What would you do if you were 23 years old again, Mr. Buffett?

Go into the Investment business!

"This year, a young shareholder from New Jersey asked for advice on entrepreneurship. Below are my notes on the shareholder's question, along with responses from Buffett and Munger.

Shareholder: Being a young person without an ability to code or build robots, I don't know technology. If you were 23 years old, what non-tech industry would you start a business in?

Buffett: I'd probably do just what I did at 23. I would go into the investment business and I would look at lots of companies, talk to lots of people, and learn what I could about different industries. One thing I did when I was 23: If I got interested in a coal business, I'd go and see the bosses of eight or 10 coal companies. I'd ask a lot of questions.

One question I would always ask: If they had to put all their money in a company in the industry and go away for 10 years, which would it be? And if they had to sell short under the same conditions, which company would it be, and why? And if I talked to everyone in the industry like that, I would know more about the industry than anybody.

There's lots of ways to learn about the economic characteristics of companies, such as reading, personal contact, etc. ... But you need a real curiosity about it. It really has to turn you on. And what could turn you on more than asking questions about, for instance, coal companies? [Laughs] And in my case, the insurance industry was particularly interesting, and perhaps you could become well equipped to run such a business some day. If you just keep learning things, something will come along that will be very useful. But you have to be open to it.

Munger: Try the trick that Larry Bird used when he wanted a new contract. He asked all agents what agent he should hire if he didn't hire that agent, and when they all came up with the same second choice, he went with that second choice.

Buffett: We did the same thing for Salomon. I called in eight or 10 of the managers. We had to open for business, and I had to have someone to run the place. I said, "Who besides you would be ideal, and why?" And one guy told me no one could compare to him. He was gone within a few months [laughs], but it's not a bad system to use. You could really learn a lot just by asking. Sounds like a Yogi Berra quote, but it's true. People like to talk. You just have to be open to it, and you will find your spot. You may not find it the first day of the week, but you'll find what fascinates you. I found it when I was 7 or 8. Sometimes it'll take a while, but you'll find it.

Munger: It's a very competitive business. When I was at Cal Tech and studied thermodynamics, there was a guy who was tremendously talented at thermodynamics. I realized that I'd never be as smart as him in that field. I tried other industries with the same results, so I just kept doing that until I ended up here.

Buffett: I had a similar experience with athletics."

Read more: http://www.fool.com/investing/general/2014/05/25/what-would-warren-buffett-do-if-he-was-23-years-ol.aspx#ixzz32rVwz2Px

Value Makeover

http://blogs.wsj.com/moneybeat/2014/05/23/giving-yourself-an-investing-makeover/

This is a wonderful piece. Most of the value lessons are free, but the hard part to walk the walk.

----------------------

If you set out deliberately and systematically to remake yourself into a great investor, how would you go about it?

That is what the money manager Guy Spier has spent much of the past 17 years trying to figure out. He believes that most investors pay attention to the wrong things and allow their minds to get hijacked by bad ideas.

So Mr. Spier has set about purifying the environment in which he makes investing decisions — changing his work space, altering the information he uses and, above all, continually trying to counteract his own irrationality. What he calls his “journey” is a transformation any individual investor should be able to emulate — perhaps even better, he says.

That journey accelerated in 2008, after Mr. Spier and his friend, fund manager Mohnish Pabrai, donated $650,100 to a charity and won a private lunch with Warren Buffett. After listening to Mr. Buffett, Mr. Spier says, he realized “I’ve got to hit the reset button and make drastic changes.”

Mr. Spier, 48 years old, is worth listening to. A graduate of Oxford University and Harvard Business School, he runs the Aquamarine Fund, a $180 million partnership specializing in cheap “value” stocks. Since its launch in September 1997, the fund has beaten the S&P 500 by an average of 4.9 percentage points annually, net of fees.

