Why didn’t Warren Buffett get fired for failing to beat the S&P 500?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 288.3 million views in recent years.

In the answers below I focused on the following topics and issues:

  • Why hasn’t Warren Buffett been fired for failing to beat the S&P500 recently?
  • How can people work smart and not just hard?
  • Is life too short to work for somebody else?
  • Is investing in stocks a good idea?

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Why didn’t Warren Buffett get fired for failing to beat the S&P 500?

There are a few things to point out. Firstly, the share price of Berkshire Hathaway has beaten the S&P500 long-term:

However, as you say, he hasn’t recently. Over-performance doesn’t always last.

I suspect he hasn’t been fired because:

  • It isn’t his job anymore to beat the S&P500
  • His track record for the company is great.
  • It is now harder to grow the company as quickly as when it was smaller
  • If you fired all investment managers for failing to beat the S&P500, too many would get fired!
  • He isn’t a salaried investment manager with a boss who can just fire him.

Once he leaves, I doubt the successor will do much better. In fact, it will be hard for anybody to match his long-term record.

I suspect that is another reason why most shareholders wouldn’t want to remove him.

How do you work smart as opposed to work hard?

You have probably heard the expression add fuel to the fire. Well, I think it applies here.

Those who work the smartest, usually work very hard as well, or at least used to.

There is a simple reason for this. You can learn what works more quickly if you also work hard.

A simple example. Let’s say you are new to the world of online. You work really hard creating loads of content and do Facebook Ads or other techniques.

Eventually, you will stumble on what works. Once you know what works, you can double down on that ad with the best ROI.

Of course, you might need to keep reading and check how the algorithm changes, but you get my point.

What is more, people who worked hard in the past, are more likely to have resources to outsource, to begin with.

Your conscientiousness and even your spouses’ conscientiousness can impact your income as per the chart below – which is another reason to pick your marriage partner wisely but that is another topic!

So, the people who work smartest, often are hard workers, but they merely want to focus on working hard on the right things.

I have seldom met a lazy person who is very productive. I have met many hard and smart workers who beat those who merely work hard.

I have also met people who have “slowed down” and “taken it easy” after more than a decade of hard work, aided by smart work:

Anyway here are some tips

  1. Leverage time. If you read a book when you are young you have 50 years to make money from it. If you do it at 65, you have less time. The same is true of compounded investment returns. Investing $200, Euros or Pounds a month can be enough to become a millionaire if you start very early. If you start at 55, you need to invest a lot.
  2. Leverage technology and other people. We all get tired. Everybody needs sleep. Nobody can work 24 hours a day. What we can do, however, is buy time, either by employing people or using technology to do those basic functions. Take business and old-fashioned techniques. How many cold calls or doors can you know on? 300 a day? With technology, it is possible to 100x that at least.
  3. Negotiate. The last point is more relevant for business owners. For salaried employees, asking for a pay rise takes a few seconds and can make you a lot. Of course, people can say no, but if you get into the habit of asking in the right way, you will get some breaks.
  4. Surround yourself with the right people. Spending an hour having a coffee with a negative and toxic person takes the same amount of time as spending that one hour with a positive person who wants the best for you, and can give you good tips. The best way to do this is to seek out those you admire in your industry and spend more time with them. Surround yourself with people you want to be like.
  5. Take care of your health. Eating more healthily and exercising can improve concentration, happiness, and end outcomes. Simple things like waking up earlier, or later, depending on what works for you, can make all the difference.
  6. Focus on the 80/20, 64/4 and 50/1 rules. 80% of your results will come from 20% of your actions. Sometimes as much as 50% of your results will come from 1% of your actions. Think about business. Some of those huge deals can make or break a year. The same is true when it comes to health. One right decision can make all the difference
  7. Think hard. Have you ever noticed that you come up with good ideas whilst on holiday or taking a shower? Sometimes when your brain is relaxed, you can think more clearly. Thinking hard, and reading a lot, can be just as important as traditional hard work IF you implement ideas. Great ideas are useless in and of themselves.
  8. Change your residency. We live in an online and digital world. More people can work from home. Changing your residency can reduce your taxes and cost of living, meaning that your net and disposable income can go through the roof. Of course, this does depend on your nationality and many things. For Americans, unlike most other nationalities, people need to also renounce citizenship. If that sounds too adventurous, more within your own country.
  9. Don’t listen to society. Many people work hard on the wrong things. Get married by 30, have a house by 32, and so on. Learning to say no to society’s expectations can make a huge difference. Of course, if these things would make you happy, go for it, but don’t do it just because other people are.
  10. Reduce toxic habits. I spoke about toxic people. However, toxic habits like gambling, drugs, and alcohol are usually negative if taken to excess. If you can moderate it, it might not affect productivity. If you can’t, reduce to zero over time.

