Warren Buffett — The Master Wizard:
On the Power of Persuasion
Warren Buffett is undoubtedly one of the most successful people of all time. At several points in time, he has been the richest person in the world. His wealth is built from the bottom up. What started as a partnership with seven partners and $105,000 on May 1st 1956 is now a global behemoth $450 billion. It goes by the name of Berkshire Hathaway and contains brands as diverse as Geico, See’s Candies, majority stakeholder shares in Coca Cola, Kraft Foods and Wells Fargo.
The fact that Warren Buffett is successful is hardly newsworthy. What is newsworthy however is the fact that everything we know about his success is wrong. I know what you’re thinking. I must be crazy! Buffett has been studied in so much detail, that there can’t possibly be anything new to say about this. Bear with me for a moment, as we explore his history together, and at the end you can let me know if you think the key to Buffetts outsized success might be different than you thought when you started reading this article.
The general opinion of the nature of Buffetts success is that he is a prodigy. He is the Shakespeare of Value Investing. He is the Mozart of Fundamental Analysis. After all, according to his biography The Snowball, Buffett’s favorite book at age 7 was the book “Bond Salesmanship”.
To show just how incredibly prodigal Buffett is, it might help to understand what type of fundamental framework he works with, when he is analyzing a company. Here’s an excerpt from Adam Smith’s excellent book Supermoney:
Adam Smith: If a younger Warren Buffett were coming into the investment field today, what areas would you tell him to point himself in?
Warren Buffett: Well, if he were doing — if he were coming in and working with small sums of capital I’d tell him to do exactly what I did 40-odd years ago, which is to learn about every company in the United States that has publicly traded securities and that bank of knowledge will do him or her terrific good over time.
Smith: But there’s 27,000 public companies.
Buffett: Well, start with the A’s.
Starting with the A’s has become one of the most oft-quoted Buffett-isms, and is accepted as a standard explanation of Buffett’s success. He earned it. His passion gives him fuel to work around the clock and he is smarter than the competition. This might be true, but it overlooks a very important factor. There are plenty of smart, hard-working money managers out there. There are literally astro-phycisists and Nobel laureates who try their hand at money management, and never come close to Buffett’s level of success. So there must be something that sets Buffett apart from these people. Something other than his raw talent.
The Master Wizard
I have read The Snowball more times than I care to admit, because I think Warren Buffett is such an inspirational figure, and his life’s story is amazing. The thing that always stands out to me, is his ability of Tom Sawyering people into doing things that he wants them to do, and pay him for the privelige. In high school Warren got an idea to sell used golf balls that was to be retrieved from a lake. But instead of doing the retrieving himself, he would convince one of his friends to do the bidding for him — Excerpt from The Snowball:
“Doing what he called his Tom Sawyer routine, Warren said to Kerlin: ‘This is your chance. We’re going to deal you in.’ We told him that we would go out at four in the morning to some golf course in Virginia, and that he would wear the gas mask in the lake and retrieve the balls, and we’d split the money three ways.’”
The scheme didn’t work out quite as planned, but Warren went on to use the Tom Sawyer routine to great effect during the rest of his career. Here is another example — one that ended up being one of the most defining moments of his career, namely the purchase of See’s Candies:
“Candy Harry really didn’t want to run See’s. He was interested in wine and girls. He wanted to chase after girls. But, of course, he got cold feet about selling at the last minute. Rick and Charlie went to see him, and Charlie gave one of the great lectures of all time on the advantages of grapes and girls, how the highest and best use of Candy Harry’s time was chasing after women.”
Buffett managed to buy a company, that the owner didn’t want to sell, at a price he felt was below what it should be, because he was able to persuade Candy Harry that it was the right thing to do.
This is where things get interesting, because this is the key to Buffetts enormous success. I acknowledge that he is razor-sharp and passionate about his work, but it is his persuasion skills that is the key to empire.
Another example of Buffetts incredible persuasion skills is his acquisition of Hoschschild-Kohn, when he asks the owner Martin Kohn:
“Don’t you want to take care of your own?”
