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The Success Of Warren Buffett

  
  Education
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Singular focus – Since Warren Buffett was a young boy, he had almost a singular focus to accumulate wealth. He also believed his way to wealth would be through the stock market. At a very early age, he knew what he wanted and where he wanted to go. Successful people always have long-term visions of their life. This is a lesson especially for younger folks. You will only really succeed in life once you know what you want to accomplish. As Yogi Berra said, “If you don’t know where you are going, you may end up some place else.”

Dedication – Mr. Buffett spends about 18 hours every day dedicated to investing capital. This is the type of dedication needed to succeed at his level. I doubt he wastes anytime in front of the television or shopping at the mall. Almost all his time is spent thinking and working on Berkshire Hathaway. This type of dedication can have its drawbacks as well. The book does not portray his family life in a very positive manner. He was separated from his first wife (it appears they did not divorce for P.R. reasons) and did not spend much time with his children as they grew up. There is only so much time in a day, and he spent it mostly on business-related activities.

Independent thinking – Buffett has come up with his criteria for investing in companies. These criteria have been developed over years of studying and reading about his craft. He will only invest in companies that meet these criteria. He does not feel pressured when things do not go his way nor when outside sources suggest new rules for investing. The most telling story of this was back in 1999 during the “technology stock bubble”. Many people were saying he was too old and out of touch. They said he did not understand the “new economy”. Buffett continued to plot his course using the rules he knew and understood. He has been vindicated as the technology market crashed and Berkshire Hathaway has continued to thrive.

Alliances – Mr. Buffett has developed partners and allies to help him attain his goals. He uses these partners to manage his businesses, help find new investments, and to obtain access to capital. Mr. Buffett will be the first to tell you that his wealth would be a small fraction of what it is today without these business associates. (more…)

Book Review: Hedge Hogs: The Cowboy Traders Behind Wall Street's Largest Hedge Fund Disaster

  
  Education
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I’ve recently enjoyed reading Hedge Hogs: The Cowboy Traders Behind Wall Street’s Largest Hedge Fund Disaster, the story of how Amaranth blew up. It’s essentially a story of one man who was successful for a while and took on unbelievable amounts of risk trading natural gas futures while all of his supervisors, mostly the fund’s owner but some others as well lost all control or even desire for control. The book greatly details the actual trades and talks about many related personages, but it left me puzzled about how the trader who was mostly responsible for this disaster lasted this long. He had made a huge amount of money prior to blowing up, and even though he appeared to be quite intelligent the reasoning behind his trades are either inadequately or perhaps truthfully described as being close to random. He suddenly takes a liking to certain types of spreads and just bets on them evidently without much more than a seemingly unjustified belief that they will widen.

At some point he essentially became the market and and had to keep up the spreads by continuous buying until the fund blew up. The main trader and some others are portrayed as sociopathic degenerates driven by irrational beliefs as well as a strong desire to win at all costs. I would be interested to hear some energy trader’s or any commodity trader’s opinion about the book.

Pizza Proves to Be the Best Motivator

  
Analysis, Education
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In the upcoming book “Payoff: the Hidden Logic that Shapes Our Motivations,” behavioral economist Dan Ariely detailed a study showing that pizza motivates workers to increase productivity more effectively than money.
Looking for a way to encourage your employees to show better results? The answer might be pizza.

In his book, Ariely recounts an experiment conducted at an Intel  semiconductor factory in Israel. For the experiment, factory employees were split into four groups, three of which were promised a reward if they managed to complete stated goals by the end of the day.
Members of the first group were offered about $30 cash apiece. The second group was told that they would receive a compliment from their boss, and members of the third group would get vouchers for pizzas. (more…)

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