“The four most expensive words in the English language are ‘this time it’s different.’”— Sir John Marks Templeton, dubbed “the greatest global stock picker of the century” in 1999
An old video recently resurfaced on social media. It’s yours truly asking Warren Buffett and Charlie Munger a question at the 2008 Berkshire Hathaway Shareholders Meeting:
I was intensely nervous, as the quavering voice makes clear.
This clip went viral, and a number of media outlets (Wall Street Journal, Business Insider, etc.) reached out to me for comment, asking questions like “What advice would you give a 30-year-old now who’d just amassed their first million?”
Given space constraints, my full answers couldn’t be included.
I decided to write this blog post to share some expanded thoughts.
First things first: how on earth did I actually get a coveted mic and ask the Oracle of Omaha a question? It took some planning. Here’s the full story and strategy. For those interested, I also shared my highlighted notes from the event.
The first headline and subhead of the recent WSJ piece looked like this when I saw it:
Fair enough. I’ve studied Warren for a long time, read nearly all of his letters, and invested a lot according to his principles, so this made sense.
But then we have this curious development…
Since the above headline was used in the print edition, I’ll quickly clarify a few things.
The WSJ piece makes some great points and highlights hubris we all need to watch for in ourselves, but I do not identify as a Warren Buffett wannabe.
In fairness, the piece doesn’t directly describe me as such, but casual readers might conclude that based on the headline. I have indeed modeled him for a lot, and I highly recommend the books Seeking Wisdom: From Darwin to Munger and A Few Lessons for Investors and Managers from Warren Buffett, even if you don’t consider yourself an investor. But I don’t aspire to be Buffett in all things. I’ve also strongly advised against anyone trying to copy my investing approach with tech, so I’m more anti-cheerleader than cheerleader.
But perhaps most important, the print edition stated, “Mr. Ferriss ignored these pearls of wisdom [to invest in low-cost index funds].” The WSJ was kind enough to update the digital version, but in case you missed it, here’s the correction: I did put a decent portion of my money into low-cost index funds, as I fully accepted I was an amateur in public equities and had no competitive advantage. For me, this is true in almost all asset classes.
There is one exception. I decided to “go pro” with early-stage angel investing in tech. That ended up returning far more than if I had put all of my savings in a low-cost index fund in 2008.
I would highly advise against this for 99.99% of people, but I did approach it systematically, and I’ll share more on that below. It’s also worth reading The Power Law: Venture Capital and the Making of the New Future, which will give you an idea of how this world functions, how the economics work or don’t work, and what assumptions are made with investment strategies. Particularly for angel investors who don’t have the benefit of receiving management fees, “wins” generally mean that you end up with a substantial portion of your net-worth in 1–3 companies.
Is that anti-Buffett? Nope. In the same 2008 meeting, Buffett repeated a few things that he’s said and written many times in some form, including:
“Diversification is for the know-nothing investor.”
“There have been several times I had 75% of my net worth in one situation.”
“I mean, you will see things that …—if you’re working with smaller sums—it would be a mistake not to have half your net worth in.”
But… these only apply if you are willing to do a lot of heavy lifting.
If someone asked me to give investing advice to a 30-year-old today who had just made their first million, I would first point them somewhere else. I’m not a financial advisor and don’t think I’m qualified to give anyone financial advice. The particulars matter too much. But if they insisted, I might say:
(1) If you want to play in early-stage tech investing (or anything high-risk, high-reward), ensure you have a plan for developing an ENORMOUS informational advantage. Aim to develop new skills and relationships through portfolio companies so that you can win over time, even if you “fail” with many bets going to zero. Only bet what you are comfortable losing and what you can recoup in other ways. Though my angel investing snowballed, I began with $10K checks and advising for sweat equity. Think of this as tuition for a real-world MBA. Are you willing to move to the hub of activity to ensure the best possible information and deal flow, as I did when I moved to SF lifetimes ago? Or make commensurate commitments or sacrifices to ensure you are in a position to win? If not, I’d suggest choosing a different game. Other people will take the initiatives that you won’t, and they will beat you. Much of early-stage investing is cooperative, but let’s not kid ourselves, a lot of it is competitive, and not everyone will podium finish.
(2) For the rest—which could be everything—follow Buffett’s advice. Keep it simple.
One cautionary example of doing the opposite: I spotted the COVID curve ball early, and I made a lot of very “sophisticated” (complicated) decisions related to investing, and the associated research, diligence, phone calls, and so on chewed up an unbelievable amount of time and energy. Eighteen to twenty-four months later, I’d done very well but decided to look at how passive S&P 500 returns would’ve added up over the same period, and… they were roughly the same. Of course, you can’t always bank on this outcome, but beware of seeking complexity if you’ve been rewarded for problem-solving throughout your life. Looking back over the last 15+ years, the handful of investment decisions that made all the difference have been simple and were somewhat obvious to me, no major gear-grinding required.
(3) Knowing when to buy isn’t enough. Have policies and rules for when you will sell, or the universe will punish you with very bad and very expensive decisions.
