Basically, advocates of the Free Market Hypotheses believed that it was impossible for anyone to deliberately, repeatedly generate alpha. The market was rational, and success was probabilistically distributed. With a large enough population, you will get Buffett level returns - therefor Buffett is a fluke.
However, Buffett calculated that there weren't enough investors for his success to be a factor of random distribution, plus there were 2 dozen others who followed a similar strategy who also consistently generate alpha
Unfortunately a lot of proponents of the EMH (especially non-academics) have taken this concept and run with it in ways Fama didn't intend. His position would be more accurately stated as the claim that modern markets are eventually informationally efficient, for any given instance of information asymmetry.
It's a useful model that approximates markets, not an empirical claim about the world.
From https://en.wikipedia.org/wiki/The_Superinvestors_of_Graham-a... :
> The speech and article challenged the idea that equity markets are efficient through a study of nine successful investment funds generating long-term returns above the market index.
edit: With Buffet, he's not actually getting everything right, so I guess a better metaphor would be like 70% heads over 1000000 flips... more likely under random circumstances, but still pretty suspicious.
There's a multiple-endpoints effect here. If there are 2^20 participants all doing that, one of them is going to flip 20 heads in a row. You only notice the one who did after the fact. Some participant has to be the most outlying result and that's the only one you notice.
(Not that that's necessarily the case for Buffett, but that's a general fallacy to be aware of.)
Warren Buffet is Warren Buffet because of the way he consumed the information available to him, interpreted it and finally reacted to it.
Certainly, Warren does not control the many factors in the environments he found himself in, factors that was favorable for him to get to where he is today and factors that were obstacles to him. But his chosen actions are his, the paths he took, the burdens, the risks, and the responsibilities.
I would perhaps think of him as wise, not a genius or any such worship nonsense.
The prevailing theories of today are that "free will" isn't so real.
https://www.psychologytoday.com/us/blog/sapient-nature/20120...
https://en.m.wikipedia.org/wiki/The_Superinvestors_of_Graham...
Also: There is a saying: You only have to get rich once. It is much easier, if you come into money at one point in your life, to hold on to it, than it is to repeatedly go from zero to hero, since capital has a tendency to create more capital, and a lack of capital has a tendency to prevent you from accumulating any.
I know it goes against the mindset of the American entrepreneurially-minded crowd here. But it's a thought.
Now that would be a skill that would set you up for success!
But your second saying about only getting rich once is probably closer to the truth.
If it were akin to flipping coins, we'd almost surely have seen 16+ proto-Buffetts emerge into public consciousness only to see 15 of them blow up. Sure, there have been hedge fund failures and you could argue that Madoff was a public eye super-investor who turned out to fail, but I don't think there are enough examples of "this guy is a genius based on his track record" turning into "that guy we thought was a genius turned out to just be a lucky idiot" to suggest that all of Buffett's returns are luck.
I mean Warren Buffet invested in Apple about a year ago based on the idea that they have a sticky brand and went so far as to say that iPhones were underpriced (which is just flat out wrong given how poorly they sold relative to predictions). . .and it turned out to be a terrible investment decision (so far). While I find it hard to believe that WB is all luck I think you can't dismiss that argument entirely based on his track record, no matter how successful.
"I do not focus on the sales in the next quarter or the next year," he said. "I focus on the ... hundreds, hundreds, hundreds millions of people who practically live their lives by it [iPhone]."
Apple does continue to boost services income, keep cash on hand, pay dividends, and do share buybacks, all with a P/E below major utility stocks -- things Buffett traditionally considers.
Disclaimer. Apple Shareholder
Listen, I was just trying to make an argument that even WB can misjudge a situation. It was not a convincing argument because half the example I used was not correct. Timing wise, buying apple stock in early 2018 before concerns about Apple being able to grow and stoke the hunger for their consumers to upgrade is not ideal. Hindsight is not a necessarily fair way to judge his decision because as you mentioned his horizon goes far beyond a year.
