Buffett, The Beatles, and Success in Investing

LONDON -- The question is asked again and again: Just what is it about Warren Buffett that makes him such a great investor? The question is asked so frequently that one eventually becomes rather blase about it. But having recently read Malcolm Gladwell's book Outliers, I now see Buffett's success in a rather different light.

People call Buffett a genius. They say he is one in a billion, never to be repeated -- someone who is far out of the reach of mere mortals like you and I.

I beg to differ.

I draw a parallel with another Western icon, and an example from Gladwell's book: The Beatles. What was the secret of their success? Was it genius that made them one in a billion? Let's dig a little deeper.

A hard day's night
In 1960 the Beatles were just a struggling high-school rock band, like thousands of others, when they were invited to play in Hamburg. Hamburg was not a place of high-class music venues, but rather it had an assortment of seedy nightclubs sitting alongside strip clubs and other dubious nightspots.

In Hamburg, bands did not just play a one- or two-hour set. Instead, the club's formula was a nonstop show where bands would play for hour upon hour. And so Lennon, McCartney, and company would play and play (and play). Often they would play for eight hours at a time -- for seven nights a week. As they did so, they learned new chords, new riffs, and new vocal techniques, and they composed song after song. By the end of their time in the German city, they had played an incredible 270 nights.

Hamburg was the making of The Beatles. Then they finally hit the big time, they had been playing together for 10,000 hours.

The 10,000-hour rule
After the interminable hours of hard graft, The Beatles were the best band in the world. Were they one-in-a-billion geniuses, never to be repeated? No. The secret of their success was actually far more prosaic: It was simple, honest hard work.

Gladwell calls it the 10,000 hour rule: In every case of outperformance he has looked at -- the Beatles, Bill Gates, even Mozart -- these people were not born geniuses, as you might have assumed. Instead, they worked for about 10,000 hours to build up their experience and expertise. Such dedication and perseverance, and not some God-given ability, made them world-beaters.

Chewing gum, newspapers, and Ben Graham
Now look at Buffett. The first few cents he ever earned were from selling packs of chewing gum at the age of six. By the age of 13 he was delivering newspapers, and he applied himself to it with a characteristic ferocious drive.

When he read Ben Graham's The Intelligent Investor in 1949, his relentless drive to make money found a new outlet. He threw himself into investing with incredible drive. In those early years, Buffett learned an immense amount about what made a good investor. He put in thousands of hours of hard work, investing his own money and that of his friends and family and creating his early partnerships.

Through this constant hard work he learned about the fundamentals of value investing, the importance of a margin of safety, the qualities that make a great company -- indeed, all the knowledge that makes a brilliant investor.

There is no such thing as innate genius
By the time Buffett was investing through Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) , his hard graft had made him a world expert in investing, and it showed. His expertise enabled him to make some brilliant investment decisions as he bought into companies such as the Washington Post, Coca-Cola, and IBM.

Of course, hard work was not the only ingredient. You also need a strong intellect and a psychological make-up that fits with investing. But my point is that Buffett did not have some innate genius that made him a great investor. No, Buffett had to work at it -- just like you, me, and anyone who wants to make it in the world today. The secret of success in investing is the same as the secret of success in anything in life: sheer, honest hard work.

If you want another example of the fruits of hard work, just consider what's been happening on our doorstep these past few weeks -- namely, the success of the British Olympic team. I'll leave the last word to a certain Mo Farah after his stunning 5,000 meter Olympic victory: "It's been a long journey, and grafting, and grafting. But, you know, anything is possible. So, for the people out there: it's just hard work and grafting."

Buffett's hard work has made him the greatest investor in the world. He has invested in many of the world's best companies. But only one company has drawn him to invest in the U.K. Want to know what it is? Well, simply read this free report: "The One UK Share That Warren Buffett Loves."

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Prabhat does not own shares in any of the companies mentioned. The Motley Fool owns shares of Berkshire Hathaway, Coca-Cola, and International Business Machines. Motley Fool newsletter services have recommended buying shares of Coca-Cola and Berkshire Hathaway. Motley Fool newsletter services have recommended creating a synthetic long position in International Business Machines. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 20, 2012, at 12:41 PM, irvingfisher wrote:

    Wayne Gretzky once scored a goal right from an offensive zone face off. An interviewer asked Gretzky how he managed to do that. Gretzky seemed a little surprised by the question. His response: I practiced.

  • Report this Comment On August 20, 2012, at 5:27 PM, TMFJebbo wrote:

    Sean Combs, or Puff Daddy, or Diddy or whatever, originally got into the business by volunteering his time to prove himself. Regardless of what you think of him, a healthy dose of hard work (along with smarts) got him to where he is today. I wish that angle would be commented on more often.

  • Report this Comment On August 21, 2012, at 8:46 AM, TempoAllegro wrote:

    Dear Author,

    I am not sure about the point of this article, except to remind us of Gladwell's book. Do you have any stock recommendations of your own?

    Also, your math on how the Beatles reached their 10k mark is fuzzy. 270 nights playing in Hamburg times 8 hours comes to 2160, which is quite far from 10,000. If you meant it was just one step along the way, it would have been better to emphasize this rather than to make it seem like that Hamburg part of their time was what did it alone in terms of performance time. Even if you doubled the number, assuming they practiced every waking hour they were not performing, it would only be 4320 hours.

    And anyway, this 10k idea can be taken to extremes. For some people it may be more, for some it may be less - the point is that hard work and commitment is just as important in the makeup of genius as anything else. Perhaps mastery that requires group cooperation would need more than 10k hours than mastering an individual skill.

    And while I am certainly one to agree with the value of hard work, and educating yourself in terms of learning about investing, I would have to disagree with your conclusion about Buffett based on your reading of Outliers. He is, to me, a genius at investing who also worked very hard, and I doubt many of us would have reached his level of skill or success even if we had put in as many hours as he did, even during the same years that he did. I would read his letters to his shareholders to form a more accurate picture of him.

  • Report this Comment On August 22, 2012, at 8:49 AM, ilovesumm wrote:

    Tiger Woods once said you may beat me but you will never out practice me. He once spent 3 months

    practicing one hole of the Masters.

    Michael Jordan at the height of his career would spend hours a day practicing basketball.

    Most people think or cop out that successful people

    were 'born with it" , unfortunately they don't comprehend the "it " is drive not a particular skill.

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