20: Warren Buffett: Tomorrow Is Always Uncertain

We should never forget 9/11 nor this timeless investing wisdom

It’s hard to believe the 9/11 terrorist attacks were twenty years ago tomorrow. We shouldn’t forget the lessons of that day, including the investment advice subsequently offered by Warren Buffett.

Here’s an excerpt from Buffett’s 2014 special letter to shareholders:

The reason for our conservatism, which may impress some people as extreme, is that it is entirely predictable that people will occasionally panic, but not at all predictable when this will happen. Though practically all days are relatively uneventful, tomorrow is always uncertain. (I felt no special apprehension on December 6, 1941 or September 10, 2001.) And if you can’t predict what tomorrow will bring, you must be prepared for whatever it does.

I want to emphasize that last line:

And if you can’t predict what tomorrow will bring, you must be prepared for whatever it does.

Buffett focuses on the what and not the when. That means not only what is likely to happen on the upside but the downside too. A terrorist attack of any kind was inevitable. Why? Because it had a non-zero chance of occurring. Stick around long enough and it’s certain to happen someday.

And even when it does that doesn’t mean more bad things can’t happen. A Category 4 hurricane could have hit New York City the very next day. Anything that can happen will happen eventually.

Does that mean we need to invest scared? Or invest only in US Treasuries? No. But it means we should operate with humility and take lessons from the past. It means not relying on forecasts that are too rosy, or that don’t incorporate some business ‘lumpiness’, as Buffett and Munger have said many times.

The key is to focus on the long term (10+ years). Incorporate long-term optimism tempered by the humility of what’s possible in the near term.

As the events of September 11 fade into history, we would do well to remember the lessons of that time.

Stay rational! -Adam

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