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This Is Warren Buffett's Most Underrated Talent

By Alex Dumortier, CFA - Apr 20, 2016 at 11:59AM

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Everyone knows the Oracle of Omaha is an exceptional investor, but he's also extraordinary at this.

U.S. stocks were roughly unchanged in late morning trading on Wednesday as investors sorted through a heavy earnings reporting schedule. The S&P 500 (^GSPC 1.99%) and the Dow Jones Industrial Average (^DJI 1.61%) (DJINDICES: $INDU) are up 0.26% and 0.32%, respectively, at 11:50 a.m. EDT.

From daily market changes to an apostle of ultra long-term investing, Yahoo! Finance published a video interview segment with Berkshire Hathaway Warren Buffett (usefully, Yahoo! Finance will be live-streaming Berkshire's annual meeting for the first time this year).

At the outset, the interviewer remarks that, through mini-events held at or around the meeting, Buffett has contributed to building it up. Buffett replies, "[t]here's a little bit of P.T. Barnum in me," referring to the legendary American showman and businessman.

In fact, Buffett is lionized for his prodigious investing acumen, but that obscures another area in which he is extremely talented: salesmanship.

Except it isn't a talent in the sense that it came to him naturally; rather, it's something he developed diligently and systematically. He approached the task in the same way he developed his investment skills.

According to Alice Schroder's definitive biography The Snowball: Warren Buffett and the Business of Life, the precocious Buffett discovered Dale Carnegie's classic How to Win Friends and Influence People at the age of eight or nine.

As a teenager, he returned to it in order to improve his ability to socialize with his peers. Ever the rationalist, he even went as far as to conduct statistical tests of Carnegie's principles, comparing outcomes when he did and didn't follow them, in order to convince himself of their effectiveness (they worked!).

Freshly graduated from Columbia in 1951, Buffett returned to Omaha to work as a stockbroker at the brokerage firm of Buffett-Falk & Co.

In his biography Buffett: The Making of an American Capitalist, Lowenstein writes, "Buffett's biggest step at Buffett-Falk was not an investment at all; it was taking a Dale Carnegie course on public speaking. As Buffett recounted at the 2008 Berkshire Hathaway Annual Meeting:

I was terrified of public speaking. I signed up for a Dale Carnegie course, then went home and stopped payment on the check. Then I signed up a second time, and paid with cash. It is helpful to teach and get up in front of people. It is important to communicate well both in writing and speaking.

Did Buffett take the course in order to become a better stockbroker? No, for as Lowenstein explains:

[B]ut he didn't like persuading people to invest, particularly as he realized his own interest -- getting a commission -- was not the same as theirs. It had an adversarial -- almost a confrontational -- aspect that made him highly uncomfortable.

But when he believed in the "product," there was no stopping him. Initially, the product was Ben Graham's investment principles. A few years later, it was his ability to apply those principles and compound capital. On May 1, 1956, at the tender age of 25, Buffett started Buffett Associates, Ltd. with seven partners. The rest is investment history.

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