Bumping Elephants & Rolling Snow
I’m a Cali resident now, but I’m originally from the South’s most European city. Anyone from New Orleans, like myself, knows we have two things that make our city greater than any other; a world class zoo, and the most tasty cold treat on earth (SnowBalls). Visit this fair city, the crown jewel of the South, on a hot summer day, and you will find lines of people on an untold number of street corners waiting in line for a cup full of perfectly shaved, crushed, textured ice with colorful sugar concoctions poured freely atop the snowy orb and into every cup. If you are lucky enough to make your way to the zoo, The Audubon Zoo, in the Garden District (one of America’s most interesting and lush botanical settings), you will find, nestled there amidst the sprawling oaks, an exceptional display of many of the world’s most interesting animals in natural habitats. The highlight for me as a child was, without question, the Elephant exhibit. I remember many steamy days, standing there watching them get fed, bathed, and bumping into one another, while I enjoyed that classic New Orleans snowball treat. My flavor of choice has always been coconut with condensed milk poured atop. To enjoy both in one day, let alone at the same time, was to be in heaven. Those moments are big wins in N’Awlins. Many visitors frequent NOLA for those two experiences alone.
As interesting and enjoyable as the details of our city are with respect to the elephants and snowballs, this is not a travel and leisure article. There is a point beyond the shameless advertising for one of America’s top towns. Have a seat and get ready to enjoy some very tasty investment advice.
If you have read any of my writings or spent any time at all doing business with me you know that I regularly refer to principles I have learned from my study of Warren Buffett over the years. I’ve spoken and written of Focus Investing, principles derived from card playing and baseball, and the importance of Value above all else. I turn my attention now to what is spoken of above, but from a different perspective; snowballs as they pertain to investing strategy, and elephants as they pertain to huge financial success.
I’ve read a great deal over the years from and about Warren Buffett. I’m currently re-reading the biography on the man entitled, The Snowball: Warren Buffett and the Business of Life, by Alice Schroeder. Buffett chose her specifically to write the book for her writing ability, experience in finance, and her understanding of him.
The book opens in another rich landscape, metaphorically and financially speaking, if not physically as well. Sun Valley Idaho. This was the place, early on, where Warren Buffett gave speeches to the elite of the elite in the business world. Here, at a most selective who’s who gathering, Allen and Co. (a boutique investment company that handled massive mergers) put on an event that allowed titans to rub elbows and ideas with titans. Every moment of the event was intensely choreographed, from the time the jet wheels touched down at nearby airports to the river rafting outings where seats were assigned and guides told to be silent so that optimal “elephant bumping” could take place for several days.
Elephant bumping. That is how the event was described. Larger than life business creatures, all in the same environment, feeding, playing (sports, outdoor activities, lectures, drinks, campfires…), and thinking together in order to make ever bigger things happen. And bigger did happen, regularly. Record breaking mergers, new industry moments, and thought reformation took place here each year. The elephants made history many times at and on the heels of the event.
It was the Elephant Bumping that made it happen. Everyone wanted to be there. Not everyone could be there. The event was invite only. Many who’s who were left out, and that was part of the draw for those on the inside. “I got to be there”. “I’m on the inside”. These and others were common thoughts, and often spoken aloud with gratitude and wonder, if not a bit of bravado and ego.
Keep this image and principle, this idea in mind, as we venture toward the other big idea or moment(s) that shape Buffett’s life and career. We will bring them together shortly.
Schroeder opens the book suggesting that early on in Buffett’s life, growing up, a child at play, he caught what I am calling The First Principle for his life of financial and investment success. She writes,
“It is the winter of Warren’s ninth year. Outside in the yard, he and his little sister, Bertie, are playing in the snow.
Warren is catching snowflakes. One at a time at first. Then he is scooping them up by handfuls. He starts to pack them into a ball. As the snowball grows bigger, he places it on the ground. Slowly it begins to roll. He gives it a push, and it picks up more snow. He pushes the snowball across the lawn, piling snow on snow. Soon he reaches the edge of the yard. After a moment of hesitation, he heads off, rolling the snowball through the neighborhood.
And from there, Warren continues onward, casting his eye upon a whole world full of snow.”
It’s a great image, isn’t it? I love the last part of the phrase and its impacting imagery, “…a whole world full of snow.”
It’s also an apt image and potent metaphor for Buffett’s life and our discussion on epic, winning returns in portfolio management. It applies to the acquisition of companies, stocks, buyouts, art, and coins.
