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TIP635: Deep Diving Into The Warren Buffett Way w/ Robert Hagstrom

Jun 2, 2024

01:14:50

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Robert Hagstrom discusses Warren Buffett's early investing mistakes, GEICO's insurance float, the power of low turnover portfolios, viewing stocks as abstractions, Warren Buffett's long-term thinking, modern portfolio theory, focusing on certainties in investing, and more.

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Quick takeaways

Warren Buffett learned from early mistakes to invest in what he understands best, following Philip Fisher's concept of circular competence.

Buffett diverged from Markowitz's risk definition based on price volatility to focus on intrinsic value and margin of safety as true risk mitigators.

Emphasizing intrinsic value over price volatility in investment decisions reflects Buffett's shift towards expertise-driven investing, aligning with Graham and Williams' teachings.

Buffett's focus on business value and long-term fundamentals over market trends mirrors the enduring principles of value investing advocated by his predecessors.

Deep dives

Circular Competence and Stick with What You Know

Philip Fisher's concept of circular competence, where one focuses on what they know and understand best, heavily influenced Warren Buffett. The idea is to stick with areas of expertise and not venture into unfamiliar territories. Buffett adopted this principle, ensuring he invested only in businesses he thoroughly understood, mirroring Fisher's emphasis on expertise-driven investing.

Focus on Building a Good Business

01:22

Unlocking the Success of High Active Share Investing

01:22

Margin of Safety: Key Principle in Value Investing

01:16

Investment Criticism Context

00:49

Introduction

2min

Exploring Warren Buffett's Early Investment Lessons

4min

Lessons from Warren Buffett's Mistakes and Investment Strategy

13min

Decoding Warren Buffett's Investing Wisdom

7min

The Evolution of Warren Buffett's Investment Philosophy

37min

Economic Franchises and Competitive Advantages in Investing

7min

Exploring the Rule of One in Investing and Market Value

5min

Analyzing Warren Buffett's Critical Attributes for Success

4min

Kyle Grieve chats with Robert Hagstrom about reflections from Warren Buffett’s early investing mistakes, why GEICO’s insurance float has been setup so perfectly for use by Warren Buffett, why low turnover portfolio’s outperform other options, why looking at stocks as abstractions is such a powerful mental model, how Warren Buffett has made thinking long-term into his own competitive advantage, a detailed history on modern portfolio theory, and why it’s so pervasive today, why investors should focus on certainties in their investing strategy, and a whole lot more!

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

05:30 - Details on Warren's mistakes on Berkshire Hathaway (textile mill) and subsequent mistakes with the Dexter Shoe acquisition.

08:44 - Why low turnover portfolios tend to outperform.

16:20 - Why you can outperform the market over the long term while underperforming the market 50% of the time.

18:29 - The importance of thinking of stocks as abstractions.

27:55 - How Warren Buffett has evolved his investing methods while staying true to his deeply held principles.

43:07 - Benjamin Graham's two most influential concepts Warren still abides by today.

43:07 - The history of modern portfolio theory and why it's so pervasive today.

54:28 - The single most important characteristic that has produced so much of Warren Buffett's success.

59:36 - The characteristics required to outperform the market.

01:08:09 - Why we should spend our investing time thinking about business rather than macroeconomics.

And so much more!

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
Buy The Warren Buffett Way here.
Read more of Robert Hagstrom’s articles here.
Related Episode: TIP360: Inside The Money Mind Of Warren Buffett w/ Robert Hagstrom | YouTube video.
Related Episode: MI307: Unpacking The Money Mind w/ Robert Hagstrom | YouTube video.
Related Episode: MI222: How To Invest Like Warren Buffett w/ Robert Hagstrom | YouTube video.
Follow Kyle on Twitter and LinkedIn.
Check out all the books mentioned and discussed in our podcast episodes here.
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