24: Warren Buffett, Bobby Fischer and Chess: How To Simplify Your Investing Process (And Get Better Results Too)
24: Warren Buffett, Bobby Fischer and Chess: How To Simplify Your Investing Process (And Get Better Results Too)
Simplicity is what the two grandmasters have in common
Warren Buffett’s secrets tend to be hidden in plain sight. The more I study the man (going on two decades) the more I come to appreciate his brilliance. A light bulb went off this week as I listened to a totally unrelated podcast interview, connecting it to a clip from the 1996 Berkshire Hathaway annual meeting.
The secret is this: simplicity is vastly underrated.
I’ll start with the podcast. Shane Parrish and the team at Farnam Street interview some amazing people. I’ve been a paying member since 2016 and get nothing for promoting this. It’s simply a wonderful website, wonderful team, wonderful mission. In episode 481, Shane interviews Adam Robinson, a polymath investor/entrepreneur who studied chess under Bobby Fischer. Here’s what Adam had to say about Fischer (emphasis mine):
Well, he was a genius. And he was very simple and he played the same series of openings. Tim asked me that question, Tim Ferris. He said “What was unique about him?” And I said “He had a childlike simplicity.” He really did. When you looked at his games it was like a child playing them. Everyone else had really complicated games, and Fischer’s were always very simple. —Adam Robinson
Look at that last line again. Remind you of anyone? So many investors look for the difficult investments, the complex ones. To be sure, complexity sometimes brings opportunity. But to continually court complexity is a recipe for frustration at best and poor investment results at worst.
Buffett keeps things simple. This brings advantages beyond the investment itself to the investment process. In the video below Buffett and Munger describe how they read annual reports. They say even the simple ones take 45 minutes to an hour each. And Buffett says you should read every annual report of every business in the industry your company is in. That’s a lot of work.
Simplifying allows Buffett more time. That time is invested in looking at more businesses and in spending more time thinking very carefully about what he’s read. And because his investments are in simple and stable businesses, he doesn’t have to keep up with every single thing the company or its management says or does. If he misses a quarterly filing or doesn’t read a conference call transcript nothing bad is likely to happen.
Both Warren Buffett and Bobby Fischer figured out that simplifying is the secret to outperformance. It’s a recipe for success that can be applied to investing, chess, and beyond.
Stay rational! - Adam
This is one of my all-time favorite videos. Enjoy! (And please like/subscribe/share.)
This is actually a two-part interview. The quote comes from part 2 but it’s well worth your time to listen to both parts.