The Wizard of Omaha

You have to invest…

I am reading The Snowball, the official Warren Buffett biography by Alice Schroeder.

Buffett is some smart and impressive guy.

Starting with nothing, in Omaha, Nebraska, he is now the wealthiest person in the US, if not in the world.  It was all done by good stock picking and intelligent investment.

Buffett had an article in The New York Times on Saturday, urging people to invest in the stock market now.

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors

Buffett-thinking is deep in my mind as I read Colvin Mulvany’s posting:

Last week was by far the hardest seven days I’ve spent in my twenty-three year journalism career. I was confused, disoriented, angry, depressed. Seven of the 21 people laid off last week were coworkers I had trained to shoot and edit video for our upcoming (now delayed) new website. They were young and talented. All understood that video was going to be an important part of our digital future. And now they will all be gone.

We are at a nexus in the news business. It is impacting newspapers first, because the web went to text about a decade before it went to video. Such are the lead times of technology. What is happening to newspapers today is going to happen to television in about ten years.  No one is safe.

This is probably the end of newspapers as we know them, but it is not the end of news as a business. And it is not the end of ‘newspapers’ either, if they have the courage and ability to re-invent themselves.  They already have a lot of the pieces in place: dedicated staffs, community based reporting, recognized brands.

What they may be lacking is the courage to move aggressively forward, as opposed to hunkering down and husbanding their few tins of sardines in the cave until the bad times ‘blow over’.

The bad times are not going to ‘blow over’, and the answer is not reducing the once area of the operation that could conceivably take them into the future.

It is a natural tendency, when things get bad, to hunker down. Anyone can buy 100 shares of Microsoft in 1992 and think themselves a genius.  This does not require any brains.  But it takes a lot of courage to invest a few million dollars in two Stanford University students whose search engine just got rejected by Yahoo as worthless. (This is the story of Michael Moritz and Google – but we’ll save that for another day).

Buffett is saying that now is the time to buy stocks, when the herd mentality is driving everyone else out of the market.  It is not that Buffett is a contrarian. He is not. Reading his book, one comes to understand that he is an extremely reasoned thinker.  He notes that great profits were made by those who had the courage to purchase stocks in 1933, as the market turned before the general economy.  His advice to purchase stocks now is predicated on the understanding that in the long run, the American economy will return.

Fine.

In the long run we all understand that the digital revolution is going to happen.

Newspapers and television will migrate to the web.

This, we all know, is inevitable.

So the smart investment here is to get there first and secure a position.

Retreating from the web and video, and hunkering down to eek out the last few moment of the newspaper world is terribly short sighted.

But… it would certainly be in keeping with how most businesses react to hard times.

Which is what makes the Warren Buffetts of the world so very rare… and worth listening to.

2 responses to “The Wizard of Omaha

  1. Yep, the financial gods have given us the buying opportunity of a lifetime.

    Most of us are everyday, individual investors so picking individual stocks (unless you have some play money to trade with) is not wise compared to buying broadly diversified mutual funds of common stocks.

    As the saying goes: History doesn’t repeat but is does rhyme. With that in mind, those who are buyers today will likely end up with handsome profits a few years from now.

  2. michael,

    this post made me think of a slide that i show in my advertising seminars for local businesses. it’s a quote from charles darwin. he says: “it’s not the strongest, or the smartest that survive, but those most responsive to change”.

    indeed, the news business is stronger than ever. of course, only for those that adapt their business to this fast emerging, digital environment.

    yes! if you noticed, you have influenced me to include more historical references in my speaking & sales training engagements.

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