The Rational Investor #030: Buffett/Munger on Thinking Independently

Happy Saturday to you,

Welcome to the 30th edition of The Rational Investor Newsletter.

Today’s quote comes from the book “All I Want to Know is Where I’m Going to Die So I’ll Never Go There” by Peter Bevelin. While it’s generally an odd title, it’s a great book. It’s written as a conversation between Warren Buffett, Charlie Munger, and two wisdom-seekers. The text is drawn from countless interviews and writings of both Buffett and Munger.

The only change I’ve made to the quote below was consolidating Buffett's and Munger's words while ignoring the questions asked by the wisdom-seekers.

Onto the main event…

Here’s Buffett/Munger on Thinking Independently [Emphasis is my own]:

Buffett: “By far, the most important quality is not how much IQ you’ve got. IQ is not the scarce factor. You need a reasonable amount of intelligence, but temperament is 90% of it.

You do have to have an emotional stability, and sort of an inner peace about your decisions—because it is a game where you get subjected to minute-by-minute stimuli where people are offering opinions all the time. You have to be able to think for yourself.

…

There is a lot of temptation to cave in or follow others but it is important to stick to your own convictions. I have seen so many smart people do dumb things because of what everyone else is doing.”

Munger: “Why are we different? We’re working harder at trying to be rational. If you don’t work hard at it, and just float along, you will fall victim to the folly of the crowd—and there will always be folly of the crowd.”

Buffett: “We derive no comfort because important people, vocal people, or great numbers of people agree with us. Nor do we derive comfort if they don’t. A public opinion poll is no substitute for thought. We don’t read other people’s opinions. We want to think. We want to get the facts, and then think.

You will not be right simply because a large number of people momentarily agree with you. You will not be right simply because important people agree with you.”

Recently, there have been many opportunities to follow the crowd: tech stocks, NVDA, gold, Bitcoin, and meme stocks, amongst others. It’s just as Munger said, “…there will always be folly of the crowd.”

I also want to reiterate Buffett’s statement, “We don’t read other people’s opinions.”

Think about this: Can you imagine Buffett having CNBC (or any other media outlet) on in his office while he’s reading through annual reports?

Or, can you imagine him watching financial media ever??

I can’t either. Thus, if we truly want to think independently, maybe we should follow his lead.

Thanks for reading. I’ll be back again next week with more timeless wisdom from great investors.

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