In a book to be published in September by Palgrave Macmillan, “The Education of a Value Investor,” Mr. Spier describes his struggle to improve his decision-making hygiene. (A disclosure: A friend and former editor of mine, William Green, collaborated on the book.)

Seldom has a successful money manager so painfully flagellated himself in public. In the book, Mr. Spier calls himself “blind,” “dumb,” “spectacularly foolish,” “misguided,” “stumbling,” “wrong,” “vulnerable” and, over and over again, “irrational.”

“I’m not living a real life if I’m not naming this stuff,” Mr. Spier told me this past week. “I hope that will help make me a better person, but I’m certain it makes me a better investor.” (He has beaten the S&P 500 by 5.5 points annually since 2008, although there is no way to know how much his reinvention has affected his returns.)

“We think we control our environment, but in fact it’s our environment that controls us,” Mr. Spier told me. “We can’t change the world. The only thing we can change is ourselves, by trying to get a better understanding of our own messed-up wiring.”

For 18 months, Mr. Spier listened to nothing in his car but a lecture on human misjudgment by Charles Munger, Mr. Buffett’s vice chairman at Berkshire Hathaway. Of the two dozen mental mistakes cited by Mr. Munger, “I realized I was guilty of all of them,” Mr. Spier says.

No wonder he has sought, as he says in his book, “to banish the false assumption that I am truly capable of rational thought.” Once he accepted “just how flawed my brain really is,” he writes, “I could design an array of practical work-arounds based on my awareness of the minefield within my mind.”

To escape what he calls “the New York vortex” of bad influences such as envy, greed and hyperactive trading, Mr. Spier moved his fund to Zurich in 2008.

Worried that knowing the prices of his holdings would make him want to trade them, he checks their market values once a week at most and leaves his firm’s only data terminal switched off for weeks at a time. Mr. Spier avoids speaking to brokers; he puts in his trading orders by email, after market hours, so no broker can try swaying his judgment.

Nor does Mr. Spier publicly discuss the holdings in his portfolio—even in his letters to his own investors, where he writes instead about the lessons he has learned from the positions he has sold. He is afraid that talking about a stock will make it harder for him to be objective about it.

Mr. Spier has divided his office into two spaces—a “busy room,” with his phone and computer, and the “library,” a quiet area down the hall where no one, including Mr. Spier, enters with an electronic device. He likes to spend much of the day there, reading and thinking.

When researching a company, Mr. Spier has a strict routine. First he reads its official financial filings—annual and quarterly reports, proxy statements and so on. Next he reads news releases and conference-call transcripts. Only then will he allow himself a peek at online commentary, news coverage or Wall Street research. That way, his first impressions come from primary sources.

Individual investors are constantly being exhorted to try beating Wall Street at its own game of trading like crazy to chase whatever is hot. But why should you bother trying to play a game that even most professional players can’t win?

Instead, take a page from Mr. Spier’s book and play by your own rules. The faster Wall Street runs, the more you should slow down and step back from that madness. Buy and hold an index fund forever, or study a few stocks with all the peace of mind you can muster.

That way, you exploit the true advantages of individual investors that most professionals would kill to have: patience, independence and the ability to ignore the braying of the crowd.

Patience

Ben Graham observed and Warren Buffett repeated, "The stock market has a very efficient way of transferring wealth from the impatient to the patient." 

Patience is the virtue an investor needs.

here is another article elaborate on the same theme:

http://www.fool.com/investing/general/2014/05/06/where-outperformance-comes-from.aspx

"There's a saying that there's always someone on the other side of your trade, and that someone may know more than you. I thought of this last week while reading the biography of Joseph Kennedy.

