What Would Warren Do? Lose money, Megan McArdle says, after attending the annual pilgrimage to Omaha:
His acolytes had taken a beating, too — at least the ones I met. Most private-fund managers are cagey about their returns, but everyone at my table at Gorat’s readily admitted to having had a very, very bad year. “I’m down 25 percent,” said one friend I ran into at a “meet and greet.” He runs a tiny hedge fund mostly composed of his own money. But he quickly added, with some cheer, “I’m still outperforming other funds!”In the coming years, we’ll find out if rising above the madness is enough of a success. In many ways, it’s not even clear that Buffett could replicate his own success if he started out today. He built his reputation as an investor in an era when there were more opportunities for easy money, and these days, the news that Buffett has bought a stock is often enough to help support, or even boost, its price.
But I’m not brave enough to second-guess the Sage of Omaha — certainly not while seated at Gorat’s, cramming myself full of investment advice and moderately priced midwestern beef. And even if none of the value investors I ate with are likely to replicate his outlandish success, they will still have an edge over competitors, and the rest of us, because one Warren-like trait they do share is his commitment to thrift and prudence. Just as Warren still famously lives in the same modest house he purchased in the 1950s, almost everyone I met seemed more interested in building wealth and security than in spending riches. During my five days in Omaha, I had at least three conversations about the best way to save money on rental cars. I’m pretty sure that at least one of the people enthusiastically pitching me an off-brand vendor half an hour from the airport was there on an expense account.
Right now, the academic literature suggests that value investing has a modest advantage over a broader market strategy. Better information, more widely available, may continue to erode that edge. But the principles of prudence, patience, and thrift will always, in the end, offer a better chance at outsize returns. The question is whether, once Saint Warren passes, his followers will find the courage to stick to them.