One of the biggest problems facing investors is the amount of ‘noise’ that we get from the financial media and commentators. Financial news sections, the internet, and podcasts are continually bombarding us with the latest ‘hot stock’ or miracle investing strategy. Meanwhile investors get caught up in the noise checking their stocks daily to see what’s performing well and what’s under-performing.
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Warren Buffett’s 2018 Activist Investment
It is therefore no coincidence that the very best investors have found some unconventional ways to shut out the noise and focus on what’s important in order to achieve outstanding returns. But how do they manage to do it?
One answer can be found in the book – The Education Of A Value Investor, by Guy Spier. In Chapter 8 titled – My Own Version Of Omaha, Spier illustrates how he and some of the world’s great investors such as Buffett, Munger, Pabrai, and Klarman have set up their work environments in such a way as to minimize distractions and cut out the noise from financial markets. While some of these methods of created a distraction-free environment may seem unconventional, clearly they work, at least from these great investors. Spier himself made the decision to move to Zurich from Manhattan to create what he calls – his own version of Omaha.
Here’s an excerpt from the book:
So I started actively to consider alternatives to Manhattan. For a while, I thought seriously of moving to Omaha, given how well it had worked for Warren. I also considered Irvine, California, where Mohnish lives. I contemplated other American cities like Boston, Grand Rapids, and Boulder. And I thought about relatively low-key European cities such as Munich, Lyon, Nice, Geneva, and Oxford. But in the end, Lory and I agreed on Zurich. I had gone there often as a child and had always liked it.
Zurich also struck me as a place where I could live in mental peace—a quiet, pleasant, slightly bland setting where there isn’t too much going on. Here I could focus on my family and my fund without undue disturbance. Occasionally people ask me, “But isn’t it boring there?” My answer: “Boring is good. As an investor, that’s exactly what I want.” Because distraction is a real problem. What I really need is a plain, unobtrusive background that’s not overly exciting. And I’m certainly not alone in finding Zurich conducive to clear thought. Historically, the city has provided a space for free contemplation to residents as diverse as Carl Jung, James Joyce, Richard Wagner, Vladimir Lenin, and Albert Einstein—not to mention Tina Turner.
Next, I set about finding the perfect office—another key component of my new environment. Initially, I made a mistake, renting an office for a year on the Bahnhofstrasse, a ritzy street that is Zurich’s own enclave of Extremistan. It’s an elegant area, full of expensive stores. But super-rich settings like this are not ideal for me since they stimulate unhealthy appetites. So I soon decided to move to an office on the other side of the river, a 15-minute walk from the Bahnhofstrasse’s glitz and glamour. For me, this feels like a safe distance.
I also began to recognize that other investors I admire had adopted a similar approach to building their environment, whether consciously or not. Mohnish, for one, works in a less-than-glamorous office park in Southern California with no other financial institutions nearby. I once asked him why he hadn’t set himself up in an attractive office in one of Irvine’s fancy shopping centers, close to his favorite restaurants. “Oh, Guy,” he replied. “I don’t need all that razzmatazz!” I have no doubt that he understands what the area around him can do to his mind.
Likewise, Seth Klarman, one of the most successful investors on the planet, works out of a decidedly unflashy office in Boston, far from the intoxications of Wall Street. If he wanted, he could easily rent the top floor of a gleaming skyscraper overlooking the Charles River. Nick Sleep set up his office in London near a Cornish pasty shop on the King’s Road, far from the grandeur of Mayfair, which has become Britain’s hedge fund mecca. Allen Benello, the manager of White River Investment Partners, works out of a nondescript office in San Francisco, nowhere near the city’s financial district. And Buffett, as we’ve discussed, is tucked away in Omaha’s Kiewit Plaza—another building that is not exactly known for its razzmatazz.
This strikes me as a significant yet largely unrecognized factor in the success of these investors. Small wonder, then, that I wanted to create my own version of Omaha.
