Is Buffett a Freak of Nature?

After learning about successful investors, entrepreneurs and Warren Buffett himself, it’s almost obvious that anyone can replicate their success. They may not able to do it to the same magnitude, but it is possible to replicate these individuals to a considerable extent.

You have to train your brain on how to think. Buffett does not own the patents on value investing. It’s not a proprietary formula. He’s quite honest about his investing approach and its underlying framework. He’s open about learning from Philip Fisher and Benjamin Graham, and he discusses everything at length in his annual letters to shareholders for Berkshire Hathaway.

Buffett’s decision-making skills are what distinguish him from other investors. In particular, he is a rationalist. He is able to approach any issue in a dispassionate, calm and deliberate manner. Because of this, his decisions aren’t clouded by some of the logical errors that a less rational person might make.

Buffett and Managing Fear

Buffett’s philosophy about fear illustrates this point better than anything else. We all know his most famous saying, “be fearful when others are greedy and greedy when others are fearful.” What most people fail to realize is just how radical this line of thinking is when looked upon biologically.

Over the grand scheme of things, human beings still possess the same instincts and characteristics of our caveman ancestors. We’re more like Fred Flintstone then George Jetson, as an example. We have beautiful houses. We have fantastic cars. We can watch movies on our iPads and listen to music on our iPods. Science and medicine have come a long way. There’s no question about it.

But we share more commonalities with our ancient ancestors then differences. This is quite true when it comes to issues of the brain. “Our brains were simply not shaped by life in the world as we know it now, or even the agrarian world that preceded it,” says Daniel Gardner in The Science of Fear.

“They are the creation of the Old Stone Age. And since our brains really make us what we are, the conclusion to be drawn from this is unavoidable and a little unsettling. We are cavemen. Or cavepersons, if you prefer. Whatever the nomenclature, we sophisticated moderns living in a world of glass, steel, and fiber optics are no different, in a fundamental sense, than the prehistoric humans for whom campfires were the latest in high tech and bison hides were haute couture.”

The consequence of greatest importance of this is particularly how the way humans are created to respond to fear. It goes in direct contradiction to Warren Buffett’s advice. We look to avoid fear at all costs no matter what the situation. We look to avoid fear in the case of a lion attack, and we look to avoid it when the bears have taken hold of the market. Psychologists call this phenomenon loss aversion. It’s a variation of what is known as risk aversion.

Hold Back Your Inner Caveman

As investors, the takeaway is simple. Rationality wins every time. When Buffett tells us things like the “most important quality for an investor is temperament, not intellect,” we should respond in kind and take him at face value. You’ll reap ultimate rewards by following this advice, and the time and effort are worth it.