Perfect Punter / 11 November 2009
Dave Farrar's mission to hone his punting super-senses continues with a look at the wisdom of business guru Warren Buffett
"One of the traps that we can all fall into as punters is constantly trying to find an outlandish answer to the conundrum of a sporting event, when if you can identify the right kind of blue chip sportsman, then often that is the right course of action. It’s well known, for example, that investment in Roger Federer at Wimbledon was one of the building blocks of Harry Findlay’s punting empire, and knowing that you have class on your side is reassuring and can be profitable."
With fate well and truly put in its place (at least in my fevered imagination) we can move on and try to be everything that the last two weeks haven't. Measured, calm, professional, profitable. Proper gamblers will feature heavily in this weekly rant as we turn into the New Year, but this week we have the chance to learn from the greatest gambler of them all, although he would argue that what he does is as far from punting as you can get.
Before Brian Howard and a naked Paulo Barreto took over my thoughts, I'd become faintly obsessed with Warren Buffett, and delighted that the BBC sent skeletal twerp Evan Davis to interview him. This, if anyone is, has to be a man worth listening to.
If you're wondering why, then one bare fact speaks for itself. An investment of 1,000 dollars in shares of Buffett's company in 1965 would today be worth five million. Astonishing, and yet the way that he accomplished this is remarkably easy to understand, and serves as a lesson to all of us who want to be as good at gambling as we can be. Buffett's philosophies on investment are staggeringly simple, and the nature of the BBC beast is that Davis broke down his life lessons for us in bite size chunks. And they can all teach us something. Here are just three of them and how they may help.
INVEST - DON'T SPECULATE
One of the incredible things about Buffett's fortune is that much of it has been built up in investment in big, well known, companies, rather than 999-1 shots. He remains a significant shareholder, for example, in Coca-Cola, and says that an investment should be just that, and not a gamble. One of the traps that we can all fall into as punters is constantly trying to find an outlandish answer to the conundrum of a sporting event, when if you can identify the right kind of blue chip sportsman, then often that is the right course of action. It's well known, for example, that investment in Roger Federer at Wimbledon was one of the building blocks of Harry Findlay's punting empire, and knowing that you have class on your side is reassuring and can be profitable. It doesn't mean that you should ignore prices completely (we'll come to that later) just that there is room for the odd blue chip in your portfolio. It wouldn't have hurt in recent years to have had Tiger Woods, Federer, Barcelona and Kauto Star on your side and, while we can look beyond that, we shouldn't ever forget it.
YOU DON'T HAVE TO DIVERSIFY
This is the subject on which Buffett's remarks make the most clear thinking sense. Standard betting wisdom often dictates that you shouldn't put all of your eggs in one basket, and yet consider this direct quotation from him: "If you own 50 stocks, can you rank number 50 as high as number one? And can you know it as well?" The answer is plainly "no", and while there's nothing wrong with spreading the risk a little, a clear staking plan is what's needed to make the most of what you really know. And make sure that you DO really know your number one subject, don't just pretend to.
THINK INDEPENDENTLY
Davis hit upon an interesting geographical point with regard to Buffett. The fact that he lives in Omaha, rather than New York City, means that he stays away from fashion, and doesn't have to know about - let alone ignore - trends. Buffett and his co-investor, Charlie Munger, make sure that they come to their own conclusions before even looking at the market, and they do so unaffected by outside influences. This is a major building block for all professional punters, working out their own tissue before deciding what constitutes value. But not all of us do it. The Racing Post is my favourite newspaper, but listening to Buffett made me think that I should work for two hours every day BEFORE I read it. It's impossible not to be swayed by external influences, no matter how independently you try to think. "The market is there to SERVE you, not to INSTRUCT you", says Buffett, and we should all have that phrase stuck on top of the computer screen which we use to place a bet. It's your money, it has to be your judgement that you're backing. And the price, as dictated by your research and analysis, has to be right.
There is so much more to learn from Buffett, and I point you in the direction of Davis's documentary on BBC iPlayer, as well as the many books that he has produced on the subject. This column will return to him, probably more than once, but reading a little more about him, and learning more from him, may just be the most profitable thing that you do this week.
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1 comments:
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