4 ms·

Relevant to this discussion is Warren Buffet's 1975 memo to the board of the Washington Post regarding investment strategy for their pension fund. He advised be

Relevant to this discussion is Warren Buffet's 1975 memo to the board of the Washington Post regarding investment strategy for their pension fund. He advised being patient, investing like an owner, and eschewing highly paid money managers. A quote from the memo: "If above-average performance is to be their yard stick, the vast majority of investment managers must fail. Will a few succeed — due to either to chance or skill? Of course. For some intermediate period of years a few are bound to look better than average due to chance — just as would be the case if 1,000 ‘coin managers’ engaged in a coin-flipping contest. There would be some ‘winners’ over a five or 10-flip measurement cycle. (After five flips, you would expect to have 31 with uniformly ‘successful’ records — who, with their oracular abilities confirmed in the crucible of the marketplace, would author pedantic essays on subjects such as pensions.)” At the time of WaPo's sale to Jeff Bezos, the pension fund had a $1b surplus. This article describes the memo, and includes a link to a PDF (thru Scribd): http://fortune.com/2013/08/15/the-1975-buffett-memo-that-saved-wapos-pension/ http://fortune.com/2013/08/15/the-1975-buffett-memo-that-sav...

wpietri 12y ago
A point he still believes in. In 2008 he made a million-dollar bet with a highly-paid money manager: http://longbets.org/362/ http://longbets.org/362/ Seven years into the bet, he's way ahead: http://fortune.com/2015/02/03/berkshires-buffett-adds-to-his-lead-in-1-million-bet-with-hedge-fund/ http://fortune.com/2015/02/03/berkshires-buffett-adds-to-his... For those interested in the coin-flipping analysis, I strongly recommend "Fooled by Randomness", which is a smart, passionate, and funny examination of how that problem plays out in the investment industry.
- wnevets 12y ago
  >I strongly recommend "Fooled by Randomness", Its a really good read and can be applied to life outside of investment.
  - vithlani 12y ago
    I second this. To make it more effective, read every couple of years.
- lsaferite 12y ago
  It's nice to see them put their money where their mouth is on this one. And it's great to see the $1M is actually up around $1.7M at this point. Hopefully it continues to grow before it gets donated to charity.
  - bengali3 12y ago
    I'm guessing the money manager was able to get some new client funds because of his ability to put his money where his mouth is. 'I put my own money in this' is a strong argument. If it gained him $500m in funds at 2% fee, then a 1 mil losing bet is covered by new accounts in year 1.
- wcgortel 12y ago
  You may be interested to read the other guy's take on that bet. One of the more interesting reads on the business of running a hedge fund I've seen. http://blogs.cfainstitute.org/investor/2015/02/12/betting-with-buffett-seven-lean-years-later/ http://blogs.cfainstitute.org/investor/2015/02/12/betting-wi... (Disclosure: I work at CFAI)
  - jcdavis 12y ago
    The article is bs and reeks of ass-covering (and lots of other folks agree). If S&P 500 was such a bad benchmark, why did he bet $320k on being able to beat it? The other points (interest rates etc) amount to "We couldn't predict the future", which would normally be fine, but not when you are charging 2 & 20 to do so. Edit: a better response - http://msantoli.tumblr.com/post/110804679383/cry-me-a-river-that-leads-to-omaha http://msantoli.tumblr.com/post/110804679383/cry-me-a-river-...
- mathiasben 12y ago
  Also take a look at "The Drunkard's Walk" - same vein.

wpietri 12y ago

A point he still believes in. In 2008 he made a million-dollar bet with a highly-paid money manager: http://longbets.org/362/ http://longbets.org/362/ Seven years into the bet, he's way ahead: http://fortune.com/2015/02/03/berkshires-buffett-adds-to-his-lead-in-1-million-bet-with-hedge-fund/ http://fortune.com/2015/02/03/berkshires-buffett-adds-to-his... For those interested in the coin-flipping analysis, I strongly recommend "Fooled by Randomness", which is a smart, passionate, and funny examination of how that problem plays out in the investment industry.

wnevets 12y ago
>I strongly recommend "Fooled by Randomness", Its a really good read and can be applied to life outside of investment.
- vithlani 12y ago
  I second this. To make it more effective, read every couple of years.
lsaferite 12y ago
It's nice to see them put their money where their mouth is on this one. And it's great to see the $1M is actually up around $1.7M at this point. Hopefully it continues to grow before it gets donated to charity.
- bengali3 12y ago
  I'm guessing the money manager was able to get some new client funds because of his ability to put his money where his mouth is. 'I put my own money in this' is a strong argument. If it gained him $500m in funds at 2% fee, then a 1 mil losing bet is covered by new accounts in year 1.
wcgortel 12y ago
You may be interested to read the other guy's take on that bet. One of the more interesting reads on the business of running a hedge fund I've seen. http://blogs.cfainstitute.org/investor/2015/02/12/betting-with-buffett-seven-lean-years-later/ http://blogs.cfainstitute.org/investor/2015/02/12/betting-wi... (Disclosure: I work at CFAI)
- jcdavis 12y ago
  The article is bs and reeks of ass-covering (and lots of other folks agree). If S&P 500 was such a bad benchmark, why did he bet $320k on being able to beat it? The other points (interest rates etc) amount to "We couldn't predict the future", which would normally be fine, but not when you are charging 2 & 20 to do so. Edit: a better response - http://msantoli.tumblr.com/post/110804679383/cry-me-a-river-that-leads-to-omaha http://msantoli.tumblr.com/post/110804679383/cry-me-a-river-...
mathiasben 12y ago
Also take a look at "The Drunkard's Walk" - same vein.