Why can't you be Buffett?

What I'm about to tell you is: I'm not here to teach you how to be a great investor.　　Instead, I come to tell you why so few of you dare to expect to be such a person. If you spend enough time studying Charlie. Munger, Warren. Buffett, Bruce. Bockwitz, Bill. Miller, Eddie. Lambert and Bill.　　You'll see what I mean by the titans of the investment community. I know that everyone here has the intelligence beyond the ordinary, and it is hard work to reach today's level. You are the smartest man in the wise. But even if you don't listen to anything else I'm saying today, at least one thing to remember is that you have almost no chance of becoming a great investor. You only have very, very low probabilities, such as 2%, or even less. This has taken into account the fact that you are both highly intelligent and hardworking people and will soon be able to get an MBA from one of the country's top business schools. If this is just a randomly sampled sample from a large population, the chances of becoming a great investor will be smaller, such as one of 5000.　　You will have more advantages than the average investor, but in the long run you have little chance to stand out from the crowd. The reason for this is how much IQ you have, how many books and magazines you read, how much experience you have, or what you will have in your future career.　　Many people have these qualities, but almost no one has made a compound return of 20% or 25% over the entire career. I know that some people disagree with this view, and I have no intention of offending all of you here. I don't mean to say to someone, "you have little chance of becoming great."　　"There may be one or two people in this room who can achieve 20% compound returns in their careers, but it's hard to say in advance who they are without knowing you." On the good side, although most of you are unable to achieve a 20% combined return on your career, you will still do better than the average investor because you are Harvard's MBA. One can learn how to become an investor on a general level. If you are smart, diligent and educated, you can do well enough to keep a good well-paid job in the investment community. You can earn millions of dollars without being a great investor. With a year of hard work, a high IQ and a great effort, you can learn to go beyond the average at a few points.　　So there's no need to be frustrated with what I'm saying today, even if it isn't Buffett, you're going to have a really successful and well-paid career. But you can't always add value to your wealth with a combined 20% return, unless your brain has a certain trait at the age of 22. I'm not sure if it's natural or acquired, but if you don't have that trait when you're a teenager, you're not going to have it anymore. Before the brain is developed, you may be able to surpass other investors or not. Coming to Harvard doesn't change that, and after reading every book on investment, not many years of experience. IfYou want to be great investors, those are just the necessary, but not enough, because they can be replicated by competitors. Make an analogy and think about the various competitive strategies of the business community. I'm sure you've been or are going to take a strategic course here. You might be studying Michael. Potter's articles and books, which I taught myself before I went to business school.　　I've benefited from his book, and I still use that knowledge when I analyze the company. Now, what is the advantage of being a CEO of a company to keep you from being brutally competitive?　　How to find the right point to build a broad "economic moat" (economicmoat) as Buffett called it? If technology is your only advantage, it is not a resource to build a moat, because it can and will always be replicated. In this case, your best hope is to be acquired or listed and sell all the shares before the investor realizes that you have no sustainable advantage. Technology is a very short life advantage. There are other, like a good management team, an inspiring advertising campaign, or a high fever trend.　　The advantages made by these things are temporary, but they change with time and can be replicated by competitors. The "economic moat" is a structural (structural) advantage, like Southwest Airlines in the 1990 's. It is deeply rooted in corporate culture and every employee, and even if everyone knows what Southwest is doing, no one else can replicate it.　　If your competitor knows your secret but cannot replicate it, it is a structural advantage, a "moat". In my opinion, there are only 4 kinds of "economic moats" that are difficult to reproduce and can endure. One is economies of scale, Wal-Mart, Procter and Gamble, Home Depot is an example. Another resource is the network effect, such as ebay, MasterCard, Visa or American Express. The third is intellectual property, such as patents, trademarks, government licenses or customer loyalty, which is the model of Disney, Nike and Genentech.　　The last one is the high cost of user transfer, which is the benefit of Paychex and Microsoft, because the cost of switching users to other products is high.　　Just as companies either build a "moat" or endure mediocrity, investors need some advantage over competitors, otherwise he becomes mediocre. There are now more than 8,000 hedge funds and 10,000 mutual funds, and millions of individual investors each day try to turn to the stock market. How do you have an advantage over these people?　　Where does the moat come from? First of all, reading books, magazines and newspapers is not a resource to build a moat. Anyone can read. Reading is naturally very important, but it will not give you a strong advantage over others, so that you do not fall behind others. People in the investment community have a lot of reading habits, some people are more outstanding, but I do not think the investment performance and reading quantity is positively correlated, your knowledge accumulation reaches a certain key point, after reading moreReading will yield diminishing returns.　　In fact, reading too much news will hurt your investment performance, because that means you're beginning to believe all the nonsense that journalists are pouring out of newspaper sales. In addition, it is impossible for you to become a great investor if you are an MBA at a top school, or if you have dozens of possible degrees and certificates, such as certified Financial Analyst qualifications, Ph. D., CPA certificate, etc. Nor can Harvard teach you such a thing as Northwestern University, the University of Chicago, The Wharton School, or Stanford. What I'm saying is that MBAs are the best way to learn exactly how to get the average return on the market. You can greatly reduce the mistakes on the way forward through the MBA study. This can often make you pay handsomely, even if you are far from being a great investor. You can't afford to buy or learn to be a great investor.　　None of this will allow you to build a moat, just to make it easier for you to get into the game. Experience is another thing that is overrated. Experience is really important, but it is not a resource to gain a competitive advantage, it is just another necessary ticket. When experience accumulates to a certain point, its value begins to decline. If not, then 60, 70 and 80 should be the Golden age for all the great money-manipulators. We all know that this is not the case. So a certain degree of experience is necessary to play the game, but at some point it will no longer help. It is not the economic "moat" of investors. Charlie。　　Munger said, you can tell who can "understand" correctly, sometimes it is a person with little investment experience. So what are the competitive advantages that investors must have? Like a company or an industry, the "moat" of investors should also be structural.　　They are related to some psychological factors, and psychological factors are embedded in your mind, is a part of you, even if you read a lot of related books can not change. I think there are at least 7 traits that are a common feature of great investors, a real advantage, and that you will never be able to gain once you become an adult.　　In fact, some of these qualities are not even possible to learn, you must be born with, if not in this life is difficult to find. The first trait is the ability to buy stocks decisively when others are panicking, and to sell shares when others are blind to optimism. Everyone thinks they can do it, but when the day of October 19, 1987 arrives (historically famous "Black Monday"), the market collapses and few people have the guts to buy stocks. In 1999 (The Nasdaq crash of the following year), the market is rising almost every day, and you will not allow yourself to sell the shares because you are worried that you will lag behind others. Most people who manage wealth have MBAs and high IQs, and have read a lot of books. By the end of 1999, these people were also convinced that stocks were overvalued, but they could not allow themselves to withdraw their money from the tables because of what Buffett called "institutional compulsion" (Institutionalimperative). The second trait is that the great investor is the kind of person who is extremely obsessed with the game and has a strong desire to win. They're not just enjoying the fun of investing-it's their life. When they wake up in the morning, even when they're half asleep, the first thing they think about is the stocks they've studied, or the stocks they're considering selling, or the biggest risk their portfolios will face and how to avoid them. They usually get into trouble in their personal lives, although they may really like other people and don't have much time to communicate with each other. Their minds are always in the clouds, dreaming of stocks. Unfortunately, you can't learn this obsession with something, it's natural. If you don't have OCD, you can't be the next Bruce.　　Bockwitz (founder of Fairholmefunds, the stock-picking mentality is deeply influenced by Buffett, combining concentration, low turnover rate, very little cross-border. The third trait is the strong will to learn from past mistakes. This is hard for people to do, and it is the strong desire to learn from their past mistakes to avoid recidivism. Most people will ignore the stupid decisions they've made and move on. The word I want to describe them is "repression" (repression). But if you ignore past mistakes rather than analyze them in a comprehensive way, there is no doubt that you will make similar mistakes in your future career.　　