Built to Make Billions?
Emotional IQ just as important as brainpower for Buffett
To the legions of wannabes hoping to replicate, or at least aspire to, Warren Buffett's success as the world's greatest stock market investor, it's a depressing thought, indeed.
What if the Oracle of Omaha's brain is simply a freak of naturea wondrous but ultimately inimitable web of neurons that somehow allows him to deduce profits like no one else? What if Buffett's $52 billion fortune is all thanks to a rarefied double helix strung with the genes of the resolute Scandinavian forebears on his dad's side and the brainy Estonians and arithmetically inclined Iberians on his mom's?
Consider Buffett's typical day at the offices of Berkshire Hathaway, the company he has run for the past 42 years, and you might throw in the towel right now. The spry 76-year-old arrives on the early sideusually about 8:30 a.m.not to prepare for meetings (he rarely takes them) or check his E-mail (he has no work computer) or even to tally his stock portfolio (there's no Bloomberg terminal or even a calculator on his desk). He doesn't read progress reports from his managers (he discourages them) or study the latest research from the top stock market analysts (he shuns them completely). He doesn't even talk on the phone much, save for the occasional call to his stockbroker, when he might give the nod to buy tens of millions of a company's shares in a single dayall without pumping its CEO for information or getting approval from Berkshire's directors or from anyone else except, maybe, a few words from his longtime confidant and Berkshire vice chairman, Charles Munger.
More than luck. Despiteor, quite possibly, thanks tothe dearth of input, Buffett's results are as impressive as they are his alone. His stock picks beat the Standard & Poor's 500 index in 20 out of 24 years, according to one recent study, and by a margin so wide that its authors conclude that even the rarest of lucky streaks can't explain how $1,000 invested with Buffett in 1956 was worth $27.6 million at the end of 2006.
So what can? To be sure, Buffett possesses one of the keenest intellects in business, with a knack for crunching numbers in his head. "His neurons are really good at thinking in a purely abstract, rational way," says law professor Lawrence Cunningham, author of How to Think Like Benjamin Graham and Invest Like Warren Buffett. "It's a way of thinking in terms of calculations, of instantly recognizing if a company generates profits at a given cost over time. It's something businessmen learn to do before making a capital allocation. But for him, it's an innate apparatus."
Cunningham and other Buffettologists nonetheless doubt that the superinvestor possesses some sort of superhuman intelligence. "If you think he's got different chemicals flowing around in his cranium, you've got it all wrong," says journalist Roger Lowenstein, author of Buffett: The Making of an American Capitalist, in which he makes the case that it's Buffett's strength of character, as much as his smarts, that has made him so successful. "It's a combination of hard work and good judgment, and having the disposition to go with your call whether it's popular or not."