Kennedy's wealth came from a mix of genius and a sheer lack of morals. Take this story: The repeal of prohibition in 1933 was bound to benefit companies that made supplies needed to make alcohol. One was a bottling company called Owens-Illinois. Rather than investing in directly in Owens-Illinois, Kennedy purchased shares of a company called Libbey-Owens-Ford. "Libbey-Owens-Ford was an entirely separate company, which manufactured plate glass for automobiles, not bottles, but its name was close enough to the bottle glass company to fool unwary investors," writes biographer David Nasaw. On news of the repeal, Kennedy and his partners traded shares back and forth between each other, pumping up trading volume to draw attention. That caused other investors to buy shares "on the mistaken belief that they were buying shares of Owens-Illinois, the bottle manufacturer." After a surge, Kennedy dumped Libbey-Owens-Ford with a $1 million inflation-adjusted profit and invested the proceeds in his original target, Owens-Illinois.

Almost half of Gen Yers -- those between age 20 and 32 -- say they "will never feel comfortable investing in the stock market," according to a 2012 study by MFS Investment management. They use words like "casino," "crapshoot," and "rigged" to describe the market. They know someone is on the other side of each trade, and that someone -- like Kennedy -- may know more than them.

But there's something every mom-and-pop investor can do to gain an edge on the person on the other side of the trade: be willing to wait longer.

That's it. There are few things more powerful in investing than the realization that the biggest gains tend to accrue to the person who waits the longest. If you bought an index fund 20 years ago and checked your account statement for the first time this morning, you could legitimately call yourself one of the top investors of modern history, having outperformed three-quarters of professional fund managers. You can say this only because you were willing to wait longer than everyone else who trades, fidgets, rotates, sells in May and goes away, and make (small-f) fools of themselves while you let compound interest work.

Most outperformance in the stock market doesn't come from Kennedy-like mischief, but instead from something simple called time arbitrage. It's exploiting the gap between your time horizon and mine. If you're worried about the next six months, but I can be patient for the next six years, I have an edge over you. You may sell shares today because you don't want to have another down month, and I'll be happy to buy them from you to focus on my up decade. That's all time arbitrage is. With a diversified portfolio, anyone can do it, because patience doesn't require inside information, fancy math models, or high-frequency trading algorithms. All you have to do is wait. It works best with an indifference to short-term volatility that borders on obliviousness.

Companies didn't report much information in the 1930s, but archive documents show Libbey-Owens-Ford earned somewhere around $1.1 million in profit in 1933. By 1985, profits were more than $70 million. Getting tricked by Kennedy didn't matter much if you were willing to wait."

The most important trend

Demographics drives everything.   The most important trend for the next few decades is the aging of the society:  there will be much more old people and their behaviors drive economic and political trends.

here is an article from the blog Fivethirtyeight:

http://fivethirtyeight.com/features/what-baby-boomers-retirement-means-for-the-u-s-economy/

US:

World:

Sushi chef and Investor.

http://www.marketfolly.com/2014/04/parallels-between-investors-and.html

One of the best commentary of investing as a craft that needs a life long conviction for improvement.

At first glance, it may seem odd to compare a sushi chef to an investor.  But as you'll see by the end of this post, they both share a common goal: to become masters of their craft.

Jiro Dreams of Sushi is a documentary about renowned sushi chef Jiro Ono in Tokyo, Japan.  His restaurant, Sukiyabashi Jiro, is a Michelin three-star restaurant, requires reservations a month in advance, and prices start at ¥30,000 (around $300 US).

After watching this insightful documentary, it became glaringly evident that investors and sushi chefs have a lot more in common than one would think. 


Parallels Between Great Investors and a Renowned Sushi Chef


1.  Develop a constant, repeatable process.  Jiro does the same thing almost everyday.  He sculpts the pieces of sushi the same way over and over.  He constructs the day's menu and seating chart.  He even boards the daily train from the same exact spot each time.  His attention to detail might seem maniacal to some, but to him, it's a necessity to achieve greatness.

Applied to investing, great capital allocators seek to identify their own 'style' of investing.  Many of the greatest investors develop a repeatable process of finding ideas that meet various criteria.  Instead of being a deep value investor one day and then becoming a momentum trader the next, talented investors seek to find their niche and stick to it over and over and over again. 


