Buffett: The Making of an American Capitalist

by Roger Lowenstein

“It’s not that I want money,” Warren replied. “It’s the fun of making money and watching it grow.”

Inevitably, the advice of such partners was to sell until the future was “clear.” For some reason, market commentators suffer a peculiar blind spot. They routinely assume that once the “uncertainty” of the immediate moment is lifted they will have a plain view of the future unto Judgment Day. The fact that they did not foresee the present uncertainty does not deter them from thinking that no new clouds will trouble the future.

It might have been supposed that competition between expert professionals, possessing judgment and knowledge beyond that of the average private investor, would correct the vagaries of the ignorant individual left to himself. It happens, however, that the energies and skill of the professional investor and speculator are mainly occupied otherwise. For most of these persons are, in fact, largely concerned, not with making superior long-term forecasts of the probable yield of an investment over its whole life, but with foreseeing changes in the conventional basis of valuation a short time ahead of the general public. They are concerned, not with what an investment is really worth to a man who buys it “for keeps”, but with what the market will value it at, under the influence of mass psychology, three months or a year hence.

Don’t misunderstand. I do not think that tens of thousands of people can perform as well. But hundreds of thousands can perform quite well—materially better—than they otherwise might. There is a duality there.

“Never lose money” is an unyielding standard; it forecloses the option of taking any speculative risks.