Going Beyond Buffett
From Stagnant Stoats to Harebrained Ideas
[This article has a 4/10 Woo Rating]
Somebody once told me that if you wanted to hack engagement on Financial Twitter (“FinTwit”) you simply had to favourably compare yourself to Warren Buffett. And it’s true, the Sage of Omaha is the God-king of American capitalism. I witnessed the cultish adulation in person when I went to the Berkshire annual meeting a couple of years ago. Warren and Charlie have deservedly sucked up most of the oxygen in the investing arena. They are wise, pithy and have had extraordinary investment performance.
But the stark fact is: Charlie Munger has already passed away and Warren is ninety four. Who is Warren passing the baton to? A thousand puff pieces have been written about who might take on the mantle of his investment performance, but far fewer on who is the heir to his wisdom.
Wisdom never advances by rejecting what has gone before, but by transcending and including it. This is what life after Buffett might look like.
Stagnant stoats
On our honeymoon in 2013, my wife and I spent three days hiking through the majestic landscapes of New Zealand. Throughout the entire time, we didn’t hear a single note of birdsong. I asked our baritone guide, Bard, why. He said the Europeans had introduced rabbits. With no natural predators, the rabbit population exploded. So the Europeans introduced stoats to kill the rabbits. With no natural predators, the stoats then killed all the rabbits. And then all the birds. Unlike Australia, where it seems like nature is relentlessly trying to kill you at all times, New Zealand’s mild climate and relative isolation led to a very benign evolutionary environment.
Despite what two-dimensional capitalism would have you believe, “survival of the fittest” alone produces very unstable ecosystems. It only takes one outbreak of Stoatpox to wipe out everything. As in New Zealand, you typically only see natural systems crumble like this as a result of naive human intervention.1
A great deal of Buffett’s success is due to capitalizing on this power-law dynamic in markets. His roughly $100bn gain on their Apple position (an especially stoatlike company) is likely the second largest in history (after SoftBank’s Alibaba investment).2 He has also benefited for the power of compounding. As writer Morgan Housel has noted, if Buffett retired at 60 and went to play golf in Naples it’s likely nobody would have heard of him. Approximately 99% of his wealth was accumulated after his 50th birthday and 97% came after his 65th birthday.3
Buffett has benefited from the capitalist system more than almost anyone else in history. But in his 2023 letter to Berkshire Hathaway shareholders, it was clear that even he can see what’s happening. "Capitalism has two sides: the system creates an ever-growing pile of losers, while concurrently delivering a gusher of improved goods and services."
It’s doubly appropriate that the U.S. stock market is being swallowed by the incarnation of the left-hemisphere itself: Artificial Intelligence. And an ecosystem increasingly dominated not just by a single industry or company, but a single technology, is incredibly vulnerable. You couldn’t ask for a clearer recent example than $1 trillion of market cap being knocked off the Nasdaq in a single day following the mere possibility of China producing a superior and less tech-intensive AI model, DeepSeek.
This is not the sign of a resilient system. In my twenty years of reading investment commentary, there been a steady decline in anyone saying anything interesting, impactful or novel. It’s because the system is stagnant, and there’s little left to do other than picking the right couple of stoats, or letting the index do it for you. But there’s also no obvious sign of when (or even if) the current system will collapse. And any interventions designed to save it are beyond the control of most of us.
How should we deploy our time and money in this environment? The awkward truth is that public markets are dominated by stoats. And then in private equity, too often the implicit goal is to slash costs, not perpetuate healthy legacies. We’re turning rabbits into more stoats. The asymmetric payoffs required by venture capital also means they are often merely stoat incubators.
So by ploughing effort or capital into less competitive but more holistic businesses, it’s probable that we’re just breeding more defenceless rabbits to feed to the stoats.
We actually need to turn the rabbits into hares.
Harebrained ideas
“He that would run his company on visible figures alone will in time have neither company nor figures.”
— W. Edwards Deming
The Vice Chairman of Ogilvy UK, Rory Sutherland, is at the forefront of the new generation of right-brained business sages. He describes how, when a hare is being chased, it zigzags in a random pattern in an attempt to shake off the pursuer. This technique will be more reliable if it is genuinely random and not conscious, as it is better for the hare to have no foreknowledge of where it is going to jump next. This gives fewer cues for the chasing predator to anticipate.
Hares can outrun stoats by tapping into the unpredictability of their unconscious. In a broader human context, our unconscious is in relationship with “attractor” intelligence, or the Tao. Unlike the hare, we aren’t moving at random, we are moving with the intrinsic intelligence of the entire system.
It’s a very tricky concept to understand or communicate, because it transcends the limitations of our current system. I’ve never seen any evidence that even Buffett grasps the importance of holistic attractor intelligence. He isn’t what you could honestly call a “sustainable” investor. It’s easy to point out some pretty substantial negative externalities from coal, candy and Coke. Contemporary capitalism, and Buffett’s empire, has tended to enshrine shareholder returns as the ultimate judge of quality.
