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Annual report is good feedback mechanism for Buffett. (For me, my newsletter is a good feedback mechanism.) Finding some type of feedback mechanism is good.

Most of my posts deal with strategies on how to save, and are posted at the Retire Early board, but I lurk at this board often. Since this feedback mechanism issue is something on which I believe I possess more expertise than I do in regard to the valuation exercises often discussed here, I thought I might contribute an observation of two.

A question that has come up on the Motley Fool boards from time, particularly in the days following the decision to charge for access, is why do people take time from their days to post here? Just about everyone is pressed for time, and there's no need to post in order to obtain the insights gained from reading the boards. So why do people (some of them smart and busy people who could be increasing their propsects of getting rich by channeling their energies in other directions) willingly give up a precious resource--their time--to prepare posts that do not garner them any direct financial return?

The answer, for me, is that, like Buffet, I have found great value in obtaining access to a feedback mechanism. While I think I know a thing or two about saving, I also know that some of my ideas are not yet fully developed and a few are probably outright misguided. I could try to enhance my understanding by going over my ideas again and again in my own mind--thinking things through does provide benefits. There is a point of diminishing returns to self-analysis, however.

The problem is that, once you have bought into an idea, it becomes very difficult to see the flaws in it. So there is a tendency to stick with even those ideas that are not producing good results. Adding a feedback mechanism to the thought process is the solution to this problem. Often, the mistakes in reasoning to which you yourself are blind to (and which are undermining your prospects of making profitable use of all the genuine insights you have arrived at over the years) are readily apparent to others (even when they have not yet been won over by the genuine insights). By taking your thought process public, you force yourself to reconsider the weak links in your logic and come up with better, stronger ideas over time.

I discovered the value of exposing myself to feedback of this sort soon after first posting to these boards. I found myself being surprised at times that reactions to posts I did were at some times more positive than I expected and at other times that reactions were more skeptical or more negative than I expected. In some cases, it was because of a flaw in the unnderlying idea or in my presentation of it. In others, there was some aspect of how most others understand the issue that I had not yet taken into account. In almost all cases in which I was surprised by the reactions of others (expressed through response posts or recs) to my ideas, there was something to be gained by analyzing the reasons for that surprise. Unexpected feedback generated fresh thinking, and ultimately generated modifications in earlier insights that proved helpful to me and to others.

My bottom line is that exposing ideas to feedback is an esential part of the thought process, as important as doing research, looking for connections between seemingly unrelated phenomena, and applying logic to apparant puzzles to unearth the message you need to take from observing them. It's not easy to obtain useful feedback, however. If you share your ideas with others who think like you (family members and friends often fall into this group), you may enjoy the communication experience but you are not necessarily getting useful feedback.

Buffet's shareholder letters have often been praised for the education they provide to people trying to learn how to invest as well as the master. I think what he is saying in this comment at the shareholder's meeting is that Buffet himself may have profited more from the exercise of writing those letters than any of the investors who learned about his ideas from reading them. Buffet doesn't have another Buffet to look up to to learn how to become a better investor himself. His only hope is to shapen his own insights.

He cannot do that by having people tell him how smart he is. The process of forcing himself to reduce vague notions into understandable prose that will make sense to and inspire action in others may be the most profitable use he can make of his time for the number of hours it takes to prepare those shareholder letters each year. It may be that, had he not written the shareholder letter that came out in 1991, he would not have advanced his thinking to the stage that it needed to be at in 2001 to write the shareholder letter for that year.

We learn from Buffet, yes, but he also learns from us. Each of us adds far less to his investment education than he adds to ours. From his standpoint, though, that doesn't matter. He already knows all the stuff he knows. What he needs to know at this point is all the stuff he hasn't yet figured out. His best chance to identify that stuff may be through interaction with other investors interested in these ideas, such as those reading the annual reports.

I believe that anyone hoping to be a truly successful investor needs to do more than read the best books. He or she needs to develop a feedback mechanism as well. I have hopes that over time many who are not now doing so may come to use the Motley Fool message boards for this purpose. It would make the boards a more valuable resource for those reading the messages contained on them. But it would also add to the wealth of the people contributing the messages by sharpening the insights they started with to a level of perfection that turns them into powerful wealth-generating tools.
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