Now let’s get back to the first principle, the idea of “Bumping Elephants”.
In a nutshell (elephants do like nuts, I learned as a kid), this is about finding one’s way to the table where the big assets and big acquisitions are for the taking and making. In Buffett’s world that is often event driven. He lives in a rare air where the biggest of elephants show up and things get done.
Attaching ourselves to “elephant investments” is a sure principle for massive gains in the world of rare things. Elephant investments are the rare air of numismatics, fine art, fine autos, autographs, manuscripts, and more. Where is this air found? In World Class, super rare specie. The elephant bumping of rare things is found where populations are very low, everyone wants to be there, but only a select few have the opportunity to own the day. Think a $5million Nickel or a $500 million da Vinci.
The arena of massive portfolio gains and outsized profits is found where Elephant sized assets are roaming. If you are looking to bump into greatness in your collectibles investing you must stay committed, from the beginning to investing in unusual quality, NOT quantity. While the Allen and Co. events could have drawn untold numbers, they were so compelling and successful because of the limited access.
What kind of storied assets are you investing in? Let me make it clearer. You want the rarities that represent elephant chasing. The specie that elephant sized investors want are elephant sized return driven assets. You want to invest in pieces that will be competed for with an absolute zeal. Just as big investors lusted to be at the Allen and Co. event in Sun Valley, rarities investors should obtain those assets that other elephants crave. Invest in the very best and you will attract a crowd of elephant hunters who long to do a little profit bumping with the big boys and will pay handsomely for such.
Now, the snowball principle.
What exactly is Alice getting at in setting the stage for Buffett’s success like this? How does this quaint little story act as the foundation and setting for decades of billionaire success for the world’s most successful investor?
It is as once as simple and compelling as it appears, really.
Read any of Buffett’s interview, lecture, audio transcripts and you will be struck with how much he focuses on fundamentals, common sense (not all that common it appears). From first principles he draws huge implications and gains.
Buffett put it this way,
“Life is like a snowball. The important thing is finding wet snow and a really long hill.”
It would be helpful to read that again. Now read it aloud. Now say it aloud like you absorbed it.
But what about finding that “wet snow” and that “really long hill”?
Aha! There are the keys inside the principle. How do we find our way to “bumping into elephants”?
Where do we find that Coca Cola asset that compels us to leverage a major portion of our dollars all in one swing?
Look at the numbers, understand the value, and have the courage to go in hard and for the long term. That was and is Buffett’s approach.
He was always looking for wet snow. In numismatics wet snow are the assets that started, upon their minting, at $1, $2, $4, $20, and have steadily made their way up and up and up and up. Wet snow assets in Buffett’s world are the assets he can track for long periods of time and find unrelenting value and periods of huge growth. Only the companies that represent such draw his attention and dollars.
The same is true for the most successful investors in rare coins or art, and across the collectibles spectrum. Investors who have made the history books have seen coins move from their minted value up into the millions over the decades. These are the assets that hold strong even when market gyrations are causing fallout with other sectors. These are the assets that always find elephant sized investors competing for them. Pollock, Rembrandt, and others romp through the asset world with surging strength.
If you want to know you are investing in wet snow and finding elephant bumpers just look at what the asset has done in the last 10, 20, and 40 years. By the way, rare coins, secured strategically, worthy of attention have far outpaced bullion and a more common strategy over all of those time periods. You will find that Buffett’s assets meet a similar test. Fine art, at the top end, breaks records monthly.
If you are considering an asset that shows strong decade long, let alone multi-decade long growth, then jump in! When you find one that has a strong risk to reward ratio, and has demonstrated huge gains before, then, like Buffett, realize that is an “all in” opportunity and get after it!
Warren Buffett cautions, do NOT obsess about the acquisition price if you are going to secure a world class performer. You can invest in Value without any reservation. It’s more about the opportunity than the price at that point because elephant size growth is ahead. Don’t miss out because you are pinching pennies and squeezing nickels. Make the move when you are in the room with an elephant. Bump. Be smart about the buy-in dynamics but realize there are times to compete fiercely.
Lastly, Buffett’s approach is instructive in its discipline to stay focused on quality. The search for another portfolio addition does not end, as Elephants are always roaming, …we just have to keep tracking them down. Keep bumping. Keep the momentum rolling down that long hill.
This is how Legacy Wealth is built.
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