How Buffett Makes 50% Returns Working With A Smaller Amount Of Money

Alice Schroder was allowed to interview Buffett and examine his notes to gain unique insight into how the Berkshire Hathaway CEO analyses business, views risk, and explains how he makes investment decisions about companies. She explains his strategy in this talk and question and answer session. Schroder is author of the biography The Snowball: Warren Buffett and the Business of Life.

Alice Schroder Analyzes How Buffett Makes 50% Returns Working With A Smaller Amount Of Money

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Transcript

These days it doesn't take quite so large a check to make the bank bounce but it's interesting to see that when it does happen it's Warren Buffett that they run to to cover the overdraft. He is really a singular figure in these times. And when I started working on the snowball of course things were very different. The Internet bubble had just imploded and it was just after the aftermath of Enron and I never anticipated anything like this occurring but I knew what he was like. And of course much of the importance of him is that his ideas and principles haven't really changed in 50 years. So I thought that writing a book about him would actually be a fairly simple matter. When you ask where in a question he always had the answer when I would present him with a business problem he always would have the solution. So the job was just to write it down. What I didn't realize was how quickly I would encounter something called civil rights law which is that the cause of problems is solutions. So having asked all my questions. Having listened to his stories and having gotten all of his solutions very quickly I was presented with a problem which was that I had far more solutions material questions answered than I knew what to do with and I began casting about for a way to construct a narrative and to come up with how to put together a book about this man's life that would be meaningful and present a set of ideas. And I had a few attempts that that failed that I thought you might like to hear about them. So here's here's my first shot at it. The story began with a journey through the life of a 78 year old man.

It traveled back through the decades tracing and uncovering a common truth that lies at the core of the most powerful investment philosophies teachings and models in the world. What you will learn today is the single secret underlying law of the snowball. A set of principles based on the most powerful law in the universe. All that Warren Buffett ever accomplished or attained in the business of life was done in full accordance with this most powerful law. Using this simple universal law the snowball offers the knowledge of how to create intentionally intentionally and effortlessly a joyful life. This is the secret the secret to everything. The secret to unlimited happiness love health and prosperity. This is the law of attraction. The secret of Warren Buffett. Okay well I passed on that idea. I thought it was not too good but somebody else went there. So my next attempt snowballs action kicks off in modern day New York where a bloodstained copy of The Intelligent Investor is found symbolically laid at the foot of the New York Stock Exchange. The quest for the holy grail of investing led to a search that spanned the globe from London to Los Angeles leaving a gruesome trail of interview subjects behind as evidence. The result was an exhaustively researched page turner about a secret investing cult cover ups of ancient mistakes and savage vengeance against those who tried to capture the holy grail for themselves. In the end I found the Grail guarded by an ancient 78 year old heretic buried deep in a maze of files under a pyramid in Kiewit Plaza. I love that idea. But then there was this guy named Dan Brown who went ahead and used it before I got there. So I was sure however that somewhere hiding in Cuba plaza there was a Holy Grail because I spent two thousand hours with Warren Buffett. I did get to go through all his files and I got to ask him all of the questions and business problems that I wanted to. And I thought you know there had to be a Holy Grail because I had heard from so many investors a little bit of irritation might not be the right word.

But you know Warren always says that it's very simple. There's a few simple principles. And if he were only working with a smaller amount of money he could earn 50 percent returns a year.

Well I've had a lot of people say to me you know I am working with a smaller amount of money.

If it is really that simple why am I not earning 50 percent returns a year. So the question is is it just that Warren Buffett is a genius. Is it just that we're all dumb or is the truth somewhere in between. And I think the truth is somewhere in between. I was sure that hiding somewhere in his office was the Holy Grail. And in fact while Warren is brilliant and he is definitely different from everybody else there is something more to it because he does have a way of making the difficult look easy. And he also has a hard time understanding or perhaps even admitting how hard he works. It's sort of like asking a fish to describe water and there are some concepts that are so ingrained in him and so embedded in him that he doesn't really understand them himself. He's he's just they've been there for so long. For example take the rule that he follows about asset turnover quote.




About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver