Warren Buffett, Freak of Nature

To get rich like Warren Buffett, the first thing one must do is stop acting like the cavemen that we are.

Feb 4, 2014 at 12:17PM


The more I learn about Warren Buffett and other successful entrepreneurs and investors, the more convinced I am that their success can be replicated -- perhaps not to the same magnitude, but to a considerable extent nonetheless.

The key is to train your brain how to think. Buffett doesn't have a patent on value investing. It isn't proprietary. He's open and honest about the theoretical framework underlying his approach -- namely, that of Benjamin Graham and Philip Fisher -- and he discusses it at length in Berkshire Hathaway's (NYSE:BRK-A) (NYSE:BRK-B) annual report.

What distinguishes people like Buffett is how they make decisions. He, in particular, is a consummate rationalist. He approaches issues in a deliberate, calm, and dispassionate manner. And by doing so, his decisions aren't adulterated by the logical errors that obscure a less rational person's thought process.

How Buffett manages fear
Nothing illustrates this better than Buffett's philosophy toward fear. Everyone knows his saying to be "fearful when others are greedy and greedy when others are fearful." But what's less appreciated is how incredibly radical this advice is from a biological perspective.

In the whole scheme of things, modern humans are little more than well-accessorized cavemen -- think Fred Flintstone as opposed to George Jetson. Yes, we have houses and cars. Yes, we listen to music on our iPods and watch movies on our iPads. And, yes, medicine and other sciences have come a long way since our club-carrying days.

But the commonalities that we share with our ancient ancestors greatly outnumber the differences. And this is particularly true when it comes to the brain. "Our brains were simply not shaped by life in the world as we know it now, or even the agrarian world that preceded it," wrote Daniel Gardner in The Science of Fear.

They are the creation of the Old Stone Age. And since our brains really make us what we are, the conclusion to be drawn from this is unavoidable and a little unsettling. We are cavemen. Or cavepersons, if you prefer. Whatever the nomenclature, we sophisticated moderns living in a world of glass, steel, and fiber optics are no different, in a fundamental sense, than the prehistoric humans for whom campfires were the latest in high tech and bison hides were haute couture.

The most important consequence of this for our purposes is the way humans are programmed to respond to fear. That is, in direct contradiction to Buffett's advice, we seek to avoid it at all costs regardless of whether the presumed threat is in the form of a saber tooth tiger or a figurative bear market. Psychologists refer to this as loss aversion -- a slight variation of which is known as risk aversion.

The takeaway for investors is simple. Rationality wins. When Buffett says things like the "most important quality for an investor is temperament, not intellect," we should take him at face value and respond in kind, as the rewards from following his advice will greatly outweigh the time and effort spent doing so.

Fighting your inner caveman
It's for this reason, in turn, that I invite you to delve deeper into Buffett's thought process and strategies by downloading our popular free report covering the best of Warren Buffett's wisdom. To access your copy instantly and for free, simply click here now.

John Maxfield has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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