with Buffett’s returns / track record as their north star (though no one has come really close to matching it!)… and, once you were a professional investor and the market inevitably hit you in the face, there was always a Buffett CNBC appearance (or his famous “buy American. I am” NYT oped) to reassure you that things would be alright in the long run (or, on the off chance Buffett wasn’t making a media appearance, you could go back and read some of his letters talking about the long term!). Plus, in a crisis his reputation often allowed him to steer the government / Congress in ways that produced superior outcomes for everyone (as just one example, Paulson credits Buffett with part of the TARP design in the GFC).

Outside of just his impact on professionals / helping steady the industry, Buffett was the face of investing in the same way Jordan was the face of basketball in the 90s. If you were that weird kid who grew up caring about the stock market¹, Buffett was who you idolized, and he was probably your inspiration for wanting to turn investing into a career. I know that’s the case for me (I’ll give the full story of how Buffett impacted me at the end of this post if you’re interested in some personal anecdata). More than just being an inspiration / guide, Buffett was also the moral compass for the industry. Did the industry always heed his advice? No, of course not… but it’s crazy how many things Buffett (and Munger) warned about on moral grounds² that ended up blowing up³.

Anyway, I don’t have much of a point behind writing this article. In fact, I started writing this article because I’m rereading The Snowball for my fintwit bookclub with Byrne Hobart (you should check it out if you haven’t; I think our last episode on tariffs was by far the most interesting we’ve done now that we’re starting to get the hang of it) and I had some thoughts on Buffett’s retirement that I wanted to put down…. but when I started to write, I realized just how much Buffett retiring marked a changing of the guard for me. So I’ll devote this post to how Buffett inspired me to be an investor and I’ll follow up with thoughts on The Snowball in my next post.

Before I dive into how Buffett inspired me, I’ll note one thing: it’s a personal story. It’s kind of sappy. I can’t promise you’ll take anything from it! So feel free to stop reading here and no hard feelings… but, again, Buffett retiring kind of hit me, and I wanted to put a small thing down just to mark the occasion.

How Buffett inspired me to be an investor

When I was born, my grandparents bought some savings bonds for me, and they gave them to me when I turned 16. They were worth ~$1k when I got them; that was some serious money to a 16 year old, and when I got it I remember my dad asking me what I wanted to do with it. I told him I wanted to invest the money (“save it”).

I think that decision was partly my personality; my teachers used to tell my parents that every student would play music and arts games during computer class… except for me. The computer had a math game built around a checkout register that had come to life and would eat all sorts of different coins while counting them. I was the only student who played it… and I played it obsessively every computer class (I believe I set all of the high scores by a huge amount…. but it wasn’t that impressive since I was also the only person who played it more than once!). I also remember when we got our first home PC when I was maybe 8 or 9, I somehow discovered Microsoft Excel. Rather than spend all of my time playing video games like most kids, I would spend hours building primitive spreadsheets based around saving money for 40 years and see how widely the numbers would swing with small changes in either the compounding rate or savings rate (i.e. it would blow my mind how much more money you ended up with in 40 years if you increased your savings rate by $100/year or increased the compounding from 8% to 9%). I remember getting somewhat obsessed with being able to save $3.6k/year, because if you could do that every year for 40 years you would retire a millionaire.

So part of my decision to invest those savings bonds was clearly personality based…. but part of it was also probably driven by my dad, who was a banker and very frugal (he bragged about saving every penny of every bonus he ever got), so there was probably a little bit of unspoken family pressure as well.

Anyway, after I said I wanted to save the money, my dad beamed and told me he was going to put me in touch with his “investment guy”. His “investment guy” turned out to be a salesman from Edward Jones. A few days later, we drove out to the Edward Jones office, and I told the sales rep I wanted to save the money and not touch it till I was retired. I had done a little research on savings, and I told him I wanted an aggressive stock portfolio to maximize my compounding. He smiled and told me he had just the product for me (a concentrated emerging markets equity fund), shook my hand, took my check, and off I went.

