Tuesday, October 26, 2004

The Buffett System

Great interview of Moneyball author Michael Lewis. Moneyball continues to receive high praise. I guess, it's time I get my act together and read it. :)

Michael Lewis asserts being a contrarian isn't always about going against the grain. Being contrarian is about asking why something is done and finding out if there is a better way. Sometimes there is...and sometimes there isn't. He gives a great example on how Bill James discovered the error in errors and how conventional wisdom was right in ERA's. Read more...

The best part of the interview is where Michael Lewis shows his contrarian side in questioning the role Warren Buffett plays in the investing world and whether there is a way to profit from it. Here's the excerpt:

Michael Lewis: I hate to use this example because he is so successful, but Berkshire Hathaway's (NYSE: BRK.a, BRK.b) Warren Buffett. My God. Warren Buffett has been a wonderful investor. He has been a wonderful influence on American life. But I can't believe Warren Buffett is always right.

And that means that if you can find a position that you can take with some conviction and certainty and it is the opposite of something that Warren Buffett is doing or saying, there is probably a huge opportunity in it. You may have to weather a little storm along the way. But with the markets following whatever he says and does almost instantly in a way that may be unprecedented in financial history, there are definitely inefficiencies being created.

Since the Internet bubble burst, he was right about that in a way. His reputation was already huge, but since what was it, January 2000 or thereabouts, his influence in the market has been out of all proportion to any wisdom that a human being could have. What he says is taken as pure gospel so there is an opportunity in that for someone.

Great stuff!

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