2.  Never stop learning, pursue perfection.  Jiro talks about how he is always trying to improve despite the fact that he was 85 years old when this documentary was filmed (in 2011).  He wants to be at the top of his game, even though he doesn't know how high up that is.

Jiro's fish vendor says that, "even at my age (50), I'm discovering techniques.  Just when you think you've figured it all out, you realize that you're just fooling yourself."  His shrimp vendor adds, "When you work at a place like Jiro's, you are committing to a trade for life." 

The documentary also references 'shokunin' frequently, which literally translated seems to mean 'artisan,' but it sounds like the meaning goes much deeper than that in Japanese culture.  Jiro says that, "Shokunin try to get the highest quality fish and apply their technique to it.  All I want to do is make better sushi.  I do the same thing over and over, improving bit by bit.  There is always a yearning to achieve more." 

Likewise, investing is a continual education.  Great investors are always improving and refining their process.


3.  Be passionate about your craft.  Instead of retiring, Jiro is doing what he loves on a daily basis: making sushi and perfecting his art.  He gives his all every single day.  Jiro says, "You have to love your job.  You have to fall in love with your work."

Some investors, like Warren Buffett and Charlie Munger, are getting up there in age but they don't stop.  They love what they do and they come into work each day excited to try to find their next investment and to perfect their art.


4.  Develop a discerning palate.   Jiro says, "The quality of ingredients is important but you need to develop a palate capable of discerning good and bad."  In investing, 'ingredients' can be the various inputs that determine the success of a business, such as the management team.  While that 'ingredient' is important, at the end of the day, you still have to develop a palate that's capable of discerning between a good and a bad business.

As Warren Buffett put it, "When a manager with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."


5. Be highly selective.  Jiro's vendors are very specific: 1 focused on tuna, 1 for shrimp, 1 for rice; each is the best of their trade.  This is somewhat akin to an investment fund that has analyst teams broken down by sector.  The analysts and sector heads become so immersed in those businesses that they become micro experts.  Jiro trusts these vendors to bring him the best ingredients, and fund managers trust their teams to bring them the best ideas.

There's also a fantastic scene at the Tsukiji fish market where Jiro's tuna vendor comments that, "I either buy my first choice or I buy nothing.  If ten tuna are for sale, only one can be the best.  I buy that one."

This is comparable to focusing on a strict set of criterion each investment must pass before it's added to the portfolio.  An example of this is Mohnish Pabrai, who frequently talks about the importance of an investment checklist.  Extrapolated further, many successful investors have allocated capital only to their best ideas.  As Fairholme Capital's Bruce Berkowitz says, "Why put money in your tenth best idea?"  


6.  Determine the important metrics.  Jiro's eldest son, Yoshikazu, helps run the restaurant and will succeed his father one day.  In the film, he goes to the market to buy some octopus and the vendor points out the color difference between two octopuses.  Yoshikazu doesn't care; he says he's only focused on one thing: the flavor.

In investing, investors need to identify the few key metrics that define and drive a given business.  Once those metrics are identified, it helps the investor really focus on the business' performance.


7.  Learn from a mentor.  A fish vendor says, "When you work for Jiro, he teaches you for free.  But you have to endure ten years of training."  There's a natural progression for employees at Jiro's restaurant from preparation cook to apprentice to a chef who opens their own restaurant.  Jiro is the master and his son, Yoshikazu, is the protégé being groomed to takeover.

On Wall Street, there are many examples of successful mentor/protégé relationships.  In value investing, you have Benjamin Graham and Warren Buffett.  In global macro, you have George Soros and Stanley Druckenmiller.  In long/short equity, you have Julian Robertson and all of his Tiger Cubs (John Griffin, Andreas Halvorsen, Lee Ainslie, among many others).

This just goes to show that some of the greatest investors (and sushi chefs) have spent time to learn under the best.  It also reinforces the junior analyst > analyst > sector head > portfolio manager hierarchy that many larger firms employ.  You have to gain valuable experience and learn the necessary skills to succeed in the craft of investing.  