Which immediately persuaded to Kohn to sell the business to Buffett. Or in his partner Charlie Mungers words:
“That’s not negotiating. It’s just using pithy examples to steer people to what they should be doing. Sure, it’s persuasion, but it’s legitimate persuasion.”
Whatever Buffett wants, Buffett gets.
One might argue that he bends reality that he sees fit. Or to use famous author Scott Adams’ words — he creates a Reality Distortion Field.
The ability to create a reality distortion field is something that Buffett has in common with many other larger-than life characters including Steve Jobs, Madonna, Elon Musk and current president of the United States Donald Trump.
In his book Win Bigly, Adams argues that there are an infinite number of ways to interpret the world — what he calls filters. Most people think that we live a world where people are persuaded by reason and facts. Some people however, such as Buffett, Jobs and Trump, know that this is simply not the case. They know that people are persuaded by emotions, simplicity, repetition and metaphors.
This is what makes a Master Wizard.
Someone who has understood how the world works, and how it can be manipulated to suit ones needs.
The following is Adams’ definition of a Master Wizard, from his blog, which I whole-heartedly recommend that you read:
1. The wizard succeeds in a high-profile field without the benefit of as much talent as you would expect should be necessary. (This is the biggest tell.)
2. People seem to have an irrational hate for the wizard that is not entirely explained by the wizard’s actions. Regular readers already know these unusual reactions are signs of cognitive dissonance. Wizards induce cognitive dissonance often, without trying.
3. Look for an inflated ego combined with an unusually strong ability to withstand withering criticism. (Wizards get a lot of criticism.) The common view is that wizards are egomaniacs. In reality, the wizard works hard to remain ego-free, and hence can handle criticism well.
4. Wizards are often more ambitious, and often more aggressive, than you think is normal.
5. One or more major PR disasters define the wizard’s history.
6. The wizard has a gift for simplification.
7. Observers detect a reality distortion field.
8. Wizards have an ability to succeed where other fail by changing the entire game as opposed to winning at the existing one.
9. Wizards use words to create images and emotions in people’s minds.
10. Wizards seek public attention.
Is Warren Buffett a Master Wizard?
1. Is unequivocally and resoundingly true. Even though one might argue that the level of talent is where one would expect it to be. However, as I said there is more than ample evidence that people who are smarter than Buffett have tried their hand at money management and failed miserably. Most notably Long Term Capital Management.
2. is most certainly true. Although he seems to be the kindest, most gentle and grandfatherly spirit there are a lot of people who dislike and mistrust Warren Buffett in spite of the fact that he is doing more good for the world than anyone else in history.
3. is true in so far as Buffett can withstand criticism better than anyone I have ever seen. No matter what his critics and detractors say, he manages to stand firm, and hold his own. The most notable example of this was when the Internet-bubble was at its peak and Barron’s ran a headline titled “What’s Wrong Warren” calling him old money and out of touch with the times. In the face of withering criticism, guess who got the last laugh?
4. Is Warren Buffett ambitious? I think we both know the answer to that one.
5. PR scandals are rare where Buffett is involved, but they do happen.
6. Do yourself a favor and read Buffett’s Letters to Shareholders through the years. They are a treasure-trove of simple and straightforward advice about investing, business and life. Does he have a gift for simplicity?
Absolutely!
7. The force is strong in this one. Buffetts reality distortion field might one of the most powerful of all time. He checks this box real hard.
8. Smarter people than Warren have tried and failed at this game. He has won the money management game so hard that it almost defies belief.
9. “We believe that according the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a Romantic” — Warren Buffett. Fitting the bill again.
10. Does he seek public attention? Like a moth to the flame.
The inevitable conclusion is that Warren Buffett is undoubtedly a Master Wizard. He is the Gandalf of Persuasion.
The reason that Buffett has led his partners to the promised land, where the streets flow with milk and honey is because of his ability to persuade others to do what is good for him.
Persuasion is a super-power.
A super-power that can generate outsized results for yourself and your partners in life.
The good news is, that it is also a skill that can be learned.
If you want to learn more about persuasion — which I am sure you do after reading this article — I suggest you read the following books:
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What other Master Wizards can you think of?
Share your thoughts in the comments.
