Simple Lessons From Billionaires Warren Buffett, Sam Walton, and Ted Turner

Enjoy these must-reads to learn how you can become an investing predator like Warren Buffett, Ted Turner, and other billionaire success stories!

Feb 8, 2014 at 11:46AM


Sources: Travel and Leisure and Georgetown University.

Can you remember the adolescent Internet in the year 2000?

It was the heyday of message boards and forums, and your grandparents didn't have email yet. It was also an inflection point for retail investors.

For the first time ever, an average Joe and Jane sitting in their living room could access the same information available to elite Wall Street analysts.

It was a time when the SEC, Wall Street, and everyday investors like you and me were grappling to deal with securities laws ill equipped for the Wild West of the Yahoo! Finance message boards. This was the world 15-year-old Jonathan Lebed entered when he first logged on to day trade stocks.

With the brokerage account his mother opened for him, Lebed would build positions in micro-cap stocks and then hit the message boards hyping the stocks.

Like a young Wolf of Wall Street, Lebed successfully traded his way to nearly $1 million before the SEC stepped in.

The story is wrought with connundrums. Is the trading game rigged for the pros on Wall Street? At what point does a 15-year-old kid writing anonymously on message boards become a master market manipulator?

The original New York Time article from February 2001, 13 years ago this month, frames the complexity and absurdity of day trading then and now:

By the Spring of 1998, Jonathan was 13, and his ambitions were growing. He had glimpsed the essential truth of the market: that even people who called themselves professionals are often incapable of independent thought and that most people, though obsessed with money, have little ability to make decisions about it. He knew what he was doing, or thought he did. He had learned to find everything he wanted to know about a company on the Internet; what he couldn't find, he ran down in the flesh. It became part of Connie Lebed's life to drive her son to various corporate headquarters to make sure they existed. He also persuaded her to open an account with Ameritrade. ''He'd done so well with the stock contest, I figured, Let's see what he can do,'' Connie said.

Be a business and investing predator
Warren Buffett encourages investors to invest in index funds for the low cost and highly diversified exposure to stocks. It's a long-term strategy, and it seems smart enough. Hey, it's Warren "the Oracle of Omaha" Buffett, for crying out loud!

But Buffett himself doesn't exactly follow the same approach.


Whoa, cowboy! Manage your risks!

His extreme success came from investing heavily in a smaller basket of companies and holding them forever. Take a look at Berkshire Hathaway's (NYSE:BRK-A) (NYSE:BRK-B) latest holdings for proof; its hardly comparable to the S&P 500.

Ted Turner, another billionaire, certainly didn't diversify when he was building what would become Time Warner Cable (NYSE:TWC) and Time Warner (NYSE:TWX). Same for Fiat founder Giovanni Agnelli, hedge fund billionnaire John Paulson, Wal-Mart founder Sam Walton, and countless other extremely successful business owners, investors, and tycoons.

But this lack of diversity does not imply a cowboy's approach to risk. In fact, according to this article by Malcolm Gladwell from a 2010 issue of The New Yorker, these success stories are characterized by a shocking lack of risk. The lesson is worth its weight in gold for investors large and small: 

The entrepreneur has access to that deal by virtue of occupying a "structural hole," a niche that gives him a unique perspective on a particular market. Villette and Vuillermot go on, "The businessman looks for partners to a transaction who do not have the same definition as he of the value of the goods exchanged, that is, who undervalue what they sell to him or overvalue what they buy from him in comparison to his own evaluation." He moves decisively. He repeats the good deal over and over again, until the opportunity closes, and -- most crucially -- his focus throughout that sequence is on hedging his bets and minimizing his chances of failure. The truly successful businessman, in Villette and Vuillermot's telling, is anything but a risk-taker. He is a predator, and predators seek to incur the least risk possible while hunting.

What's the takeaway from all this?
These two pieces together give tremendous insight into what it takes to be a successful investor. First, the day-trading, short-term style of investing that is hyped by talking heads is a rigged game against you as a retail investor. The system is designed to eat away your returns with fees and commissions, and short-term market movements are not based on any real analysis of a businesses prospects, but instead by mysterious market forces you can't control or truly predict. 

To be a predator, to truly win in the game of business and money, you must play the game on a level playing field. You must research your investments and understand the company's fundamentals and future prospects. When you find that special company that is undervalued, that is poised for long-term success, you pounce. You've found your prey, and it's time for you to be a predator. 

Learn how to be like the greats
Warren Buffett didn't make billions by betting on half-baked stocks. And he didn't do it by buying and selling in thinly traded microcap stocks either. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has allowed us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Jay Jenkins has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway and Yahoo!. The Motley Fool 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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