The two ways to learn; My upcoming book, The Rise and Fall of Kase Capital; Learning from others, especially Buffett and Munger
Broadly speaking, there are only two ways to learn things: personal experience or learning from others.
While doing things yourself is generally the most effective way to learn, it can also be the most costly – witness the calamitous results when people (generally overconfident men) try to invest, start a business, ski down a triple-black-diamond slope, etc. without taking the time to learn what they were doing.
Trust me, I speak from experience...
In my youth, filled with the hubris of graduating from Harvard – with high honors, twice – I thought I was God's gift to the world and could do anything.
So when I discovered investing in the late 1990s, I jumped right in – buying stocks based on hot tips... and lost my shirt.
I still remember the name of a boiler-room fraud whose shares I bought: StreamLogic. I recall that shares had recently risen from less than $1 to $6, which was very exciting to me, dummy that I was. (I actually Googled "StreamLogic bankruptcy" this morning and refreshed my memory: the stock declined 82% in a day on June 17, 1997 and filed for bankruptcy shortly thereafter.)
But in the late 1990s the market was ripping, especially anything related to the Internet, and I was lucky enough to buy a few hot stocks that did well – most notably, $20,000 of AOL stock that turned into $120,000 a year later.
Boy, that got my adrenaline flowing and really made me think I was the next coming of Warren Buffett... so I quickly created a hedge fund, raised $1 million from friends and family (including my college buddy Bill Ackman and his dad), and launched on January 1, 1999.
What happened over the next 18 years is the subject of a book I've 90% written, The Rise and Fall of Kase Capital (don't ask me when I'll get around to finishing and publishing it... maybe writing about it here will inspire me to do so!). Here's a draft of the cover:
To summarize it in one paragraph...
I had no business investing my own money, much less anyone else's, much less starting a hedge fund because I didn't have the requisite personal experience or learning from others. But I learned fast, got lucky, and had a great 12-year run – successfully navigating the inflation and bursting of the Internet and housing bubbles, tripling my investors' money in a flat market, and growing assets under management to more than $200 million. I was on the cover of Kiplinger's, appeared on CNBC almost weekly, and was featured on 60 Minutes twice. And then my lack of experience caught up with me, I made a number of serious business and investing mistakes, which led to seven years of underperformance and, eventually, my decision to close my funds and return my investors' capital in 2017.
I learned so many business and investing lessons – mostly, sadly, the hard way, but I do give myself some credit for trying to learn from investing greats. For example, I read Ben Graham's The Intelligent Investor, Phil Fisher's Common Stocks and Uncommon Profits, Seth Klarman's Margin of Safety, Peter Lynch's One Up on Wall Street and Beating the Street, and Joel Greenblatt's You Can Be a Stock Market Genius (and then audited the value investing/special situation class he was teaching at Columbia Business School at the very peak of the Internet bubble in the spring of 2000).
And most important, I discovered Warren Buffett and Charlie Munger, who have made a bigger impact on my life than anyone other than my parents and my wife. I started by following the advice Bill Ackman gave me when I first expressed an interest in investing in the mid-1990s:
To learn about investing, read all of Buffett's annual letters... and you can stop there.
I not only read Buffett's Berkshire Hathaway (BRK-B) letters, but then became the first person to track down all of his old Buffett Partnership letters dating back to 1957, which are now posted on various websites. (I did such a good job that when Alice Schroeder, who was doing research for her biography, The Snowball: Warren Buffett and the Business of Life, asked Buffett for a copy of his old partnership letters, she told me he said: "Ask Whitney – he has a more complete copy than I do.")
I read Roger Lowenstein's classic, Buffett: The Making of an American Capitalist. And of course, I started going not only to the Berkshire annual meeting – I've now been to 26 in a row – but also to Munger's Wesco and now Daily Journal (DJCO) annual meetings.
Munger was much harder to learn from because he was (and is) much less public than Buffett, but I was able to track down recordings of some of his most famous speeches such as his 1995 classic, "24 Standard Causes of Human Misjudgment" (transcript here and audio here).
Similar to what happened with Alice Schroeder, when Peter Kaufman was pulling together his brilliant biography of Munger, Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger, he invited me to be a contributor to it because I had transcribed five of Munger's speeches that comprised the heart of the book. It was such an honor! Here's a picture of the team behind it:
That's a (much younger) me wearing a red tie in the lower left. Others I recognize are Peter Kaufman, the primary author, in the front also wearing a red tie, and the three women to his right: legendary journalist Carol Loomis, who has worked with Warren Buffett for decades on his annual letter, Buffett's assistant (then and now) Debbie Bosanek, and Munger's assistant (then and now) Doerthe Obert.
Tomorrow, I'll continue with further thoughts on how I've learned from business and investing greats... Stay tuned!
Best regards,
Whitney
P.S. I've leveraged my 20-plus years in the financial markets – and my contacts inside Wall Street – to give an advanced warning of how, due to an extremely rare convergence of two economic forces, we're about to undergo a massive financial reset here in the U.S.
And as a veteran of the financial markets for decades, I can confidently say that it's during these rare financial convergences where savvy investors make money hand over fist – growing their wealth to new heights... while unsuspecting victims suffer huge losses and get completely left behind. Get the full story here.
P.P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.