A month later I got my first statement, and I was kind of shocked to see I only had ~$900 in my account. I could not believe how much money I had lost; I was working ~40 hours/week that summer making minimum wage, so after taxes I was taking home around $200/week (I can visualize a check that was for $212.43, but I can’t confirm and human memory can be very frail!), so that $100 loss was just astronomical to me…. It would take me more than two full days of work to make up for those losses! So I called the Edward Jones guy and asked him what had happened, and he gave me the normal pitch. “It was a rough month, stocks go up and down, stay in it for the long term, etc.” I told him I got all that, but I was still surprised that stocks had gone down 10% in less than a month⁴; the books I had read suggested that 10% losses didn’t happen all of the time, and I had been following the market a bit now that I was invested in it and it didn’t seem down anywhere close to 10%. The sales rep told me the market was down 5% and then was kind of coy with what happened to the other 5%; eventually, I realized that I had paid him a ~5.25% sales fee to get into the mutual fund.

That was just highway robbery to me. I had paid him ~$52 bucks; that was more than I made in an entire day! It was more than a new PlayStation game cost! I was just furious; I wanted to know why I was paying this man so much money. So I bought a book on savings (I think it was stock investing for dummies). Eventually, I came to realize that the ~$50 bucks I paid was a sales load, and there were plenty of mutual funds that were comparable to the one I had purchased that I could buy without the sales load. To put it bluntly, I had unknowingly paid Edward Jones a full day of wages in return for a good handshake. And it was kind of crazy when you thought about it; if someone had a ~$100k portfolio and invested it in a mutual fund with a load fee, they’d pay the sales person >$5k. That load fee would represent probably the biggest expense that person would make that year (outside of maybe mortgage payments and a car note), yet people paid it without thinking or maybe even realizing they were doing it!

I promised myself then I’d never pay another sales load again. Whatever book I read suggested using broad based index funds with no load to invest; I believe it referenced the Boglehead’s guide to investing (or perhaps an earlier forbearer). That was the next book I read, so at 17 I quickly became a Boglehead. I wanted to save as much of my income as possible in low-cost index funds.

But I kept thinking back to my excel sheets… being a Boglehead was awesome, and I’m a pretty frugal person so I had no doubt I could save up a nice bit. I was getting ready to start college, and I felt confident that after graduation I could get a job that would let me save even more than the $3.6k/year I had been thinking about when I built my primitive spreadsheets…. but what if I wanted to do better than the market? What if I didn’t just save ~$70/week⁵…. what if I could compound it at 10% a year instead of 8% a year? How much more money would I have then? Was that even possible?

One of the books I had read on investing mentioned Berkshire Hathaway and how it had been built into a giant through great investing. So I did some googling and found Hagerstrom’s The Warren Buffett Way⁶. I read it and was instantly hooked. Buffett was the role model of what I wanted to do with my life: read and think about investing all day, compound money, and eat lots of candy. I picked up my first 10-K and bought my first stock that summer⁷.

That was almost exactly 20 years ago. Obviously, a lot of things have changed since then; for example, at 17 one of the things I loved about Buffett was his diet of basically nothing but junk food, steaks, and hamburgers. Today, approaching 37, I can’t imagine eating Buffett’s diet (I’d love to, but if I tried for more than a day I would die), but the overall dream remains the same. Buffett’s the best to ever do it, he inspired me to get into investing, and he remains a role model.

I’ve never met or interacted with Buffett, but he’s had an indelible impact on my life (and so many others)…. and I just wanted to take a second to recognize / thank him for all of that in my own small way.

1. And if you’re reading this blog, chances are you were that weird kid!

2. The one that always stands out to me is Munger calling out Valeant, though there are plenty of others

3. I’m sure there are plenty of exceptions to this rule, but it’s interesting how against crypto Buffett / Munger were (see, for example, the famous rat poison squared quotes). Berkshire has made plenty of people wealthy beyond their wildest dreams… but I wonder how many early value investors are kicking themselves for going to Berkshire in the mid-2010s, getting turned off crypto, and missing a generational run? Particularly younger investors; if you went to Berkshire around then and learned “be conservative” and “don’t buy hype”, how much have you been set back versus your younger peers who just started throwing out some YOLOs? Obviously that’s very much resulting, but it’s an interesting thought (and I’m speaking very much from the heart; I was always crypto skeptical, but locked into a no-coiner when I heard Buffett and Munger just smashing it)

4. I believe the account had been open for eight days between funding and month end, so the statement represented a 10% loss in 8 days.

5. $70/week turns into ~$3.6k/year

6. At least I think that’s the book I read. Again, human memory is frail; maybe I started with a different Buffett book and then read that one. But I know I read this before college and thought “this is what I want to do.”

7. Obviously it took a while for the Buffett way to sink in; I believe the first stocks I bought were Capital One and GE… this was ~2006, so I was buying these right in front of the GFC. Ouch!