Warren Buffett: You Don’t Have To Make It Back The Way You Lost it

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In their latest episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discuss Warren Buffett: You Don’t Have To Make It Back The Way You Lost it. Here’s an excerpt from the episode:

Jake: Yeah. I don’t know the answer. I’ve wondered if it would be a useful model for everyone to think about something that Munger said in the 1994 meeting. Buffett at that time said, “You don’t have to get it back the way that you lost it.” Munger pointed that out as being very wise advice, and I wonder if that would be good for us to hear right now as well. If you’re trying to buy the dip in things or if you lost something and maybe there’s a chance to trade up into something else, even just if you maybe tipped more growthy earlier and thinking growth is where you need to stay, maybe you don’t necessarily. I don’t know. But just trying to evaluate the entire opportunity set as cleanly as you can without any kind of recency bias and anchoring bias to what had worked the last 10 years, let’s say.

Bill: Yeah.

Tobias: That’s a good thought.

Bill: It would be interesting. I don’t know.

Tobias: I like to say a lot of this stuff initially– So, I’ll get cover when it actually happens, but I think [Jake laughs] you need to be able to buy stuff that you think is undervalued and then sell it lower, because you’ve got better opportunities to put in there. It was not a bad decision when you bought it, because that’s what the auguries indicated. Whatever you look at, the entrails were pointing in that direction. Entrails were pointing in a different direction when you rolled out. There were better opportunities around. The shoulder bone cracked in a particular way when I threw it in the fire [crosstalk] that way.

Jake: It’s tough to sell 5 PE to buy 2 PE, huh? [chuckles]

Tobias: I would love that opportunity to do that. I don’t mind doing that.

Jake: I think you’re kind of rare in that instance though. I think there’s a lot of people who are like, “This is too cheap to sell.” Even if there is something else, they just feel like they know it better. “I’ve already done all this work on this one.” Yeah, it’s really easy to get sunk cost bias happening.

Tobias: I’ve wrestled with it for a long time and that’s why I say it up front so I can do it with impunity. Is it Buffet who says–? Munger, develop your eccentricities when you’re young, so it doesn’t look like senility when you get older.

Jake: [laughs]

Bill: Hmm.

Tobias: Same kind of theme, trying to do that.

Jake: Yeah.

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