The question is asked again and again: Just what is it about Warren Buffett that makes him such a great investor? The question is asked so frequently that one eventually becomes rather blase about it. But having recently read Malcolm Gladwell’s book Outliers, I now see Buffett’s success in a rather different light. People call Buffett a genius. They say he is one in a billion, never to be repeated — someone who is far out of the reach of mere mortals like you and I. I beg to differ. I draw a parallel with another Western icon, and an example from Gladwell’s…
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The question is asked again and again: Just what is it about Warren Buffett that makes him such a great investor? The question is asked so frequently that one eventually becomes rather blase about it. But having recently read Malcolm Gladwell’s book Outliers, I now see Buffett’s success in a rather different light.
People call Buffett a genius. They say he is one in a billion, never to be repeated — someone who is far out of the reach of mere mortals like you and I.
I beg to differ.
I draw a parallel with another Western icon, and an example from Gladwell’s book: The Beatles. What was the secret of their success? Was it genius that made them one in a billion? Let’s dig a little deeper.
A hard day’s night
In 1960 the Beatles were just a struggling high-school rock band, like thousands of others, when they were invited to play in Hamburg. Hamburg was not a place of high-class music venues, but rather it had an assortment of seedy nightclubs sitting alongside strip clubs and other dubious nightspots.
In Hamburg, bands did not just play a one-or two-hour set. Instead, the club’s formula was a nonstop show where bands would play for hour upon hour. And so Lennon, McCartney, and company would play and play (and play). Often they would play for eight hours at a time — for seven nights a week. As they did so, they learned new chords, new riffs, and new vocal techniques, and they composed song after song. By the end of their time in the German city, they had played an incredible 270 nights.
Hamburg was the making of The Beatles. Then they finally hit the big time, they had been playing together for 10,000 hours.
The 10,000-hour rule
After the interminable hours of hard graft, The Beatles were the best band in the world. Were they one-in-a-billion geniuses, never to be repeated? No. The secret of their success was actually far more prosaic: It was simple, honest hard work.
Gladwell calls it the 10,000 hour rule: In every case of outperformance he has looked at — the Beatles, Bill Gates, even Mozart — these people were not born geniuses, as you might have assumed. Instead, they worked for about 10,000 hours to build up their experience and expertise. Such dedication and perseverance, and not some God-given ability, made them world-beaters.
Chewing gum, newspapers, and Ben Graham
Now look at Buffett. The first few cents he ever earned were from selling packs of chewing gum at the age of six. By the age of 13 he was delivering newspapers, and he applied himself to it with a characteristic ferocious drive.
When he read Ben Graham’s The Intelligent Investor in 1949, his relentless drive to make money found a new outlet. He threw himself into investing. In those early years, Buffett learned an immense amount about what made a good investor. He put in thousands of hours of hard work, investing his own money and that of his friends and family and creating his early partnerships.
Through this constant hard work he learned about the fundamentals of value investing, the importance of a margin of safety, the qualities that make a great company — indeed, all the knowledge that makes a brilliant investor.
There is no such thing as innate genius
By the time Buffett was investing through Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), his hard graft had made him a world expert in investing, and it showed. His expertise enabled him to make some brilliant investment decisions as he bought into companies such as the Washington Post, Coca-Cola, and IBM.
Of course, hard work was not the only ingredient. You also need a strong intellect and a psychological make-up that fits with investing. But my point is that Buffett did not have some innate genius that made him a great investor. No, Buffett had to work at it — just like you, me, and anyone who wants to make it in the world today. The secret of success in investing is the same as the secret of success in anything in life: sheer, honest hard work.
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A version of this article, written by Prabhat Sakya, originally appeared on fool.co.uk