Maybe my personal bias is coming through because I just don't see it as such an exciting brand anymore and I struggle to see where they will find new areas for growth. Whereas 10 years ago I was looking to upgrade my laptop/smartphone every 1-2 years, now I've got my iPhone 7 and my 2013 macbook air and I'm sticking with them until they fail because nothing that Apple offers makes me go 'I want that'.
> I just don't see it as such an exciting brand anymore
The stock market also doesn't see it as exciting anymore. The market has had this view since Steve Jobs was alive; where Apple's P/E places it below value and dividend stock (it trades at half the multiple of Duke Energy). In order for you, or Warren Buffet to think Apple is a good value investment, it only has to be ~1/2 as exciting as Microsoft or Duke Energy.
By this time, I think it's become clear that Apple's disappointing results were entirely caused by the macroeconomic conditions in China and nothing else. Certainly not because of increases in their product prices like you speculate.
To buy Apple's explanation that most of their disappointing quarterly earnings were as a result of Chinese macroeconomic conditions is frankly being generous to them. Just focusing on the iPhone, it is a muddled offering where successive iterations don't stand out from the next as they did in previous generations. Now, this isn't just an Apple problem. Innovations in smartphone technology have slowed down across all handset makers. However, until Apple shows that they can successfully increase their service offering to get more money out of their users and are able to charge more for handsets then opportunities for growth seem pretty limited in that space. Moreover, when I see that apple is increasing credit on trade ins for newer iPhones a few months back. . .I take that as a sign that consumers see little value in upgrading. Not saying Apple is doomed but they don't show signs (to me) that they are on the path for growth.
My comments on the price of iphones was from misremembering WB comments about them 6 months ago. He said that the iPhone was underpriced but that Apple could not increase prices due to competition. I thought he made a statement saying he believed that prices should be increased on the iPhone range. I never claimed that their stagnant sales are from product prices, rather that worldwide sales demonstrate that the price should definitely not be higher than it is currently (unless they improve the product dramatically).
I was just addressing your notion that the investment was "terrible".
To buy Apple's explanation that most of their disappointing quarterly earnings were as a result of Chinese macroeconomic conditions is frankly being generous to them…
But we don't have to "buy" their explanation, because we can just look at numbers. Apple has released their quarterly results, and the iPhone grew in every region except China. Yes, growth has slowed, but this is not a new trend and is not the reason that this quarter has disappointed investors.
until Apple shows that they can successfully increase their service offering
But they have shown that! Service revenue grew by a very healthy 19% last quarter (relative to the same quarter yesteryear).
when I see that apple is increasing credit on trade ins for newer iPhones a few months back. . .I take that as a sign that consumers see little value in upgrading
Why would you look to signs, when you can look at the numbers? There is no reason to speculate when Apple has released the results.
Six Colors has a lot of pretty graphs and numbers if you're interested: https://sixcolors.com/post/2019/01/apples-dramatic-q1-2019-r...
The markets are supposed to be efficient and you can’t beat them.
I'm not very familiar with Warren Buffet or the world he operates in, but my understanding is that he does not in fact take particularly risky stakes and explicitly stays away from verticals he's not familiar with. Hence my personal opinion would be that how he "thinks and acts" has directly contributed to his success - but happy to be proven wrong.
I Strongly recommend this book: Outliers by Malcolm Gladwell.
He studies outliers, their family, culture, timing. One of many fun facts is that almost every pro-hockey player in Canada is born in the early's month jan, feb, mar.
Why? they compete versus small children when their are kids, and those months of strength give them advantage, which sent them into better teams, with better coaches and so on..
If you want to learn rigorously, better look toward academic sources.
I've checked the sources from that book and they seem legit, including papers and articles[1]. Besides, the reviews of that book are very positive [2].
[1]: http://guides.skylinecollege.edu/c.php?g=279172&p=1861295 [2]: https://www.amazon.co.uk/Outliers-Story-Success-Malcolm-Glad...
Also, always read the negative reviews. Sometime, they are bunk, but they sometime can be very informative.