Buffett's scorecard and Wall Street greed

My recent Bloomberg column on Wall Street ethics got me thinking about the common questions people ask in me interviews about Warren Buffett.  For example, isn't Buffett a hypocrite for getting special deals like Goldman Sachs? Don't the special deals invalidate his track record?

I think the deals "count" on Buffett's scorecard because he worked for decades to earn the trust and financial clout that are the reasons why people approach him. With that said, it's obvious that these deals are unique to Berkshire, so the comparison of his record to others is apples/oranges. (It's an apples/oranges comparison in any case, because Buffett doesn't report his portfolio returns, only the growth in Berkshire's book value.) Anyway, you can see a genuine frustration, which ranges in tone from ruefulness to outright envy, at Buffett for having all the "luck." He started his career in a time and place that offered little competition, tremendous investing values, and the chance to compound his skills for decades.

It's also true that others who graduated from HBS and Columbia and Wharton at that time had the identical opportunity. Instead nearly all of them went to work for P&G and US Steel and so forth. This is why the field was so wide open. So the question becomes, what would all the money managers of today be doing if they had started college in 1947? Would they major in business, much less go into asset management? The numbers say no.

That, of course, is not going to change anybody's envy of Buffett, or their ruefulness at having less excellent timing with which to begin their careers than him. Buffett actually plays into whatever envy and frustration are present with his talk of tap-dancing to work and his insistence that investing is so simple that he could earn 50% returns a year running a smaller amount of money. He makes it sound so easy.

One thing I found in writing The Snowball was that it never was easy, even when the field offered a lot less competition. Acting as though investing were easy is belittling to the legions who are sweating it out every day in the market trying to earn an honest buck (again, see my Bloomberg column on why it's so hard to earn an honest living -- there's just not enough alpha to go around for all the thousands of people). Charlie Munger has a nice reponse to those who are seeking a short cut (I'm paraphrasing here): "why on earth would anyone expect it to be easy to do something that will make you rich enough to live" for the remainder of your life on a completely different level than the rest of humankind?

Anyway, those who aren't tap-dancing to work every day can take comfort in one thing. Well, two things. First, honest work really is its own reward. Second, it's quite hard to do what Warren Buffett does. It never was as easy as people thought, even when he was young, and it's a lot harder today -- even with all the special advantages that he has.