Graduate plus: Sage of the big time

Roger Trapp on what Warren Buffett, the Forrest Gump of finance, has to teach investment managers
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The Independent Online
Though Warren Buffett has recently warned that returns at his flagship investment vehicle Berkshire Hathaway might slip, he is still one of the big men of world finance. When the Sage of Omaha, as he is known, speaks, anybody contemplating a career in finance would do well to listen. When his thoughts appear in a book, it deserves to be read.

Somewhat confusingly called Warren Buffett Speaks, the little volume is, as the sub-title says, a distillation of the "wit and wisdom" of the man who may be the world's greatest investor. Compiled by Janet Lowe, an American business journalist, it has as much down-home wisdom on investment as would be expected from someone reported to have said: "With enough insider information and a million dollars, you can go broke in a year."

That remark was a response to being questioned on why he lived in the Mid-West rather than in New York, where he could be closer to the financial markets and the rumour mill. Further evidence of his equivocal attitude towards the markets can be found in his quip that "Wall Street is the only place that people ride to work in a Rolls-Royce to get advice from those who take the subway".

Buffett, who had a brief stint as interim chairman of the Salomon investment house in the wake of its US government bond scandal, has built his reputation on the performance of Berkshire Hathaway. A former textile manufacturer that he has transformed into an almost unique investment vehicle, the company has seen its share price soar from less than $2,500 (pounds 1,600) in 1985 to more than $30,000 last year.

It is a venture that has made a lot of money not just for Buffett and his wife, who, despite living apart from him for some time, owns a majority interest in the company with her husband, but also for thousands of investors, many of whom flock to Nebraska each year for the company's annual shareholders' meeting. If somebody had given Buffett $10,000 to manage when he started in the business in 1956 and had reinvested all the profits they would be sitting on a stockholding worth $80m now.

But - for all that - Buffett is, in the words of one newspaper, "fast, frank and folksy". While it is the last quality that attracts all the attention, leading another journal to dub him "the Forrest Gump of finance", the other two go just as much to the heart of describing him. Though he does indulge himself by owning 25 per cent of his local minor league baseball team, in matters of business the man who vies with Bill Gates for the sobriquet of America's wealthiest individual is generally preoccupied by his bottom line.

But he still manages to make life with such a steady focus sound interesting. Among his suggestions for setting goals are: "Like Wayne Gretzky says, go where the puck is going, not where it is" and "I've often felt there might be more to be gained by studying business failures than business successes. It's customary in business schools to study business successes. But my partner, Charles Munger, says all he wants to know is where he's going to die - so he won't ever go there."

Equally, he is not all in favour of hustling all the time. "You do things when the opportunities come along," he says. "I've had periods in my life when I've had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing".