Influences – Investing

Warren Buffett

“I don’t want to buy any stock where if they closed the New York Stock Exchange for five years, I won’t be happy owning it. I buy a farm and I don’t get a quote on it for five years, I’m happy if the farm does okay. I buy an apartment house, don’t get a quote on it for five years, I’m happy if the apartment house produces the returns that I expect. But people buy a stock and they look at the price the next morning and they decide whether they are doing well or not doing well. It’s crazy because they’re buying a piece of a business. That’s what Graham most fundamentally taught me. You’re buying a part ownership in the business. You will do well if the business does well if you didn’t pay a totally silly price. And that’s what it’s all about.” – Warren Buffett talk to University of Florida MBA students

Buffett is an obvious choice for any list of influential investors with good reason. He’s well-known for investing success over the past century, folksy business platitudes and homespun annual shareholder letters. What makes Buffett so remarkable is that he has maintained his convictions over decades where the rest of the financial industry has moved further away from his line of thinking. With the proliferation of technology, the investing community is prone to over-think its collective actions. The regular person is oversold on the concept that financial professionals are that much more knowledgeable than them.

Buffett has derided the financial establishment for these actions. In its place, he has espoused the timeless basics to business: Make more money than you spend. He says, “I am a better investor because I am a businessman and a better businessman because I am an investor.” As an business owner, his job is to run businesses in the preceding manner. As an investor, his job is to find businesses run that way. It’s slightly more complicated than that, but not by much. In this day and age, it feels harder to find than it should.

If more people in business followed his thinking, the economy and society at large would be a much more prosperous place.

Jim Cramer

“I’m not trying to tell you what to buy or sell like an automaton on my show. I’m trying to give you investment ideas and trying to help you understand how I come up with my conclusions so you can do the same.” – Jim Cramer on Mad Money: Know Thyself

Jim Cramer sparked my interest in finance. I came home from school one day to find my dad watching his show. His energy is compelling to youngsters and those unfamiliar with the stock market. His ability to break down financial terminology into layman’s terms is valuable to anyone needing to learn more about how the stock market works.

There are criticisms that his glamorization of the market masks the underlying work to watcher at home and people are prone to blindly following his recommendations. I tend to not hold this against him personally so much as holding it against the format of his show (where having to make money-making recommendations on a daily basis is bound to fail) and naive viewers.

What sealed my respect for Cramer is when I got to meet him at Ohio State. He visited campus to shoot an episode of his “Mad Money” show and speak to a select group of students. Two events happened in his one day on campus:

First, during the midday one-hour session with 50 business school students, I got to directly ask Cramer a question. I asked, in the spring of 2009, if he believed there was a threat of another round of mortgage defaults and further declines in housing prices. He gave a surprisingly detailed, ten-minute answer citing technical metrics used by Bank of America to determine what and how many loans may be at risk and when a market bottom could be found. I was impressed that he did not give a flippant five second answer and showed the in-depth expertise which presumably served him well when he was an active fund manager.

Second, during the filming of his show, he continued to make references to some famous actor whose name I forget. It was a widely recognizable name. During the commercial breaks, when talking about his previous segment to the audience while his stage crew rearranged the set, Cramer continually butchered the name of a seemingly popular celebrity. I don’t remember the exact name, but I remember the feeling that Cramer spent more time researching the stocks to be discussed on his show than any of the soundboard, props, or pop-culture references that go into the script. This reinforcement of his knowledge domain reassured me that he was a great entry point into the financial industry.