Few things are more insightful in the investment world than Warren Buffett’s annual letter to shareholders (see this year’s letter here). When investors pick my brain for resources and educational tools I almost always recommend that they read the Buffett letters before reading anything else. When I was first getting into the business one of the first things I ever did was print up every single Buffett leader (including his partnership letters which you can find here) and read them thoroughly. I probably learned more from those letters than just about any other thing I’ve ever read in the investment world. And the best part is that you don’t have to pay a dime for the education….
This year’s letter is no different than the last. The opening section is particularly pertinent as it puts our current predicament in perspective. I know I spend quite a bit of time focusing on the risks that investors confront (because butterflies and rainbows don’t ruin your day), but on the whole I am an incredibly optimistic person. And that certainly applies to America. I am incredibly bullish about the long-term prospects for this nation. Yes, we’ve hit a snag, but it is not insurmountable. Buffett succinctly describes his perspective:
“Money will always flow toward opportunity, and there is an abundance of that in America. Commentators today often talk of “great uncertainty.” But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain.
Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective.
We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.”
I won’t rehash the rest of the letter. It is a must read. But if there is one thing that you take away from the letter it is this lesson – nothing stopped so many innovators and entrepreneurs more than the fear of failure. If you allow yourself to be constantly scared into thinking that the world is doomed you will never take that risk which might result in great reward. And perhaps worse, if you never fail you will never learn to get up, brush yourself off, move on and succeed in the future. This does not man you should wander through this world with great complacency and blind optimism, but if you deny yourself the ability to maximize your full potential you will always come up short.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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