Enjoying Warren Buffett
Let’s recount the reasons why we should like Warren Buffett. For starters his discipline illustrated in his investing is obviously unmatched. This discipline lends itself to his consistency. To exemplify the awesomeness of this consistency, let’s look at a specific example. When we turned his history into a math problem:
we concluded that in order to achieve the kinds of gains he did, from beginning to end, he had to have yielded about 28% compounded per year for 51 years, which by doing so turned a little bland—sidestepped entirely in fact—the overall gain he made which was…are you ready?… 24,262,195%. That’s right: that’s millions of percentage points. He did that by being bland for 51 years without missing one. Of course in real life he no doubt had better years and worse years, but the net end is the same. That would be like picking fifty stocks in a row that went up a third in value, and never picking one that didn’t. That kind of track record would look like this:
Before we get carried away, let’s next talk about a few other things.
Dear Sir,
I really like how you broke down Buffett’s gains like that.
But I was thinking, if you take the amount of money he initially started off with, and then take the Future Value of that, and then, from there, use that figure (the 610k) as the Present Value in your calculation to get 28%, then would that 28% be the amount he beat inflation each year?
I know that’s complicated, and I could be wrong, but it’s worth thinking about, I think.
Dear Sir,
Your comment is such an important one, that instead of making an effort here to address it, an effort which would fail to address it properly, I’m planning on making an entire upcoming post to address it.