And yet the most optimistic future of capitalism is sageism; where the focus will return to marrying our own individual agency with this broader intelligence of the systems we inhabit. Because this intelligence that transcends and includes capitalism is literally unthinkable to most people in the current system, we need a new generation of maverick thinkers to help us understand it.
Investor Chris Begg teaches at the legendary value investing programme at Columbia. He calls this intelligent force “dynamic quality.”4 Referencing Robert Persig, dynamic quality is “good as a noun… that leading edge, that horizon edge of where we’re going, where we’re becoming and where we ought to be.” This edge is where emergent innovation happens.
Writer and investor Eric Markowitz of Nightview Capital has been writing a great series studying the traits of resilient and innovative businesses.5 Hōshi Ryokan is a Japanese hot spring inn that’s been run by the same family for 1,300 years. Zengoro Hoshi, the 46th-generation owner, is known for sharing a deceptively simple insight: “the secret is to learn from water.” And a large component of that is the freedom and fluidity that allows you to “wait for the most opportune timing.”
An interview with the luxury clothing artisan Brunello Cucinelli from 2015 is probably my favourite illustration of these principles.6 He targets beauty not profitability. He pays his employees 20% more than market and mandates they don’t work beyond 5.30pm. The company has been a 8x since their IPO in 2012. I also love this quote of his:
This century is where enlightenment and romanticism must blend. A great idea that is born out of the mind and then goes through the soul — there is no doubt that the outcome is marvelous. If this idea is true, fair, beautiful, there’s no doubt that it is also a good idea. I think this applies to everything.
Sutherland also talks about the need to make space in your system, “20 minutes a day to stare off into space.” Dynamic quality can emerge in that womb. This is because we can use that time to pursue what is interesting.7 In a rich interview8 with another contemporary sage, Rick Rubin, Sutherland made a profound point:
“Basically to me anecdotes are data because they're outliers. The fact that we find them interesting suggests that in evolutionary terms they're important and therefore you shouldn't discount anything as being anecdotal.”
Pursuing what’s interesting, not necessarily what’s rational, takes you to the leading edge of dynamic quality, and that’s what creates a truly innovative and enduring business. As Sutherland puts it, a spreadsheet leaves no room for miracles. Indeed, he believes that the “biggest progress in the next 50 years may come not from improvements in technology but in psychology and design thinking.” Hares don’t merely beat stoats with raw speed, they beat them with intuitive unpredictability.
How do we do it?
It’s largely being left to private investors, family offices and founders to breed more hares. They have different timeframes and priorities. The real opportunity is bringing the wisdom of these whole-brained-harebrained sages to the new generation of startup founders.
This wisdom school will match new sages to ancient practices. And the stigma against many of these seemingly non-rational approaches will provide an enduring edge in the post A.I. world. That’s why I spent most of last year working on The Accelerating Wisdom Series, and emerged with an array of specific tools to restore our hemispheric balance. This could mean learning about somatic meditation from
. Begg describes the feeling of attuning to this new sense of value as an embodied experience. I’ll really know my work has succeeded when investors can openly talk about intuitive innovative insights gleaned from dream work (as explained in our lecture from Dan Lawrence). They could also learn to use an energy diary to increasingly attune to the inherent intelligence of the system, as recommended by Dr. Anne-Laure Le Cunff. And perhaps the finest example of them all is to learn intuitive meditation from Işik Tlabar, thus creating a container in your own life for that emergent intelligence.It’s optimistic to think that the hares will always outrun the stoats, especially now. But dynamic quality is more resilient in the long term; these businesses have a higher probability of weathering unexpected crises. And this may fall on the deaf ears of older capitalists, but it also increases the likelihood of doing the right thing. The win-win from the pursuit of quality will extend to your own life, because it makes you wiser. And to cite a powerful recent study,9 “wisdom has a greater influence on life satisfaction in older adulthood than health, socioeconomic status, financial situation, environment, or social engagement.” We won’t collectively transcend Buffett’s legacy by being smarter stoats, we’ll do it by being wiser hares.
[Thanks to William Oliver, co-founder of In Practice, for the editing feedback and wisdom].
Source: ChatGPT, let’s hope it’s right…
Source: Morgan Housel with Tim Ferriss.
Chris has given two of my favourite interviews in investing, one with William Green of Richer, Wiser, Happier and the other with Bogumil Baranowski of Talking Billions.
You can read his series for Big Think here, as well as the specific Ho-shi Ryokan case study here. His weekly Nightcrawler roundup is one of the best finance-centric newsletters I read.
This excellent EconTalk podcast with Margaret Heffernan tells some great stories about low-cost innovative experiments and the benefits of involving the whole company in that process.
The whole interview is gold, as is Rory’s book Alchemy. The title obviously points towards the hemispheric blend at the heart of sageism.
“Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius – and a lot of courage to move in the opposite direction.”
Amazing stuff sir. I was happy to see Cucinelli mentioned, I re read his conversation "On My Om" every quarter.