That said, I’m different from Buffett—and not just in terms of IQ points. For one thing, it’s important for me to have a pleasant view from my office, whereas he’s not fussed about such aesthetic considerations. While I like to look out on trees or something similarly cheering, he routinely keeps the blinds drawn in his office. But in other substantive ways, I consciously modeled the environment he’d created in Omaha. For example, Warren lives about a ten-minute drive from his office, which is slightly outside the city center. Mohnish’s office in Irvine is also about ten minutes from his home, and it’s slightly outside the city center. I mirrored them, selecting an office that’s a twelve-minute walk or seven-minute tram ride from my home and that’s slightly outside the city center.
For me, it works to be outside the heart of the city, partly because this makes it less likely that too many people will drop by the office opportunistically. They need a stronger reason to make this effort, so their visits tend to be more worthwhile.
These decisions were carefully considered. For example, Mohnish and I had specifically discussed commuting times, reaching the conclusion that the ideal commute takes around ten to twenty minutes. This is close enough to improve one’s quality of life, but far enough to establish a separation between work and home. For people like me who get obsessive about their jobs, it’s useful to have this separation. We need to see our families and spend time at home when we’re not just buried in work.
As I’ve mentioned, one of my flaws is that I’m amazingly easy to distract, and I need to address this problem in designing my physical environment. Unlike Buffett, who can operate brilliantly without a computer or an email address, I rely on my computer. But I’m also aware that the Internet and email can become appalling distractions for me. To counteract this and to help me remain focused, I physically divided my office.
At one end of the corridor, I have a “busy room,” with a phone, a computer, and four monitors. But I keep the computer and the monitors on an adjustable-height desk, which I typically position so that I have to stand beside it. Responding to emails is a low mental task, but it’s easy to get sucked into it for long stretches of time. So I’ve intentionally set up the desk in a way that prevents me from sitting at it. This might seem perverse, but the goal is to create an office that gives me the space to think quietly and calmly. Minor adjustments like this awkward positioning of the computer help to stack the odds in my favor.
At the other end of the corridor, I have a room that I call the library. Here, there’s no phone or computer. I want to encourage myself to spend more time sitting and thinking, so this room is designed to be warm and welcoming. I can take piles of financial documents to study in there or select a book from the shelves that line the walls. If I close the door, it means that nobody is allowed to bother me. The library also serves as a nap room. Not coincidentally, Mohnish also naps in his office, and Warren told us that he has a place in his office where he can nap too. This isn’t a matter of sloth—or, at least, not entirely! A daytime snooze keeps the mind fresh, shuts out the noise, and provides a chance to reboot the system.
About a year after our charity lunch, Warren Buffett generously gave Mohnish and me an impromptu tour of his office in Omaha. I was fascinated to see how he had structured his own environment to enhance his ability to make rational decisions. Perhaps the most striking feature of his office was that it contained so little that could clutter his mind. He had only two chairs and no space for large meetings—a practical means of discouraging unnecessary interactions. His window shades were closed, presumably helping him to focus on the task at hand.
On the wall behind his desk, Warren had a prominently displayed photo of his father, Howard Buffett, whom he greatly admires. Lowenstein’s biography of Warren describes Howard as an “unshakably ethical” Congressman who “refused offers of junkets and even turned down a part of his pay. During his first term, when the congressional salary was raised from $10,000 to $12,500, Howard left the extra money in the Capitol disbursement office, insisting that he had been elected at the lower salary.” It’s not hard to see this influence on Warren, whose modest salary for running Berkshire reflects a similar sense of integrity and altruism. More to the point, the photo is a reminder of how helpful it can be to include images of our role models when we are constructing our own work environment.
As for Warren’s desk, it was so small that there was no room for piles, obliging him to process his reading efficiently. An in-box and an out-box lay on top of his desk, along with a box labeled “Too Hard”—a visual reminder that he should wait patiently until the perfect opportunity arrives. As he puts it, “I will only swing at pitches I really like.”
There’s an element of playfulness about his “Too Hard” box, but its presence must also have a subtle effect on the way he thinks. These cues wouldn’t help much if Buffett didn’t also have an extraordinary mind. But it’s interesting that even a man of his intelligence sees fit to keep that box on his desk as a physical aid that keeps his mind on track. To me, this shows a remarkable humility about his abilities.
