Study Shows Buffett is More Optimistic Than Not

Warren Buffett is something of an optimist. Reading any of his letters, or any quotes from him and you’ll see that with most things, especially topics relating to America and the economy, he is extremely optimistic about the way things are going.

Recently, Michael Toth, a data scientist in New York City, ran Buffett’s shareholder letters through a computer to analyze the prevalence of positive and negative wording in each letter. And as it turns out, Buffett is even more positive than you probably realize.

The analysis looked at the most common positive and negative words and ranked each year by the sentiment. He also listed out the most commonly-used words and analyzed them as well.

According to the study, there were only five letters in the past 40 years that featured more negative words than positive words. All of those dates were during major economic downturns, such as the Great Recession of 2009, the minor recession of 1990, the dot-com burst in 2002, the terrorist attacks in 2001, and the stock market crash in 1987.

Here’s a graph the data scientist produced based on his results:

berkshire_hathaway_sentiment-plotting-1

 

As you can see, 2001 and 2008 were by far the most negative years, while 1978 was definitely the most positive. And, overall, Buffett’s letters—and his mindset—are leaning towards positive.

In the analysis, Toth identified the following words as Buffett’s most negative words:

  • loss
  • losses
  • debt
  • risk
  • liability
  • casualty
  • bad
  • fail
  • difficult
  • unusual
  • negative
  • risks

The following were his most positive:

  • gain
  • worth
  • gains
  • significant
  • outstanding
  • goodwill
  • advantage
  • excellent
  • extraordinary
  • competitive
  • top
  • free

It is worth noting that the analysis is not perfect, as ‘casualty’ often is used in the context of Buffett’s large insurance empire rather than as a negative word. Regardless, noting the differences between the two word groups provides a rare glimpse into the inner mind and thought processes of the Oracle of Omaha.

You can read the full data analysis and report here.

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