Warren Buffett’s Greatest Attribute – Disciplined Rationality

During their latest episode of the VALUE: After Hours Podcast, Carbonneau, Forehand, Taylor, and Carlisle discuss Warren Buffett’s Greatest Attribute – Disciplined Rationality. Here’s an excerpt from the episode:

Jake: So, second observation from this humble little sea squirt is, I think that you have to keep seeking, learning, growing, exploring, if you want to have use for your brain. How many people do you know who might have maybe figured out a little bit of some stuff early on, but they get stagnant and their brains just turn to mush? They’ve lived the life of the tunicate.

Tobias: How dare you?

Jake: Once they think they have everything figured out, you metaphorically you cement your head to the ocean floor and then become a passive tube, usually just filtering the confirmation bias out of the ocean of information.

Tobias: That’s literally the quant strategy. You do all of the work, and then you’re not allowed to change the strategy. So, you got to dissolve your brain and cement your head to the floor of the ocean?

Jake: Fair enough.

Tobias: Turn into a feeding tube.

Jake: [laughs] I didn’t want to have to make that analogy, but I’m going to let you make that one.

Tobias: We’re all quants here. So, we’ve got to acknowledge that’s the case.

Jake: Well, I think Munger continually highlights how important it is that Buffett’s, like, one of his greatest powers is that he’s a learning machine. They both of them have kept getting better for decades. My takeaway is that, I think it’s important to still protect your curiosity and keep swimming and not cement your head to the floor.

Tobias: Yeah, good advice.

Jack: I don’t know, if you guys have seen this, but the smarter people are we’ve talked to on the podcast, the more they admit what they don’t know. Jim O’Shaughnessy talks about that all the time. He’s always saying, “I don’t know.” In our space, he’s one of the smartest guys there is. So, if those guys that can say I don’t know all the time and they can admit what they don’t know, I’ve got to be able to do it. So, it’s hard to do. Then like Toby said, it’s hard with quant strategies when you cement the thing in to say, “All right, maybe the world’s changed. Maybe we got to look at this, because there’s also the tendency to rely on short-term things to make changes,” which you can’t do. It’s like this balance between the long and the short-term, but still, if those guys can say, I don’t know, all of us have to be able to say that.

Justin: Jack, do you remember what Lawrence Cunningham said about Buffett? Was his key attribute to–? Wasn’t it disciplined rationality?

Tobias: Disciplined Rationality. Yeah.

Justin: But he talked about the learning a lot too. But we had Larry Cunningham on, who’s awesome, and he’s like a scholar on Buffett. It was like Buffett’s ability to stay disciplined and rational, but also his willingness to, I guess, adjust and pivot and change and learn, which is what those guys do, which is why they’ve had the success they’ve had.

Jake: Yeah. It’s amazing to see the tension between– I don’t feel like the principles haven’t changed, but the tactics, the execution has been more malleable to the environment.

Justin: Did you guys go to the Berkshire meeting?

Tobias: Yes, we did.

Justin: Sweet. Jack and I were saying, we got to get out there at some point.

Jack: Yeah, I’ve never gone. [crosstalk]

Tobias: Go to the next one.

Jake: Yeah, what’s the rush?

[laughter]

Jack: Yeah, that’s true, actually.

Justin: Well, that’s true.

Jack: Probably do need to do that pretty soon.

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