This
week will likely end up being the last of a three-part series. I
didn't intend to make a three-part series. I simply started writing,
one day, while I was watching a baseball game. The game led to my
post of two weeks ago. That post, the “reverse K” post, was about
being called out on strikes. It was about the inexcusably sad nature
of inaction. Here's the link if you haven't read it: Opening Day
Then, last
week, I talked about the science of inaction and regret. Specifically,
I talked about the findings of a hardcore, Harvard scientist named
Daniel Gilbert. In the post I even mentioned a research study by two
Cornell psychologists. So, whereas talking about baseball is rather
whimsical, talking about rigorous science is much more concrete. If
you didn't read last week's post here it is: The Importance of Do Do
So,
for this week, I thought I'd take something more in the middle of the
road. I want to talk about inaction and regret from an anecdotal
perspective relating to the world high-finance. You see, like a lot
of people, I am a huge fan of Warren Buffett. As you probably know,
Warren's company is called Berkshire Hathaway. When he bought the
company, BH was a textile manufacturing firm in New Bedford,
Massachusetts. Today, Berkshire's mills are closed and the company no
longer makes clothing.
What's more,
Buffett and his partner, Charlie Munger, are very clear in saying
that buying Berkshire Hathaway was a mistake. And yet, even though he has the power to change it, Buffett has kept the company named after a mistake.
Why? Well, he probably wouldn't say it this way but, Mr. Buffett has
a psychological immune system. (See last week's post)
You see, Warren
has no problem with making mistakes. He says mistakes are inevitable.
What drives him and Charlie nuts is what they call “Thumb-sucking.”
By thumb-sucking they mean sitting around like a baby doing nothing.
In fact, when asked, what was his biggest investment mistake ever,
Buffett is very clear. His biggest mistakes were NOT errors of commission but rather they were errors of omission.
Meaning, his biggest mistakes were not
what he did, i.e. buying a struggling textile company. His biggest
mistakes were the things he didn't do. These are the things people
don't see because they don't show up in any report. They are the times when he knew enough to act, but he
failed to pull the trigger.
Here's
a short, one-minute video where Buffett says this exact thing:
If
you dig Buffett, like I do, here's a lengthier video for your viewing pleasure:
Now, I
have to imagine you have heard the name Jack Welch. Welch is the
famed former CEO of General Electric. If you haven't already, I
encourage you to read Jack's autobiography title Straight
From The Gut. In the book
you will see a photograph with Welch standing next to Buffet. In
the caption of the photograph, Welch refers to Buffett as, “The
smartest guy in any room.” Quite a compliment coming from one of
history's more successful CEO's.
And
it is true that Warren Buffett is ridiculously intelligent. If you're
goal is business success, you should definitely read his annual
reports and his authorized biography titled The
Snowball. At any rate, to
list all the ways that Buffett is a genius would take a very long
time. Right now, I'd just like to point out his marvelous ability to
look into the mirror objectively.
Looking
in the mirror, and being honest with yourself, is a very hard thing
to do. But it is also very useful. It's a big element of Buffett and
Munger's success. Here are two gentlemen who are astonishing
rational. They accept life as it is and not as they wish it would be.
As an illustrative side note, let me tell you about an experience
Charlie had. Munger went in for eye surgery and the doctor botched
it. The eye ended up having to be eviscerated and Charlie has long
been able to see through only one eye. Did this destroy Munger's
life? Hardly. Charlie simply reasoned that, statistically speaking,
surgical mistakes are bound to happen. And it just so happened that
he was the recipient of this most undesirable gift. So, he decided to just get on with life. Pretty amazing
perspective, wouldn't you say?
Anyways,
back to the point of this post. What Munger and Buffett clearly
understand is how they arrived at where they're at. They understand
that they're biggest regrets, they're biggest mistakes, were errors of
omission rather than acts of commission. Stated differently, their
biggest mistakes were the result of inaction. To guard against our natural tendency to do-nothing (procrastinate), Warren and Charlie warn against the
dangers of “Thumb-sucking.” Thumb-sucking is for babies who sit
around and do nothing. Be careful to not fail into that trap.
So,
now you have three ways to think about this lesson. The lesson being
that action, while prone to error, is far superior to inaction. You
can think of the baseball analogy and the backwards K. You can think
of Do Do. Or you can think of Thumb-sucking. And, of course, it's
possible that you have an even better symbol to place in your memory (And, if you do, I'd love to hear it).
The point is, it doesn't matter how you remember the lesson. The important
thing is to remember that Do Do is better than Thumb-Sucking, K?
