Why Bores Are More Successful than Adventurers
Stockbrokers—collars unbuttoned, sleeves rolled up—are yelling into several telephones at once, gesticulating as though their lives were on the line. The air crackles. Every now and again one of them slams a receiver down onto the table like he wants to break it. Then the traders start bawling at each other over their Bloomberg terminals, on which stock prices flash like carnival lights. This is how the media depicts the world of finance, relaying images from the stock-market floor or the trading area at a bank.
Scene change. A dull office on the fourteenth floor of an unassuming high-rise in sleepy Omaha, Nebraska, the most negligible state in the USA. No Bloomberg terminals, no computers, no e-mails. Just an old-fashioned desk and a telephone. There he sits, day after day, as he has done for nearly fifty years: Warren Buffett, the most successful investor of all time.
The contrast couldn’t be starker. On the one hand: hyperactive, sweat-drenched, testosterone-laden stockbrokers. On the other: quiet, silver-haired Uncle Warren. Once you’ve grasped the difference between speculating and investing, you’ll start seeing parallels everywhere—and you’ll have a good mental tool to hand.
So, what exactly is the difference? The stockbrokers are trying to make a profit through frenetically buying and selling shares. What’s behind the shares—a software firm in California, a copper mine in Peru—is irrelevant. What matters is that the share prices move temporarily in the right direction.
Classic investors, however, buy shares in only a handful of companies, which they know as thoroughly as the backs of their hands. The opinion of the market means nothing to them. Their commitment is long-term. To avoid transaction costs, they buy and sell as infrequently as possible. Buffett and Charlie Munger don’t even seek out new investment opportunities. They wait for opportunities to come to them. From the horse’s mouth: “Charlie and I just sit around and wait for the phone to ring.”
Who’s more successful—speculators or investors? There are winners and losers on both sides, but the giants among the winners are to be found only on the side of the investors. Why is that? One central difference: investors take advantage of long timespans; stockbrokers don’t.
Our brains love short-term, spasmodic developments. We react exaggeratedly to highs and lows, to rapid changes and jarring news—but continuous changes we barely notice. As a result, we systematically overemphasize doing above not-doing, zeal above deliberation, and action above waiting.
What are the most-purchased books of all time? Not the ones on the current bestseller lists or stacked highest on bookshop tables. I mean the ones that have remained continuously in print for decades or even hundreds of years—the Bible, Mao’s Little Red Book, the Koran, The Communist Manifesto, The Lord of the Rings, The Little Prince. They’re known as “longsellers,” and no publisher can live without them. The same goes for Broadway shows, tourist attractions, songs and many other products. The most successful car of all time? The Toyota Corolla, continuously available as new since 1966—now in its eleventh generation. It wasn’t the first year’s turnover that made the Corolla a superstar but the span of time over which it has been sold.
Such long-term successes often have inconspicuous ingredients that function like baking powder, producing incremental progress that builds up over a long period of time. Take the example of investment: if you invest $10,000 at a five percent return, after a year you’ll be $500 richer. Piece of cake. But if you keep reinvesting these modest profits, after ten years you’ll achieve a capital of $16,000; after twenty years an impressive $26,000; and after fifty an incredible $115,000. Your capital will accrue not linearly but exponentially. Because our brains have no instinct for duration, they also have no feel for exponential growth.
This, then, is the secret of persistence: long-term successes are like making cakes with baking powder. Slow, boring, long-winded processes lead to the best results. The same goes for your life.
There has never been a century in which activity, industry and zeal are so celebrated as in our own. The modern religion of “disruption” demands that we constantly raze and rebuild our careers, our companies and even our lives. Only by so doing, says the consensus, will we remain competitive. Similarly, many people are convinced that for a life to be good it must be one long highlight reel of adventures, travels and relocations. I believe the opposite is the case. The more peaceful the life, the more productive. Bertrand Russell, living in a significantly more peaceful age, agreed: “Nor have the lives of great men been exciting except at a few great moments. Socrates could enjoy a banquet now and again… but most of his life he lived quietly with Xanthippe, taking a constitutional in the afternoon, and perhaps meeting a few friends by the way. Kant is said never to have been more than ten miles from Konigsberg in all his life. Darwin, after going round the world, spent the whole of the rest of his life in his own house. Altogether it will be found that a quiet life is characteristic of great men, and that their pleasures have not been of the sort that would look exciting to the outward eye.” Of course, the same holds true for the great female figures in history. A positive correlation between raucousness and good ideas, between restlessness and insight, between activity and results, can rarely be found.
So what does this mean for the good life? Less busywork, more endurance. Once you’ve identified your circle of competence (see Chapter 14), stick at it as long as possible. Likewise if you find a good spouse, a suitable place to live or a rewarding hobby. Perseverance, tenacity and long-term thinking are highly valuable yet underrated virtues. We should start fostering them again. “You don’t have to be brilliant,” as Charlie Munger says, “only a little bit wiser than the other guys, on average, for a long, long time.”