Buffett Wannabes Lose Luster

 

"Warren Buffett, who has earned Berkshire Hathaway's investors close to 4 million percent, once said "the stock market is designed to transfer money from the active to the patient." Now many younger investors are coming around to his way of thinking.

In 2008, as the seeds of the recent tech boom were being sown during the financial crisis, Tim Ferriss, bestselling author of "4-Hour Workweek," which told readers how to "join the new rich," snagged a coveted microphone at Berkshire's annual meeting. 

He asked Mr. Buffett and his business partner Charlie Munger how a 30-year-old with his first million dollars should invest.

"I'd probably have it all in a very low cost index fund," Mr. Buffett said. "I'd recognize the fact that I'm an amateur investor. . .forget it and go back to work."

Mr. Ferriss ignored those pearls of wisdom. He invested early in Facebook, Shopify, Uber Technologies, Twitter and others, penned more bestsellers and launched a popular podcast. An older, wiser Mr. Ferriss said he largely stepped back from angel investing, calling many of his wins "lucky." His words of wisdom for a 30-year-old insta-millionaire today? "Follow Buffett's advice."

Not every wunderkind saw the light. Some tempted fate by comparing themselves to Mr. Buffett. But the ranks of acolytes hungry for investing secrets are thinning as the tide goes out on the tech stocks and cryptocurrencies they touted.

Booming alternative asset classes like crypto and meme stocks made big scores seem deceptively easy, while social media amplified gurus' voices. Barstool Sports founder David Portnoy declared himself "the new generation" in investing to his millions of Twitter followers. Mr. Buffett, he said, was "old" and "washed up."

Venture capitalist Chamath Palihapitiya became so optimistic about tech's stock potential that in 2020, he reserved ticker symbols IPOA through IPOZ as placeholders for his firm's sponsorship of what he hoped would be dozens of special-purpose-acquisition-company mergers. "My ambition is to be our generation's Berkshire Hathaway," he told Fortune that year, adding his version would focus on platforms. After its listing in late 2020, Mr. Palihapitiya's "IPOB" -- now known as real-estate platform Opendoor -- lost 97% of its value in just over 12 months.

The ultimate danger sign might have been when Cathie Wood of ARK Invest was touted as "the next Buffett." Her main fund had returns of almost 160% in 2020 through concentrated bets in stocks like Tesla. It is down by 75% since peaking two years ago while Berkshire is up 25%.

The younger generation's interest in investing wasn't matched by acumen, making influencers' job easier. A recent Gen Z survey from Intuit found nearly three-quarters know it is important to invest but don't know how. Roughly half of respondents bought crypto without fully understanding the blockchain.

Messrs. Buffett and Munger probably won't be around to dole out advice during the next bubble. Their slow-and-steady approach seems to be ascendant at the moment. Last month, trading activity among individual investors hit its lowest level since January 2020, according to Vanda Research. Monthly active users at brokerage app Robinhood recently fell to their lowest level since it went public and index funds are newly popular on the platform.

Many paid a steep tuition to realize neither they nor their favorite pundits were investing geniuses. They could have listened to Mr. Buffett's tough-love advice to Mr. Ferriss back in 2008." [1]

1. Buffett Wannabes Lose Luster
Forman, Laura.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 27 Feb 2023: B.10.