Warren Buffett’s Superhuman Calculations

During their latest episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discussed Warren Buffett’s Superhuman Calculations. Here’s an excerpt from the episode:

Tobias: Well, there was a little video doing the rounds yesterday on Twitter of this lady saying– Sorry, I didn’t catch who it was, but she said, she had spent some time with Warren. It could have been– [crosstalk]

Bill: Oh, yeah.

Jake: Oh. All right.

Tobias: But she said she walked with him through a carpet, one of the carpet stores. I don’t know if it was the– [crosstalk]

Jake: Shaw?

Bill: No. It was–

Jake and Bill: Nebraska Furniture Market.

Tobias: Was it?

Bill: Yeah. He was talking about Mrs. B, like how they sell each piece. This is a good story.

Tobias: He knows the price of each piece of carpet in there. He knows the margin on each piece of carpet. He knows what they can discount to, so they can still sell it. He said Mrs. B didn’t like to discount. He said he persuaded her that they would make more money if she discounted to get the stuff that didn’t sell off the floor. And then, she just went through all of the things that– The level of granular detail that he has about every single business is just unbelievable.

Jake: Wow.

Tobias: Unmatched.

Bill: That’s why when he says, you don’t need to model, he might mean I don’t need to model.

Jake: Yeah, that’s very true. I don’t do a discounted cash flow, but I pretty much am running that in my head already.

Bill: That’s right. Yeah, I can pretty much do all the discount rates out to 15 years in a second.

Tobias: “Alice Schroeder.” Thank you.

Jake: Well, it’s so interesting to hear him. Oh, yeah, that makes sense.

Bill: Oh, was that Alice Schroeder? Interesting.

Jake: At the meetings, you’ll hear him talking. There’s sometimes where you can see him pause to do a little bit of math in his head for something, and it’s lightning quick. He’s very, very good. It’s very impressive.

Bill: Yeah.

Tobias: Maybe it’s a trick. Maybe figures it out before anyone–

Jake: Oh, I’m sure he’s got all kinds of heuristic shorthand, like, little math rule of 72 type of stuff. So what? He’s in the ballpark, and he knows all the dimensions of the ballpark.

Bill: Dude, I’ll tell you the other thing that’s crazy is, you get me– I’m not a math savant by any stretch, but I am moderately competent. But you get me on a mic, and I’m starting to do it when people are listening or on the fly, I’m terrible. And for him to do that in that arena with that complex of math, he’s got it just on autopilot. It’s just like there. It’s incredible.

Jake: Yeah. Some of them are compounding series too that he’s talking about. Some of the math problems are like opportunity cost calculations of something that he didn’t do, and he’ll figuring out what it costs to not buy Walmart or something. He’s running it through his head real quick of, “Oh, that would have been worth $10 billion.”

Bill: Yeah.

Jake: It’s amazing. Carry the one. [laughs]

Tobias: Didn’t you say he would have bought a little town at one point there in Ohio?

Jake: I think he tried to.

Tobias: He said that it would have worked out pretty well too.

Bill: Yeah, he’s one of a kind.

Jake: He is.

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