Small Bets: Buffett's Ideas

Yesterday we mentioned Charlie Munger, today we’ll talk about Warren Buffett. The legendary investor said he “tap dances” to work and that reading a company’s balance sheet is like reading music. Born in 1930, Buffett was an early businessman. He sold soda and delivered newspapers. Buffett attended Wharton because Harvard Business School thought he was too young (Warren was 19). At twenty-six, Buffett formed Buffett Partnership Ltd. That partnership served Warren well and lives on - in spirit - in Berkshire Hathaway.

There are many reasons Buffett has succeeded and one is small bets. Warren says that on his desk is a too hard pile. If an investment opportunity is too hard to figure out he puts the idea there. Remember, this is the person who compared reading 10K SEC filings to that of music. He said this:

"I only get into situations where I do know the value. There are thousands of companies whose value I don't know but I know the ones I know." He’s culls his options to things he knows. Buffett said, "If someone walks in this door right now and they weigh between 300 and 350 pounds, I don't need to say they weight 327 to say that they're fat."

Buffett may not financially invest in every company that crosses his desk but he does mentally invest in them. Each bit of research is his equivalent of Sam Walton’s ice cream machine or Marc Cohodes proding and provoking on Twitter. Small bets can be in time or money. A lot of what Buffett covers won’t work out, that’s okay, he’s got a special place for those ideas.