Buffett on the Benefits of Leaving Wall Street

When most people think of investors and the stock market, images of Wall Street probably come to mind. Dozens of computers with stock prices flipping along like some kind of complicated Matrix code, and charts zooming up and down while men in suits run around, shouting over each other, and punching in numbers on computer screens as their digital fortunes zip up and down in response to the news of the day. It’s a flurry of activity, and it would be understandable to assume that’s what it takes to be a good investor. And there probably are good investors who do that.

But not Warren Buffett.

Buffett, by contrast, lives in Omaha, Nebraska in the same house that he purchased for $31,500 in 1958. He wakes up every morning and drives himself to work (often stopping by McDonalds for a breakfast) where he¬†walks into an office that employs less than 30 people and sits at a desk which doesn’t even have a computer. There, he reads and thinks and makes the kind of sensible decisions that made him the second richest man in the world.

There’s a huge difference between the two scenes, and while it might seem odd that the Oracle of Omaha, the world’s greatest investor, stays away from Wall Street, in all actuality it makes perfect sense. According to Buffett, Wall Street is simply too much to handle.

“…the best way to think about investments is to be in a room with no one else and just think,” Buffett said at a lecture at the University of Florida. “…The disadvantage of being in any type of market environment like Wall Street in the extreme is that you get over-stimulated. You think you have to do something every day…” And that constant activity, he continued, is where you’ll lose all your money. Constant trading is not the way to fortune.

By contrast, the Oracle of Omaha is a proponent of value investing, which requires patience, knowledge, assessment, and careful decisions. All those things are hard to do when you’re constantly being bombarded with new information and pressure to act immediately.

“…What you are looking for is some way to get one good idea a year and then ride it to its full potential, and that is very hard to do in an environment where people are shouting prices back and forth every five minutes and shoving reports in front of your nose and all that. Wall Street makes its money on activity. You make your money on inactivity,” Buffett said.

Instead, Buffett prefers to visit New York to get his ideas, meet with friends, and get new ideas. Then he flies back to Omaha, sits down in his quiet office, and thinks things through before making any moves. That patience and resistance to rash actions is something that many investors lack, and it could easily make the difference between success and failure.

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