8.  Identify your competitive advantage.  Jiro recognizes his strengths and weaknesses.  Investors should do the same.  Warren Buffett famously says to, "focus on your circle of competence."

There's one particular scene in the documentary where everyone says Jiro's rice is the best.  A hotel wanted to buy the same rice from Jiro's vendor, but the vendor said no because, "what's the use if they don't know how to cook it properly?"

Jiro purchases very specific rice from this vendor and uses a distinct preparation method that involves very high pressure to cook it and requires it to be served at a specific temperature.  He doesn't know anyone else who does this.

Other examples include the fact that his chefs massage the octopus for an hour to make it less tough texturally.  Jiro also plans the progression of the courses in a certain order, something it took him years to refine.  His specific vendors, focus on high quality ingredients, and preparation techniques are some of the things that differentiate him from the competition.

Fund managers these days are often asked by potential investors what their competitive advantage is over other active managers.  Good investors will have identified this and can quickly point it out, whether it be experience, style/strategy, sector focus, time horizon, their limited partners, or a myriad of other factors.


9.  Attention to detail is key.  Jiro is laser focused on every detail of the dining experience at his restaurant.  Before customers arrive, Jiro sets a seating chart in order to enhance the flow of the meal while accommodating groups so they can sit together.  If he notices a customer is left-handed, he immediately adjusts where he is placing the sushi in front of them.  He also alters portion sizes based on whether the diner is male or female.  The presentation of each piece of fish is timed ideally for taste, texture and temperature.  Jiro is very methodical in everything he does.

Attention to detail in investing is key as well.  Just ask hedge fund manager Jim Chanos, who famously identified fraud at Enron by obsessively examining their books.  This is also why so many hedge funds dig so deep on potential investments.

Analysts perform channel checks by visiting countless retail stores, talking with competitors & industry experts, surveying customer preferences, etc.  And don't forget the basics: listening to company conference calls and reading SEC filings (including the fine print) etc.  It's the little things that can make a big difference.


10.  Take advantage when opportunities arise.  Jiro doesn't necessarily have the same menu everyday.  His son sees what the best ingredients are at the market for that day and Jiro molds the menu around it.  In this manner, the fish market is a lot like the stock market.  Advantageous investors scoop up shares of specific companies when they find the prices they're looking for.  

There are other similarities, too.  Jiro and his chefs are familiar with all the ingredients they work with, so they know what is good at any given day at the market and when to strike (this ties back in to developing a discerning palate).

The same can be said for many investors who build a 'universe' of investments they've become familiar with over time from past research.  When a business they like finally trades at a price they're comfortable with, they can buy.



As you can see, there are some interesting parallels between great sushi chefs and great investors.  

Read more: http://www.marketfolly.com/2014/04/parallels-between-investors-and.html#ixzz2zlaneZuS

The Best and Worst Thing About Investing

http://www.thereformedbroker.com/2014/04/03/the-best-and-worst-thing-about-investing-2/

"I submit to you that successful investing is a lifetime pursuit, and in the end, it’s the pursuit itself that offers the rewards along the way. The destination was never the thing – most of us aren’t meant to end up as Peter Lynch or Warren Buffett. No, it was what you learned on the way there that made all the difference. As the poet C.P. Cavafy reminds us:

Ithaka gave you the marvelous journey.
Without her you would not have set out.

A lifetime of outperforming the markets is unattainable for most. But a lifetime of self-improvement and the acquisition of skill and knowledge – that’s available for anyone who’s willing to go for it."

The journey is the reward, money is just the scorecard!

Word to the wise: finding investment insight online

http://www.irishtimes.com/business/personal-finance/word-to-the-wise-finding-investment-insight-online-1.1744758

The big picture is the one I follow everyday. http://www.ritholtz.com/blog/

Zerohedge should be on the list too for another point of view.http://www.zerohedge.com/