Mr.Market’sBipolarDisorder 13his keys every day for decades, much as a day trader would have to
clic khis mouse every day for decades. But the great investors have
not followed the daily trading strategy. On the contrary.
Buffett, for example, generated most of the billions of wealth
Berkshire Hathaway has accumulated from about ten investments
over about forty years. Many of those billions came from buying big
stakes in large companies at times when their value was woefully
underappreciated by the market.
Berkshire bought its stake in the Washington Post Company, for
example, in mid-1973.^11 Not only had the Post’s own stoc kprice been
battered by the Nixon White House’s excoriation of its investigative
reporting on Watergate, that was one of the few times in postwar
American history that the U.S. stoc kmar ket resembled its dismal
stance during the Depression. Buffett’s purchase price? About a fifth
of intrinsic value, an 80% margin of safety. Luc kplays a major role
in a day trader’s portfolio; discipline plays an obvious role in Berk-
shire’s.
Luc kis an inadequate though often partial explanation for any
human endeavor that entails effort. Those who succeed in their en-
deavors catch butterflies not by luc kalone but with the help of an
expertly cast net. Ben Graham drew a fine lin kbetween luc kand
work by saying that “one lucky break, or one supremely shrewd de-
cision—can we tell them apart?—may count for more than a lifetime
of journeyman efforts. But behind the luck, or the crucial decision,
there must usually exist a background of preparation and disciplined
capacity.”^12
Whether they are characterized as value investors, growth inves-
tors, fundamental investors, opportunistic investors, or anything
else, commonsense discipline is the unifying trait of all the super-
investors who make up this barrel of monkeys. It is true that Keynes
and Loeb are associated with the “skittish” school of investing, an
opportunistic strategy that rapidly exploits market gyrations fueled
by alternating bouts of fear and greed. Their short-termism contrasts
with the long-term views of the “value” school associated with Gra-
ham and Buffett, yet both schools recognize the price-value discrep-
ancy that these alternating bouts of Mr. Market’s bipolar disorder
create.
All these stellar investors—and many others, such as Jac kBogle,
Phil Carret, Phil Fisher, Peter Lynch, the Prices (Michael and T.
Rowe), and George Soros—succeed by exercising common sense.
The “systems” or “formulas” employed or the labels given to them