Also, don’t give up. Many people make positive changes, but then stop if they don’t see quick returns.

Is life too short to work for someone else?

It depends what you want in life.

If you want some of the following things, you will be better off starting your own business:

  • More freedom
  • More money (potentially) in return for more risk
  • A bigger sense of achievement if you succeed after trying hard
  • More social status in some countries
  • You don’t like taking orders from people
  • The ability to solve problems you care about
  • Having the choice to work remotely, even though some jobs allow that now. This can mean doing things like changing your location like your residency (moving abroad).

However, even in that case it is better to work for somebody else first, get good at it and then start your own business.

Experience is important in business. The more you have, means the higher your chances of success.

That is because you can see what is wrong in your industry, fix those problems, and know how to do the job.

It is possible to become a “life-long entrepreneur”, but it is much more difficult than getting a job first.

People in their 30s, 40s and 50s have a higher chance of success than those in their 20s:

Let’s not forget something else as well. If you want an easy life, don’t start your own business.

Some people, like some have said below, think life is too short to have to work so hard, market their own products and so on.

When you start your own business, it depends your life. It consumes you.

Yes, eventually you can outsource more and more, as fans of Tim Ferris would agree.

But more than likely you will be working much harder than salaried employees for the first five or ten years, or longer.

It depends what you want from life. For many people, getting a job and investing on the side can be a lower risk way of achieving financial independence at middle age.

I know plenty of self-made millionaires who are teachers, doctors, dentists, engineers etc.

In other words, middle or upper-middle income people, who didn’t take big risks.

They merely got a job and then invested well in the side. Now they are 50+ and don’t need to work if they don’t want to.

For other that isn’t enough. Just depends on your character. Society now pits business leaders on a pedestal, but in the 1980s and 1990s it wasn’t see as a “cool” thing to do compared to working for a corporation.

The key thing is knowing what you want, not what others like society and parents want for you.

Is investing in stock a good idea as a newbie?

It depends on what you mean by stocks. There are numerous ways to invest in stocks:

  1. Individual stocks vs the market

You can invest in an individual name like Amazon or the entire US stock market through the Total Stock Market Exchange (or the S&p500 is good enough), or the world’s market (MSCI World).

Extreme winners cloud most people’s judgment. Most people think they can spot the next Amazon.

Few amateur investors do. Even fewer do it consistently over decades.

2. Long-term vs short-term

You can hold stocks for days, weeks, a decade or half a decade. The longer term you hold = the more chance you have to make money:

3. Diversification

This was partly dealt with on point one. However, you can be even more diversified and hold stocks and bonds in a mixed portfolio.

Bonds don’t beat stocks long-term, but they can in some time periods. This further reduces your risks.

4. You can react to events or stay the course

Stock market crashes come with the territory. They have happened regularly.

The Dow was at 60 in 1900 and hit 34,000 recently but there have been so many crashes in the middle.

Crashes can’t be consistently predicted beforehand and aren’t something to worry about.

That is unless you panic sell during these moments, as so many people did in 2008 and 2020.

Basically, if you stay the course, are long-term and diversified, you will be fine.

In fact, you will do more than fine if the past returns of the stock market are replicated in the future.

Investing in the markets is a great idea for somebody to build wealth, even on ordinary incomes.

it is a huge misconception that you need to be rich to invest to begin with.

However, stocks aren’t ideal for people with a short-term mindset, or unrealistic expectations.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 288.3 million answers views on Quora.com and a widely sold book on Amazon

In the article below, taken directly from my online Quora answers, I spoke about the following issues and subjects:

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To read more click on the link below.

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