Book Review: Warren Buffett
Warren Buffett: Inside the Ultimate Money Mind. 2021. Robert G. Hagstrom, CFA. Wiley & Sons.
Over the past two decades, Robert G. Hagstrom, CFA, has written several books about Warren Buffett. This new book, however, is unique in its focus on the investment thought process. Many books, videos, discussions, and articles about Buffett attempt to help individual investors and fund managers emulate him. Not many of their readers come close to replicating Buffett’s success. Hagstrom contends that there is a big difference between knowing the path and walking the path. He maintains that the key to the latter is having a “money mind” and that Warren Buffett’s mind is the “ultimate money mind.”
Hagstrom explores the traits that are required to have a money mind. They include self-reliance, rationality, pragmatism, and continuous learning. The book provides background on how successful investors have developed these attributes through a lifetime of work and experience.
The author begins with the importance to the money mind of learning from both the successes and failures of businesses of the past. This historical study provides valuable insights on the current opportunity set. Hagstrom recounts how Warren Buffett has been an avid reader and a keen observer since childhood. He was particularly influenced by a book he read at age 11 that analyzed a variety of businesses that were started from scratch.
Although the book offers many takeaways, the most important one for me is how to operate in the “investment zone.” Doing so becomes possible by focusing on a company’s fundamentals. I have to remind myself that I am not in any contest with short-term investors or speculators. I should not be perturbed by the daily noise of price fluctuations but hold fast to the belief that the market will eventually price the stock correctly.
The book also provides perspective on perennial investment controversies. For instance, investors constantly debate the relative merits of growth and value stocks. They also argue endlessly about the discount rate that should be applied to future earnings, a subject of especially intense focus in a low-interest-rate world.
In addition, Hagstrom offers glimpses into the lives and work of luminaries such as Benjamin Graham, Bill Miller, William James, and Howard Buffett (father of Warren). He also covers the camaraderie between Warren Buffett and Charlie Munger. Taking a leaf out of the book that influenced Warren in 1941, One Thousand Ways to Make $1000, the author provides a compendium of books that investors should read.
Warren Buffett: Inside the Ultimate Money Mind is essential reading for investment professionals, active investors, and students aspiring to careers in money management. Its concepts are lucidly explained and well supported by data. This should not be a one-time read but rather a guide for the rest of one’s investing career.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
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Buffett was the man to demonstrate Graham and Dodd to the nth power. Things are different now (?), maybe, and the next fifty years of fiat money may not play out like the first fifty. Nevertheless much to be learned here.