Buffett’s Wealth and the Role of Luck

SMITH BRAIN TRUST — Berkshire Hathaway chairman and CEO Warren Buffett’s 86th birthday on Tuesday prompted a CNBC writer to explore Buffett’s interpretation of luck as a success factor in business. Buffett discussed the topic in a 2013 meeting with MBAs, including a group led by professor David Kass at the University of Maryland’s Robert H. Smith School of Business. (He’ll lead another group to meet Buffett this academic year.) Kass took notes in 2013 and summarized Buffett’s take for CNBC this week. 

Kass, a close follower of Buffett’s investment strategy since 1980,  says Buffett has stressed the importance of luck in his life, focusing not only on where he was born but also when and what gender. “Having the good luck to win the 'ovarian lottery' is a major determinant of success in life in general — and in business in particular," Kass told CNBC. Here’s more from Kass on Buffett and the role of luck (read the full piece here on CNBC):

Early career: “When Buffett was a 20-year-old MBA student at Columbia University, he learned that his hero, professor Benjamin Graham, was the Chairman of the Board of GEICO. Since Buffett was interested in anything that Graham was interested in, he took a train to Washington from New York (in 1950), arriving on a Saturday morning. Without calling or writing ahead of time, Buffett was very lucky that one employee was there, Lorimar Davidson, who spent four hours explaining both insurance and GEICO to Buffett. Buffett immediately grasped that GEICO would have an enduring competitive advantage. (Davidson subsequently became CEO of GEICO.) Insurance later became the primary business and building block of Berkshire Hathaway.”

Geopolitical environment (Kass quoting Buffett): "Just imagine that it is 24 hours before you are born. A genie comes and says to you in the womb, 'You look like an extraordinarily responsible, intelligent, potential human being. You're going to emerge in 24 hours and it is an enormous responsibility I am going to assign to you — determination of the political, economic and social system into which you are going to emerge. You set the rules, any political system, democracy, parliamentary, anything you wish — you can set the economic structure, communistic, capitalistic, set anything in motion, and I guarantee you that when you emerge, this world will exist for you, your children and grandchildren. What's the catch? One catch — just before you emerge, you have to go through a huge bucket with 7 billion slips, one for each human. Dip your hand in and that is what you get …"

Humility: "For entrepreneurs who hope to have as much luck for as long as Buffett has had it, be humble about your own contributions and the contributions from others upon which you depend. Appreciating the contributions of the teachers we have had and the people before us who have assisted us is a critical attribute of luck and lasting business success."