I also found it telling that there was no Bloomberg terminal in Buffett’s office. Apparently, there’s one at the other end of the building, used by a Berkshire employee who manages a bond portfolio. Buffett could no doubt access it if he wanted to, but he’s consciously chosen not to have this informational fire hose within easy reach.
Likewise, when I visited Nick Sleep’s office in London, I was intrigued to discover that he kept his Bloomberg awkwardly positioned so that he could use it only while sitting on an uncomfortably low chair. Like Buffett, he had consciously designed his environment to discourage his use of a terminal that costs more than $20,000 a year to rent. Why? After all, a constant flow of information is surely the lifeblood of any professional investor.
My own relationship with the Bloomberg terminal is similarly ambivalent and tortured. It’s a formidable tool, and there are times when I’ve found it helpful as a way to get stock data or news in a hurry. In my New York vortex years, my Bloomberg subscription also served the dubious purpose of bolstering my ego. It made me feel like a privileged member of a club that could afford the most expensive toys; without it, I might not have felt equal to my peer group. But beyond this foolishness, there’s also a more serious downside to using a Bloomberg—or, for that matter, rival systems sold by companies like Reuters and FactSet.
All of these products—but especially the coveted, top-of-the-line Bloomberg—are ingeniously designed to lure the subscriber with the seductive promise of nonstop information. The terminal delivers such a relentless flood of news and data into investors’ brains that it’s hard to muster the self-discipline to turn off the spigot and concentrate on what matters most. You see stock tickers flashing before your eyes, news alerts blaring for your attention. Everything links to something else, so you often find yourself ricocheting into deeper and deeper recesses within this informational netherworld.
Initially, I was totally hooked. In my early years as a money manager, I would arrive in my Manhattan office and immediately fire up my Bloomberg. It would light up like a Christmas tree, its bright colors subconsciously spurring its users to action. But as I became more self-aware, I began to realize that this call to action wasn’t helping me at all; nor were the endless hours of information surfing. I started to ask myself, “Is this really the best and highest use of my attention?” If I have only a limited amount of willpower, how much of it should I squander in trying to resist the temptation to snack on all of this informational sugar?
During the financial crisis, I saw more clearly than ever what an unhealthy addiction the Bloomberg had become. The constant barrage of bad news could easily have exacerbated my irrational tendencies, when what I needed most was to screen out the noise and focus on the long-term health of my portfolio. So I went cold turkey. In late 2008 and early 2009, as the market collapsed, I turned the monitor off for days on end. Another tactic that I used to distance myself from the Bloomberg was to stop having a personal login, though we still had a company login. I also changed the color scheme on my home screen so that it was dull and muted, thereby minimizing the risk that all those bright, flashing colors might jolt my irrational brain into unnecessary action.
In setting up my office in Zurich, I had to decide once again how to tackle the Bloomberg conundrum. By now, I was used to having the service. Psychologically, it would have been painful to let it go. I also knew that occasionally it was extraordinarily useful. But I was equally aware that, for me, it did more harm than good. So, in the end, I came to an uneasy compromise. I relegated the Bloomberg to the adjustable-height desk in my busy room. The fact that the desk is adjusted so that I usually have to stand means that there’s little danger that I’ll be tempted to use the Bloomberg for hours, grazing in a state of helpless distraction. Nowadays, I often go weeks without turning on the Bloomberg at all. Still, it’s there if I ever need it—my own exceptionally expensive version of a toddler’s security blanket.
Of course, the rational part of my brain tells me that I’d be better off getting rid of the Bloomberg entirely. Why bother paying more than $20,000 a year for a distraction that I can so easily do without? But I accept my fallibility. Instead of pretending to be perfectly rational, I find it more helpful to be honest with myself about my irrationality. At least then I can take practical steps that help me to manage my irrational self. Perhaps this is the best that any of us can do.
Article by Johnny Hopkins, The Acquirer's Multiple