Book Synopsis: Think like Graham, Invest like Buffett and Buffettology

thinklikegrahamA few days back I read a book with a title similar to this – Think Like Graham, Invest Like Buffett. While I had great expectations from it, honestly, beyond the title, there was not much in terms of depth in it. Of course, the title is a great message in itself, so I thought there would be examples of that and other stuff like that in the book. But there was not much of it in there. Lawrence Cunningham’s other book which is essentially a great collection of excerpts from Buffett’s letters to his shareholders is so much better. So while the thought of having this book and the title were great, the overall execution did not seem to make it as great a reading as I had expected.

But there was one small section in it which was absolutely like a flash of brilliance in an otherwise ordinary and repetitive book. It is a metaphorical story about a person who wants to sell his apple tree, and how he goes about evaluating various offers that people make for the apple tree. The story takes us through various stages of valuing the apple tree, starting with offers so low that they basically account for the cost of the wood one would get if the tree were cut down – something akin to scrap value. And then goes on to give examples of how one could arrive at various subjective ‘intrinsic values’ for the tree, methods based on the cost that went into planting the tree, or the value of fruits one gets from it today, or the value one could arrive if one could grow fruit yield in the future, as well as how it is important to take into account the cost of maintaining the tree farm and replanting the seeds from the fruits. Essentially taking us from the Graham thinking of ‘paying to avoid losses’ to the Buffett approach of ‘paying for high returns from predictable earnings’ in the form of a wonderful set of conversations between the tree owner and various bidders. So that was quite a nice section in the book to get the point across – Think like Graham, Invest like Buffett.

buffettology-previously-unexplained-techniques-that-have-made-warren-mary-buffett-paperback-cover-artLater, a few days back, I chanced upon another book named ‘Buffettology’ – written by his daughter-in-law. Honestly I did not have great expectations from that book, specially from the investing techniques point of view. I thought it would be more a general essay on Buffett as a person, and his style from a personal view. But surprisingly, it turned out to be a good set of writings on investing techniques. While there are a lot of writings in layman terms – but the message and detail on the source of Buffett’s success are quite surprisingly crisp. The examples on what forms a great business, how to identify great businesses, and how to value them in a manner where you don’t pay too much make quite decent reading. And the details on how Buffett started with Graham’s methods, and then graduated to a combination of Fisher’s and Munger’s techniques with Graham’s soul behind them are quite a treat to read. There are also a set of writings around how he gathered exceptional wealth primarily due to combining his acute investing acumen with an access to long-term insurance float over long periods of time. It may not be news for a serious investor, but nevertheless not bad for the layman.

So two books mostly around the same topics, both trying to distil some learning from past masters, two books with different levels of good reading.  But both of them with essentially a similar message – Think like Graham, Invest like Buffett.

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