The determining trait of the enterprising investor is his willingness to devote time and care to the selection of securities that are both sound and more attractive than the average. Over many decades, an enterprising investor of this sort could expect a worthwhile reward for his extra skill and effort in the form of a better average return than that realized by the passive investor.
-Benjamin Graham in The Intelligent Investor
I think of an enterprising investor as entrepreneurial. A good entrepreneur is a value investor. He sees value where others do not.
A small business consultant once told me that the job of the entrepreneur is to take risk out of the business. Entrepreneurs are often thought of as visionary risk takers. However, that is not necessarily the case if you think about the great entrepreneurs.
Like great entrepreneurs that saw an opportunity where others did not, the enterprising investors sees value where others don’t.
Like the good entrepreneur that reduces risk in his business by being fiscally conservative and focusing on the core business, the enterprising investor can reduce his risk by being fiscally conservative and focusing on deep research. The entrepreneur is contrarian and the enterprising investor is contrarian.
Like the good entrepreneur that doesn’t limit himself to a desk job at a large corporation, the enterprising investor doesn’t limit himself to a dogmatic investment process. He adapts.
This doesn’t mean that the enterprising investor neglects his principles. On the contrary, the enterprising investor conducts his business in a disciplined manner around his principles. The principle that the value of an investment is determined by its cash flows doesn’t change. How you determine and arrive at that value can change depending on the circumstances that surround the investment. Whether the investment is a bond, stock, real estate or a farm, the enterprising investor remains focused on the value principle. The extra work he puts into determining how to value the investment is worthwhile over time.
Due to the power of compounding, this extra work rewards the enterprising investor that approaches his investments with a disciplined research and valuation framework.
Its assigning yourself the right story and I said this to Woodward, why don’t you just assign yourself a story to work on between six and seven in the morning, they always want me to tell them what stocks to buy, I always say, well I’ll let you assign yourself a story and work on it from six to seven in the morning. One hour a day on your own assignment, the other eight or ten hours you can work for Bradlee.
This quote was in reference to Bob Woodward and his editor Ben Bradlee during the 1973 Watergate investigation and how coincidentally, Buffett was buying stock in the Washington Post when the market was valuing the company at $80 million while Buffett estimated the value to be $400 million. Buffett gives the thought experiment of Bradlee assigning Woodward to spend the next week to come up with a story explaining what the Washington Post is worth. Buffett says he would have come in with a pretty damn good story, he would have made a ton of money and it would be a lot easier than the stories he is trying to get. Finding out what the Washington Post is worth is not a tough story.
This is what the blog is about right now. Assigning myself the right story and spending one hour a day on my own assignment. I report my one hour a day assignment here.