Today is the day commonly recognized as both the birthday and the "deathday" of William Shakespeare, which of course makes it the perfect day to talk about Warren Buffett (again, I know. I'll stop eventually, but he's the best and I believe in studying the best).
What's the connection? Shakespeare is English literature's supreme uniter of great thought and great language. That is, he was both a profound thinker, on subjects like love/jealousy/death/revenge/ambition/patriotism, and a great communicator of that thought (you may not think so from having had to struggle through his plays, but in his day everyone spoke that way, and everyone from the drunk guys in the standing room of the theater (theatre?) to the Queen understood what he was saying).
The really interesting part is that those two things seem to be connected: the very greatest thinkers in a particular discipline seem to have the gift of language, the ability to explain themselves that the merely great or good do not. Think of Richard Feynmann in physics, or Abraham Lincoln in politics. In his famous essay "Politics and the English Language" George Orwell makes a similar point:
[The English language] becomes ugly and inaccurate because our thoughts are foolish, but the slovenliness of our language makes it easier for us to have foolish thoughts. The point is that the process is reversible. Modern English, especially written English, is full of bad habits which spread by imitation and which can be avoided if one is willing to take the necessary trouble. If one gets rid of these habits one can think more clearly, and to think clearly is a necessary first step toward political regeneration . . .
I believe the same thing applies in investing. Mark Sellers of Sellers Capital, a great investor himself and until recently a great writer about investing for the FT, put it best in a talk he gave to the Harvard Investment Club in 2007:
[To be a great investor] I believe you need to be a good writer. Look at Buffett; he's one of the best writers ever in the business world. It's not a coincidence that he is also one of the best investors of all time. If you can't write clearly, it is my opinion that you don't think very clearly. And if you don't think clearly, you're in trouble. There are a lot of people who have genius IQs who can't think clearly, though they can figure out bond or option pricing in their heads.
There, I did it! I connected Shakespeare to Buffett, via Orwell and Mark Sellers, no less.
Why is this important to you? This blog is about finding great investors to invest with. And in today's world, investment managers communicate to potential investors largely via the written word. Quarterly letters, annual letters, marketing materials, op-eds, blog posts, magazine articles, and even books--all designed to demonstrate that the writer is an investor worth investing with.
Our job, then, largely consists of identifying great investors from their writing. How to learn to do this? Well, study the best.
In May 1977 Fortune published an article by Warren Buffett called "How Inflation Swindles the Equity Investor." Buffett was not then famous, but in my opinion anyone who read the article when it came out and knew what to look for would have seen it all so clearly: This writer was a great investor. Some further research would have revealed that Buffett already had an outstanding track record, that unlike today's hedge fund managers he essentially worked for free, AND that anyone could have become his partner by buying shares in his investment vehicle Berkshire Hathaway. It was all right there, for less than the dollar it cost to buy the magazine.
Your consigliere was not yet alive when the article was published so he has an excuse. His parents, on the other hand, have none (Actually they have half an excuse, because whatever they were doing when they should have been reading Fortune, I was born nine months later). But I use this article to test myself: If I had read it at the time, would I have been able to identify Buffett as a genius? It's not a totally hypothetical question: I believe somewhere out there lives the "next Warren Buffett." Chances are he/she has written something about investing, something that's pretty widely available for those who are looking. If I can answer "yes" to the Buffett test question, I believe I have a better chance of finding the next Buffett through his/her writing.
So, what is it about that article? I recommend you read it yourself first and try to answer the question yourself. In a future post I'll write about what the article revealed to me, so stay tuned.