In fact, even if you do analyze it, it's hard to avoid repeating mistakes. The fourth trait is the innate risk sense of smell based on commonsense. Most people know the story of long Term Capital Management (one of the four major international hedge funds in the middle of the 1990, which was on the verge of bankruptcy in 1998 because of the Russian financial turmoil), a team of sixty or seventy PhDs with the most sophisticated risk analysis model, Failed to spot the obvious problem: they took on too much risk. They never stop to ask themselves: "Hey, though the computer thinks it's doable, does it really work in real life?" "The ability to be common in humans may not be as high as you think. I believe that the best risk control system is common sense, but people will still be accustomed to listen to the views of the computer, so that they sleep safely.　　They ignore common sense, and I see this error repeated in the investment community. The fifth trait is that great investors have absolute confidence in their own ideas, even in the face of criticism. Mr Buffett insists he does not plunge into a frenzied dotcom frenzy, despite public criticism that he ignores tech stocks. Baffitehillan Kuiranbudong When everyone else is giving up value investment. Barron made him a cover for the title, "Warren, what's wrong with you?" "Of course, this further proves Buffett's wisdom, and Barron's became a perfect example." Personally, I'm surprised that most investors have little faith in the stocks they buy.Weak。 According to the Kelly formula (Kellyformula, a mathematical formula that can be used to determine the risk of investment and gambling), 20% of the portfolio can be placed on a stock, But a lot of investors are only 2%. Mathematically, using the Kelly formula to put 2% of the investment in a stock, the equivalent of betting it only 51% of the possibility of rising, 49% is the possibility of a fall. Why waste time playing this bet? The people holding 1 million of dollars of annual salary, just to find out which stocks have 51% of the rising possibility?　　It's sick. The sixth trait is that both the left and right brains are good, not just the left-hand brain (the left brain is good at math and tissue). I've met a lot of talented people at business school. But I was shocked to see that the people who majored in finance were worthless, and they couldn't look at the problem creatively. Then I learned that some very smart people think only half of the brain, which is enough to make you a foothold in the world, but it's not enough to be a creative entrepreneurial investor with a different way of thinking about the mainstream. On the other hand, if you're the right brain-dominant person, you probably hate math and usually don't get into the financial world. So the financial people are likely to have a very well-developed left brain, which I think is a problem. I believe that the brains of a great investor play a role. As an investor, you need to calculate and have logical and rational investment theory, which is what your left brain does. But you also need to do something else, such as judging the company's management team based on subtle clues. You need to calm down and sketch out the big picture of the current situation in your mind, not to die. You have to have a sense of humor, a humble mindset and basic knowledge. And most importantly, I think you have to be a good writer too. Look at Buffett, he is one of the most outstanding writers in the business world, he is also one of the best investors in the ages is not accidental. If you can't write clearly, I don't think you can think clearly. If you can't think clearly, you'll get into trouble.　　Many people have a genius IQ, but they can't think clearly, although they can figure out the price of a bond or an option in their mental arithmetic. Finally, the most important, but also the most rare one of the characteristics: in the investment process, the ups and downs in the slightest change in the ability to invest ideas. This is almost impossible for most people. When stocks start to fall, it's hard to hold on to losses rather than throwing them. When the overall market declines, it is hard to decide to buy more stocks to make the cost diluted, or even to decide to put money into stocks. People don't like to suffer from temporary pain, even better in the long run. Few investors can cope with the short-term fluctuations that high returns must undergo. They equate short-term volatility with risk. This is extremely irrational. Risk means you have to lose money if you bet the wrong treasure. A relatively short period of fluctuation is not a loss, so it is not a risk, unless you fall in the market to the bottom of the panic, lost in fear of chaosFooted。 But most people don't see things this way, and their brains don't allow them to.　　Panic instincts invade, then cut off the ability to think normally. I must affirm that once you have entered adulthood, you cannot learn these qualities again. This time, your potential to become a great investor in the future has been decided. This potential can be obtained by exercising, but it cannot be built from scratch because it is closely related to the structure of your brain and your childhood experiences. This is not to say that financial education, reading and investment experience are unimportant. This is important, but it only qualifies you to enter the game and play.　　Those are the things that can be copied by anyone, and these 7 qualities are impossible. (the author is the founder of hedge fund Sellers Capital Fund, who served as the chief equity strategist at Morningstar, for his recent speech at Harvard)