(4) Don’t discount luck, including lucky timing. I started angel investing seriously in 2008 and hit a golden window of converging trends, cheap valuations (by today’s standards), and an uncrowded playing field. The financial crisis had culled the herd of a ton of investors and fair-weather founders. It was a target-rich environment, even for someone with very little to invest. Micro-VCs were just cracking out of their shells, and the big players hadn’t started assailing the seed stage stuff. In retrospect, it was a wildly rare combo of things. I don’t believe I could replicate what I did in 2008–2012 now.
(5) Personally, I’ve largely stepped back from angel investing to double down on writing and the podcast (The Tim Ferriss Show, soon to hit 1B downloads). This comes from a desire for more predictability and less stress. I love the excitement of startups, and I’ve had some lucky wins, but I don’t find it nearly as interesting as developing creative muscles that bring in forecastable revenue year after year. For me, that has compounded more reliably than the all-or-nothing bets. Massive ups and downs in sectors like crypto also take a toll that reduces my creative batteries. In this chapter of my life, I think simplicity is the name of the game (e.g., finding one decision that removes 100 decisions).
(6) Over-optimizing is just as bad, if not worse, than under-optimizing. Past a certain point, buying extra Skittles just doesn’t fucking matter. So, a note to self: stop fiddling around with your goddamn spreadsheets and get more interesting hobbies on the calendar. What hobbies? Exactly.
(7) If we assume the point of investing is ultimately to improve your quality of life and the quality of life of those you most care about, investments that consistently add stress over long periods of time probably don’t make sense. Money is traded for things or experiences that catalyze certain feelings. If your investments are generating the opposite spectrum of feelings, it might be time to reassess.
It’s easy to miss the forest for the trees. Money is a means, not an end.
And in the end, most things matter very, very little. Do what helps you sleep at night and wake up with a low heart rate. To me, those are the hallmarks of a world-class investor who gets the big picture.
Related posts on this blog:
How to Create Your Own Real-World MBA (I)
How to Create Your Own Real-World MBA (II)
How to Say No When It Matters Most (or “Why I’m Taking a Long ‘Startup Vacation'”)
Prepping for Warren Buffett: The Art of the Elevator Pitch
Picking Warren Buffett’s Brain: Notes from a Novice
Exclusive Warren Buffett — A Few Lessons for Investors and Managers
Related podcast episodes:
Chris Sacca on Being Different and Making Billions (#79)
Naval Ravikant — The Person I Call Most for Startup Advice (#97)
The 5 Things I Did To Become a Better Investor (#109)
Marc Andreessen — Lessons, Predictions, and Recommendations from an Icon (#163)
Ray Dalio, The Steve Jobs of Investing (#264)
Mike Maples — The Man Who Taught Me How to Invest (#286)
Ann Miura-Ko — The Path from Shyness to World-Class Debater and Investor (#331)
Howard Marks — How to Invest with Clear Thinking (#338)
Peter Mallouk — Exploring the Worlds of Investing, Assets, and Quality of Life (#356)
Graham Duncan — Talent Is the Best Asset Class (#362)
Katie Haun on the Dark Web, Gangs, Investigating Bitcoin, and the New Magic of “Nifties” (NFTs) (#499)
Ramit Sethi — How to Play Offense with Money (#524)
John Doerr on Picking Winners — From Google in 1999 to Solving the Climate Crisis Now (#543)
Edward O. Thorp, A Man for All Markets — Beating Blackjack and Roulette, Beating the Stock Market, Spotting Bernie Madoff Early, and More (#596)
Roelof Botha — Investing with the Best (#618)
Jason Calacanis on Brooklyn Grit, Big Asks, and More (#635)
Bill Gurley on Investing Rules, Finding Outliers, Insights from Jeff Bezos and Howard Marks, and More (#651)
Michael Mauboussin — How Great Investors Make Decisions (#659)
The Tim Ferriss Show is one of the most popular podcasts in the world with more than 900 million downloads. It has been selected for "Best of Apple Podcasts" three times, it is often the #1 interview podcast across all of Apple Podcasts, and it's been ranked #1 out of 400,000+ podcasts on many occasions. To listen to any of the past episodes for free, check out this page.
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4 Replies to “Revisiting Warren Buffett’s Advice to Me in 2008 (Plus: 7 Lessons for Young Investors)”
Love this. #7 is such a good reminder!
Hi Tim, I am a current MBA student in corporate finance and I have a spreadsheet that I update constantly as I come across interesting financial analysis formulas as well as the basics. I wonder if you have come across any publications that lay out these formulas in an index style or provide a brief definition of when to use them or how to interpret the results? Obviously I have textbooks and lectures but it would be awesome at work to have a quick reference that I can pull out when I need a creative jump start on an analysis. Thanks for your suggestions!
Very good text!
It took me a while in order to understand the peace of mind portion.
I used to have several high risk investments which made me good money, but took away my time. Multiple times a day I was looking at stock prices and getting desperate as one of the particular investments I had collapsed 10-20% a day due to one crazy management update. That was no life!
I learned an investment style based on purchasing high dividend companies. The returns are good, but the peace of mind is GREAT. If prices go down, you purchase more, if they are ok, you save for when they get low, if they go up, you are getting rich!