“We are often more frightened than hurt; and we suffer more from imagination than from reality.” — Seneca the Elder
I love Warren Buffett. I have loved him for two decades now since I first started following him. I love him for many reasons, one of which is his humility. He actually tells you when he messes up in his shareholder letters. While most investment managers would gloss over or otherwise divert discussions on losses, Warren fesses up and owns them: “Hey, guys, we messed up on Chevron. Thought we had a good pick there, but as it turns out, we didn’t. My bad.” Or, this one from 40 years ago, “Hey, guys, thought textiles were a good business. Turns out they are not. So, to forever remind me and Charlie, we’re keeping the name Berkshire after the textile business we bought that is basically going bust.” Or, this one that unfortunately keeps happening, “Hey, guys, we are quite long insurance as you all know. Really love the business. But as you also know, the U.S. experienced two massive hurricanes this year in 2017 so you can expect us to experience significant losses in our reinsurance business units because of these natural disasters.”
Why does Buffett do this? I don’t know. Is it simply natural for him? Perhaps. Is he simply that humble? Perhaps. Is it because he is an exceptional leader trying his best to set a positive example? Perhaps. These annual confessions of an investment manager are Buffett’s version of bleeding all over the pages. Warren lives and breathes investment vehicles. He has for over 60 years. He is heralded the world over for his investment acumen and discipline. And yet he is humble. He admits to not having all the answers. He admits to mistakes. He owns them, in fact. He doesn’t blame Charlie. He doesn’t point to the manager of the business unit and fire him. He doesn’t even divest underperforming business units. He owns them financially, physically and emotionally. Warren is smart enough to understand that the investment business is an emotional business, even when you’re already rich. (Money, status, and success do not necessarily grant one automatic emotional stability. They are mutually exclusive.) Warren Buffett understands Skin in the Game.
OK, so Warren is humble and admits his mistakes. Got it. So what? The so what here is that so few of us do, particularly those of us in the public light. Most of us are terrified we’ll be found out. Most of us are so scared of making mistakes we don’t even try because we want to be “perfect.” Most of us are metaphorically frozen into position like the good people of Pompeii due to a strange psychological disorder. Most of us would rather speak in front of 2,000 people about a topic we know nothing about than publicly air our indiscretions and commit them to writing. (That’s really saying something.) Public admission of mistakes takes Courage. Investing $10 million of collective money into an investment vehicle that goes negative on you and then having to tell 100,000 people about the event takes Courage. Sitting on a stage in Omaha in front of those same 100,000 people and having it be live cast around the world to another 1 million viewers and answering questions for six straight hours takes Courage (and endurance). Humility is important. Courage is more important. Warren Buffett exudes both humility and Courage, and he exhibits both publicly.
Where did Courage go? We are not courageous any more. Aside from our Great Military, police and firefighters, few others seem to be willing to step up and be Courageous. Find me a courageous office worker. Find me a courageous reporter or television news producer. Find me a courageous marketer. Find me a courageous investment banker. Find me a courageous economist. Find me a courageous PhD within an Ivory Tower.
Taleb talks about the importance of having Skin in the Game in order to care or otherwise make a positive difference for the collective. In fact, he cares so much about the subject he’s writing a book on it right now. Skin in the Game makes all the difference. Without it, we can blithely say as we wish, publicly predict as we wish, condemn and conspire with The Facebook and Twitterati as we wish, critique as we wish, and therefore damage the collective as we wish with no consequences whatsoever. As Taleb courageously points out to anyone who will listen, this is outrageous. We are behaving as small children. Whatever happened to With Great Power comes Great Responsibility? Does anybody care or we “too busy” checking the social media newsfeed?