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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19684  
Subject: Re: What IS a Value Investor? Date: 2/3/2013 1:50 PM
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Deranged Monkeys re Buffett and the question "Is he a value investor?"

There is more to Buffett's style than is presented in the article, which is really an advertisement leveraging off Buffett. Lots of people are trying to imitate Buffett. What I have very seldom read about is Buffett's cash or liquidity management prowess. In fact I believe Buffett has two distinct and concurrent investment styles, one aimed at listed companies and a different one aimed at private companies. The objectives in regard to listed companies could well be what the advertisement claims but I believe the private investments are done with an eye to raising "float," free capital for investing purposes.

On a related topic, Feynman stressed the opinion that you cannot do science if you have a strongly held belief about nature. You can have a bias or preference but not strongly held beliefs. "How does this relate to value investing?" you might ask. One big risk is holding a wrong opinion against all evidence. That can cost a lot of money. Recently I read about two accidents, an airplane crash and an Italian village that was literal wiped off the map by a "tsunami" when mountainside slid into a lake behind a power dam. Both were attributed to human error. In the case of the airplane the pilot disregarded the reading of an instrument because he thought the instrument was on the blink. It wasn't and a lot of people were killed. The accident in Italy a much more interesting and not on account of the 2,000 or do dead. The builders of the dam noticed that the mountainside had a tendency to side into the lake. They realized the danger this presented so they dug four holes to check out the geology of the mountain. They got one reading from three of the holes and a different reading from the other hole. They figured the instruments in the last hole were faulty. No, the first three didn't reach the deadly fault and the fourth one did. Based on these erroneous results they calculated that a 20 meter wave would result from the landslide so they lowered the lake's water level 25 meters below the dam's edge. The actual wave was calculated to have been 200 meters high! A whole order of magnitude error because the landslide happened in 45 seconds instead of in about a minute. These people worked hard to save the dam and the village but not recognizing that the odd man out hole was the right one cost over 2000 lives.

Beware your biases and your beliefs!

Denny Schlesinger
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