Jan 9, 2021
Why Buffett Avoids Twitter
Buffett has an information network that keeps him from making mistakes. It does not include social media.
Warren Buffett looked at me through gray, piercing eyes and said, “Our shareholders want to hear from us personally, not on Twitter.” As a result, Buffett writes the best read annual letter in business, and its general meeting is the most widely attended. Over 40,000 investors show up for Berkshire Hathaway’s meeting in Omaha to see the two rock stars of investing, as Buffett and his partner, Charlie Munger, are known. When I interviewed Buffett, my goal was to find out how he develops such good insights into investing, and I began with what the interview trade calls a throwaway question.
Jeff Cunningham: “Charlie Munger speaks in grunts and crackles, so his comment would fit nicely into a Twitter post.”
Buffett replied, with sweet sarcasm, “Yes, Charlie’s mumbling is a critical part of our communications efforts.”
Warren Buffett is a technophobe (not actually, more like techno-skeptic), yet he relies on a noise-canceling device. It is his news filter called intel quality or IntelQ for short. The tool is simple to use, easy to find, costs nothing, and is a much more reliable predictor of investing success than its better-known counterpart, IQ.
While some of us react automatically to social media, Buffett uses his IntelQ approach to make key decisions like investing a boatload of his money in a company. Buffett sends ‘data’ on a road trip through his smart network to find out what is fake and verifiable. It is why he’s worth nearly $100 billion and the rest of us, a bit less.
When Buffett and I spoke about his approach, he said, “When I think about whether the BNSF railroad is worth $34 billion, I pretend I’m a journalist and assign myself the story. I want to be sure the facts support my hypothesis. If they don’t, I change the hypothesis and don’t make the deal.”
One thing for sure, when Buffett assigns himself a story, he’s likely to be better paid than the average reporter. But the rewards are the result of brilliant decision-making. We can’t say that for many journalists. What makes his approach so accurate is that, unlike journalists, he is not looking for confirmation. He is actually trying to find the hole in his argument.
To Buffett, solid, reliable information is a goldmine. Once you know the precious stuff is inside, all you need is good tools. It means he doesn’t allow himself to be fooled by a news media whose purpose is to generate clicks. His algorithm begins with a diversity of sources, smart advisors, a side by side comparison with previous experience, and allow a tiny bit of room for randomness because not everything is a clean and neat formula. Although few of us can match Buffett’s investment intelligence, any of us can copy his method of filtering information.
He organizes information into a feedback loop from three networks that confirm or cancel out the noise. The secret is not simply having these three sources of good intel. It is how he uses each one to filter the previous download. Few people fool Warren Buffet using his method, and those that have usually rely on deception and live to regret it:
Listening Posts
Buffett doesn’t talk to journalists. He uses them as listening posts. They aren’t always accurate, but by relying on a broad range, he cancels misinformation. If your thing is politics, Buffett’s rule would be to watch Fox News and CNN. Otherwise, you are bathing in a journalist’s clickstream.
Renowned Experts
The second circle of the IntelQ food chain is reserved for bona fide experts. He would put well-researched books by authoritative sources in this category. He never relies on people with an ax to grind or an incentive to take a position.
Trusted Advisors
Buffett turns to trusted advisors for big deals. Charlie Munger is his confidante of choice, and Buffett admires him because he knows his opinion can’t be bought, stapled, or mutilated. Munger is there for those times Buffett’s instincts might fail. Then he faithfully seeks Munger’s opinion on all important issues. As John Dickinson said in the Liberty Song in 1768: “By uniting, we stand.”
A good example from Buffett's reliance on Munger is the time he held off investing in technology stocks in 2000, and there was pressure to throw in the towel. Berkshire’s value languished while tech went sky-high. Buffett was an old guy. Techies were teens. Wall Street became skeptical of the “Wizard of Omaha.” Had he lost his touch? h For the first time, Buffett began to lose faith.
He turned to Munger, who basically reminded him of his original investing thesis, as Buffett wrote to his partners in his first fund: “do things that are safe, easy, profitable, and pleasant.” Investing in high flying tech stocks with a business model that gave things away just didn’t fit that description. A few months later, internet stocks crashed. Munger proved a trusted partner could make the difference even for someone as savvy as Warren Buffett.
It brings to mind for most of us whether we have such a partner at our disposal, and have we built up the necessary rapport (Buffett says of Munger, “we finish each other’s sentences.”) Because that dedicated, direct, and candid feedback requires cultivation over the years.
The story of how Buffett and Munger met is worth telling. In 1959. they were invited to a dinner party, and it was love at first wisecrack: “We went to dinner, and in five minutes, Charlie was rolling on the floor laughing — and I do the same thing. We were sort of made for each other,” Buffett told CNBC. The result is the most successful investing act in business history. “We’ve never had an argument in the entire time we’ve known each other, which is almost 60 years,” He added, “We always learn something” from each other and “have a great time together.”
