Fighting Warren Buffett

Out of curiosity, I decided to venture deep into the archives of Livewire.

I wanted to find the first wire I ever had published on the site – a small blog piece I wrote for a former employer.

Almost ten years to the day, I am now working for Livewire.

The interesting thing is that if I look back at the (much younger) investor who wrote that original bit of content, I’d struggle to recognise him.

What’s more interesting is that I was saying the exact same thing back then when I was comparing myself to the period where investing was my hobby and not my job.

An investor’s first steps

I started investing in 2002.

Like everyone else, my starting point was one of complete ignorance.

Armed with nothing more than curiosity, a tiny bit of capital and some general lessons from an education session the ASX ran at the time, I dove headfirst into the markets and purchased my first shares.

This usually goes one of two ways.

Some will decide to go down the trading path.

Here, the investor in question will learn how to read charts and what technical indicators they should be looking at to work out if something is a “buy” or a “sell”.

Others, which included me, will go down the “blue chip” path. This more fundamental and long-term approach to entering the markets can be summed up as “buy the big companies that you have heard of as they must be good. Right?!”.

Whichever path the investor chooses, it is unlikely that they will see instant success, and they’ll have to decide if they want to keep going.

Omaha bound

For those that stick with investing, the next step usually is learning about Warren Buffett.

Accepting their ignorance, the investor decides to do something about it. A quick trip to the local library or bookstore later, and a bagful of books about Warren Buffett stand ready to be devoured.

This makes intuitive sense.

Buffett is arguably the greatest investor who has ever lived, managing to generate impressive returns for over half a century. If anyone knows what it takes to be a success, it is him. He has also been kind enough to share his knowledge.

The result is often a switch from the “winging it” phase to the “buy strong companies at reasonable prices” and ‘Buffett disciple” phase.

The Buffett barrier

For many, the Buffett phase is where people stay.

Who are we to disagree with the GOAT of the share market? His skills are plain to see, and he has told us how he does it. Remember his golden rule, you remind yourself. You don’t have to be the smartest, just focus on not losing money. Put your head down and follow the line.

I was still partly in this phase when I contributed that first article to Livewire ten years ago.

But issues arose.

A perfect example of the Buffett barrier was when I was in a discussion about Facebook’s, now Meta Platforms (NASDAQ: META), IPO.

I spent a good 10 minutes talking about what an interesting business it was and how it can (and likely will) become a much larger business than it already was. But, when I was asked if I was buying, my answer was a firm no.

The multiple is too high, and tech is risky, Warren Buffett has said so himself.

My head was telling me Facebook was strong, but my heart, besotted to the revered value investor, stood resolute. How dare thee disagree with the sacred texts of Berkshire Hathaway (NYSE: BRK.B).

Becoming an apostate

Don’t get me wrong, my Buffett stage had adequate success and got me a job in the industry for the first time.

But something continued to feel off.

The very companies I found interesting, which were doing better than my “Buffett” stocks, were ones that I was being told I should be avoiding because they had “too high a multiple”, were “not currently profitable” or “were risky as they were in an emerging, rather than established, industry”.

I worked out I also liked playing offence – looking to maximise return – versus defence – seeking to minimise loss.

This was the mid-2000s after all. Technology was changing the world, betting on human progress sounded like a better bet than trying to predict what wouldn’t change.

So, I decided to forsake the Church of Buffett and explore the world of markets unencumbered by investing dogma.

Finding my investing self

This journey led to the biggest lesson I have learned in my more than 20 years as an investor.

Although I can borrow from the experience of those that have found success before me, it shouldn’t define me. I realised that I have different skills, different levels of knowledge, different risk tolerances and, above all else, a very different life.

Buffett may be the GOAT, but there might be things that he does that, whilst right for him, would limit my success. Maybe there are areas where I have more knowledge or better skills than a 90-year-old from Midwestern USA.

This led me to embracing a more aggressive approach to investing.

Rather than mature blue-chips with high returns on equity, I looked for (ironically) value in areas that a typical Buffett disciple would not tread.

And, you know what, I found it.

Emerging technology, loss-making growth stocks, over-sold turnaround stocks. My universe of potential investment opportunity skyrocketed as did my returns.

Sometimes, as hard as it might be, and as much as some might not understand, you just need to turn your back on what feels safe and tread your own path.

Express yourself (but keep learning)

To this day, a little Warren Buffett will appear on my shoulder and offer his folksy wisdom and, of course, it would be silly for me to ignore him.

But I am also willing to fight back, disagree, and send him back to his realm when I think it is appropriate.

Two decades of hard-earned investing lessons, fuelled by many mistakes and some big wins, have only strengthened my conviction that for investors to succeed, they need to become the best investor THEY can be, not try to be someone else.

If, after a solid investigation and analysis, I feel that something is the case, I bet on it.

Either it will work out (in which case “yay!”) or it won’t, and you’ll learn a valuable lesson if you are open to it.

And that leads me to this point in my investing journey (a journey that never really ends) and why I am so excited about joining Livewire.

Here, I will get the chance to not only share (and test) my thoughts but learn from a diverse list of Australia’s leading investors and fund managers – all who have learned their own lessons and are walking their own unique investing journey.

I have no doubt that in another ten years, I’ll probably look back at me now and, again, struggle to recognise myself.

It’s part of what becoming an investor is all about.