While a lot of investors believe that a good finance course at one of the world’s most prestigious business schools is a sure-fire way to becoming a better investor, it seems that some of the greatest investors disagree. Here’s what Buffett, Munger, Greenblatt, Pabrai, and Lynch have to say about learning about investing at business school.
In Warren Buffett’s 1996 Berkshire Hathaway Shareholder Letter he says:
Warren Buffett: If You Own A Good Business, Keep It
To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing or emerging markets. You may, in fact, be better off knowing nothing of these. That, of course, is not the prevailing view at most business schools, whose finance curriculum tends to be dominated by such subjects. In our view, though, investment students need only two well-taught courses – How to Value a Business, and How to Think About Market Prices.
In Charlie Munger’s speech – A Lesson on Elementary, Worldly Wisdom As It Relates to Investment Management & Business, he says:
So the most useful and practical part of psychology—which I personally think can be taught to any intelligent person in a week—is ungodly important. And nobody taught it to me by the way. I had to learn it later in life, one piece at a time. And it was fairly laborious. It is so elementary though that, when it was all over, I just felt like a total horse’s ass. And yeah, I’d been educated at Cal Tech and the Harvard Law School and so forth. So very eminent places miseducated people like you and me.
In Joel Greenblatt’s book – You Can Be A Stock Market Genius, he says:
We start with some good news about your education: simply put, if your goal is to beat the market, an MBA or a Ph.D. from a top business school will be of virtually no help. Well, it’s good news, that is, if you haven’t yet squandered tons of time and money at a business school in the singleminded quest for stock market success. In fact, the basic premise of most academic theory is this: It is not possible to beat the market consistently other than by luck.
In Mohnish Pabrai’s book – The Dhando Investor, he says:
Most of the top-ranked business schools around the world do not understand the fundamentals of margin of safety or Dhandho. For them, low risk and low returns go together as do high risk and high returns. Over a lifetime, we all encounter scores of low-risk, high-return bets. They exist in all facets of life. Business schools should be educating their students on how to seek out and exploit these opportunities.
In Peter Lynch’s book – One Up On Wall Street, he says:
After that interlude at Fidelity, I returned to Wharton for my second year of graduate school more skeptical than ever about the value of academic stock-market theory. It seemed to me that most of what I learned at Wharton, which was supposed to help you succeed in the investment business, could only help you fail. I studied statistics, advanced calculus, and quantitative analysis. Quantitative analysis taught me that the things I saw happening at Fidelity couldn’t really be happening.
Article by Johnny Hopkins - The Acquirer's Multiple