Become the next Warren Buffett of the era

Yesterday during the live broadcast, someone asked how to view Buffett holding a large amount of cash and mentioned the current "strong speculative atmosphere." Today I specifically looked up the original interview transcript of Buffett, and after reading it, I felt there was nothing special—just Buffett’s classic style. He didn’t say that there are bubbles with certainty now, but rather that he prefers to buy when no one is paying attention, likes to buy when all assets are being unfairly beaten down, and people are scared stiff, because the real risk isn’t what can be seen with the naked eye now, but something like a sudden world war or similar event that is unpredictable and falls from the sky.

Have you noticed? He’s not saying things are expensive; he’s just waiting for a black swan to appear. Although he doesn’t know what kind of black swan will appear or when—just like he said, in his 60-year investment career, only about five years are worth betting heavily on.

Buffett’s reasoning makes a lot of sense, but you can’t ignore two facts: one, Buffett is already 95 years old. As a young person, are you trying to imitate a 95-year-old’s portfolio? He probably knows how many years he has left to live. And you? He can’t withstand any cycle changes brought by black swans because if he isn’t extremely conservative, he might just be in a year of extreme asset shrinkage when he dies, and people will say “his later years were not noble.” And you? Forget Buffett—any older person, even someone 10 or 20 years younger than him, should be extremely conservative when allocating assets. And you’re still young. You can withstand cycles, even the historic bubble of the internet, and survive. That’s the first point.

Another point is that Buffett’s DCF (discounted cash flow) model is heavily influenced by the Industrial Revolution. This is a characteristic of the entire era Buffett experienced—post-World War II, it was basically the age of factories, everything was in ruins and needed rebuilding. As long as you could operate machinery, there was demand. Buffett’s lifelong focus was on consumer stocks that could calculate future cash flows—these were the best assets at the time, and this persisted for decades until the internet revolution and the information technology revolution emerged. After that, Buffett’s performance was not the best. So this is very normal because, as he said, he only invests within his circle of competence, and this circle has helped him continuously earn the era’s dividends for many decades.

But what about the next era? Today’s societal changes are happening at a speed that Buffett can hardly imagine or keep up with. But Buffett won’t live many more years, so he doesn’t need to adapt anymore. But you do. You need to survive in this era where changes happen every year or even every few months, for decades to come. You can learn from Buffett’s way of thinking—such as examining moats, business models, management team characteristics and styles—but you cannot simply copy the choices of a 95-year-old because the times are different, and so is the age. Every era will inevitably have its own Buffett—someone whose compound return over the past 20 years has definitely far surpassed Buffett’s. There are many such people, but they are too young, and their years of compound growth aren’t long enough yet. So before wealth becomes widely visible, the public only recognizes Buffett—public perception is always lagging.

The times have changed. This era requires investment and valuation models that are most suitable for it. Missing out on Nvidia and Tesla can’t be justified by “I stick to Buffett’s model, I only make money from certainty, I don’t care how much those uncertain things rise, I don’t chase the hot topics of this era.” You need to think: if Buffett lived in this era, and was exposed from a young age to the internet, AI, blockchain, what kind of investment cognition and style would he develop, given his wisdom and your understanding of him? Would he prefer certain stocks? How would he allocate his assets?

Standing on his shoulders, you need to combine your current capital size with his thinking logic, applying it to different historical backgrounds, rather than blindly copying an old man’s homework. #Federal Reserve Meeting Minutes + Nvidia Earnings Report: Published on May 20 #TradFi交易分享挑战