“The really big money tends to be made by investors who are right on qualitative decisions but, at least in my opinion, the more sure money tends to be made on the obvious quantitative decisions,’’ he wrote in October 1967.
But with “the virtual disappearance of the bargain issue as determined quantitatively,’’ came the disappearance of “our bread and butter,’’ Buffett wrote in that 1967 letter. And so he migrated, as Miller says, “from value to quality. While the principles never change—they are timeless—methods can and often should change according to a given investing environment.’’
Buffett’s letter of May 29, 1969 was written five months before liquidation of the partnership began. His net worth, at age 38, in May 1969 was “a staggering $26 million,’’ Miller writes, and the partnership had assets of $100 million, from an original stake of $101,150.
“Quite frankly, I would continue to operate the Partnership in 1970, or even 1971, if I had some really first class ideas. Not because I want to, but simply because I would so much rather end with a good year than a poor one. However, I just don’t see anything available that gives me reasonable hope of delivering such a good year and I have no desire to grope around, hoping to “get lucky’’ with other’s people’s money. I am not attuned to this market environment and I don’t want to spoil a decent record by trying to play a game I don’t understand just so I can go out a hero.’’
Miller admires the integrity and loyalty that contributed to the success of Buffett Partnership Ltd., and now Berkshire Hathaway Inc., ($210.82 billion in revenues in 2015) of which Buffett is chairman of the board, president and CEO.
“The manner in which Buffett went about winding up the Partnership provides three valuable lessons: First and foremost, the integrity and the genuine care for his partners shine through. From finding a suitable equity manager, to buying bonds for those wishing to follow his advice on munis, to the near-explicit recommendation that partners hold on to their stakes in Berkshire and DRC—despite his own desire to own more, he put partners first.
“How much better off would our whole financial services profession be if everyone acted this way,’’ Miller says.
Warren Buffett’s Ground Rules. Words of Wisdom From the Partnership Letters of the World’s Greatest Investor, by Jeremy C. Miller. HarperCollins. 329 pages. $29.99.
Eleanor O’Sullivan is an award-winning freelance journalist who writes for Financial Advisor magazine.