Health, Wealth & Leadership [14 Apr 2024]

Pea vs Whey Protein, 13 Lessons from Warren Buffett & Happiness = Reality - Expectations.

Apr 14, 2024

Every Sunday I share three lessons on how to be healthier, make more money and lead by example. This week we talk about the impact the type of protein had on soccer athletes, the 13 lessons I learnt from one of the greatest investors of all time, and why having low expectations is key to happiness at work and in life.

You can access previous editions of my weekly emails here.

(1) Pea Protein vs Whey Protein in Soccer Athletes

The result of tracking 12 male soccer players over 10 days was that there was no significant difference in their athletic performance or metabolic profiles because of supplementing with pea or whey protein.

This suggests that pea protein can be a viable alternative to animal protein.

Here is the study: https://www.frontiersin.org/articles/10.3389/fnut.2023.1210215/full

(2) 13 Lessons from Warren Buffett that will help you make better investment and life decisions

Every year Warren Buffett writes to his shareholders. And every year, I head over to the simplest website on the internet to read what he wrote. Here are the 13 lessons I learnt this year from reading his 16 pages:

(1) DON'T REMIND OTHER OF THEIR MISTAKES:

Speaking about Charlie Munger, Warren wrote:

"Even when he knew he was right, he gave me the reins, and when I blundered he never – never –reminded me of my mistake."

(2) LOOK FOR COMPANIES YOU CAN HOLD FOREVER:

[SIDE NOTE: THIS IS ONE OF THE REASONS I INVEST WITH MARCELLUS. THEY FOLLOW THIS PHILOSOPHY]:

"At Berkshire, we have a more limited target: investors who trust Berkshire with their savings without any expectation of resale (resembling in attitude people who save in order to buy a farm or rental property rather than people who prefer using their excess funds to purchase lottery tickets or “hot” stocks). At Berkshire, we particularly favor the rare enterprise that can deploy additional capital at high returns in the future. Owning only one of these companies – and simply sitting tight – can deliver wealth almost beyond measure. Even heirs to such a holding can – ugh! – sometimes live a lifetime of leisure.

EXAMPLE-1: During 2023, we did not buy or sell a share of either AMEX or Coke – extending our own Rip Van Winkle slumber that has now lasted well over two decades. Both companies again rewarded our inaction last year by increasing their earnings and dividends. Indeed, our share of AMEX earnings in 2023 considerably exceeded the $1.3 billion cost of our long-ago purchase. Both AMEX and Coke will almost certainly increase their dividends in 2024 – about 16% in the case of AMEX – and we will most certainly leave our holdings untouched throughout the year. Could I create a better worldwide business than these two enjoy? As Bertie will tell you: “No way.” The lesson from Coke and AMEX? When you find a truly wonderful business, stick with it. Patience pays, and one wonderful business can offset the many mediocre decisions that are inevitable.

EXAMPLE-2: Last year BNSF’s earnings declined more than I expected, as revenues fell. Though fuel costs also fell, wage increases, promulgated in Washington, were far beyond the country’s inflation goals. This differential may recur in future negotiations. Though BNSF carries more freight and spends more on capital expenditures than any of the five other major North American railroads, its profit margins have slipped relative to all five since our purchase. I believe that our vast service territory is second to none and that therefore our margin comparisons can and should improve. A century from now, BNSF will continue to be a major asset of the country and of Berkshire. You can count on that. [Side Note: Performance was not what he wants or expects but look how he thinks independently and sticks to his decision.]

EXAMPLE-3: Then, in 1980, when 46, and independent of any urgings from her brother, Bertie decided to make her move. Retaining only the mutual fund and Berkshire, she made no new trades during the next 43 years. During that period, she became very rich, even after making large philanthropic gifts (think nine figures).

(3) MONEY IS MADE BY BUILDING OR OWNING COMPANIES. SIT QUIETLY AS YOUR WEALTH COMPOUNDS.

"I can’t remember a period since March 11, 1942 – the date of my first stock purchase – that I have not had a majority of my net worth in equities, U.S.-based equities. And so far, so good. The Dow Jones Industrial Average fell below 100 on that fateful day in 1942 when I “pulled the trigger.” I was down about $5 by the time school was out. Soon, things turned around and now that index hovers around 38,000. America has been a terrific country for investors. All they have needed to do is sit quietly, listening to no one. It is more than silly, however, to make judgments about Berkshire’s investment value based on “earnings” that incorporate the capricious day-by-day and, yes, even year-by-year movements of the stock market. As Ben Graham taught me,

“In the short run the market acts as a voting machine; in the long run it becomes a weighing machine.”

(4) YOU HAVE TO MAKE JUDGMENT CALLS WHICH ARE DIFFICULT TO PREDICT. EVEN THE BEST GET THEM WRONG:

"Our goal at Berkshire is simple: We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring. Within capitalism, some businesses will flourish for a very long time while others will prove to be sinkholes. It’s harder than you would think to predict which will be the winners and losers. And those who tell you they know the answer are usually either self-delusional or snake-oil salesmen."

EXAMPLE: Our second and even more severe earnings disappointment last year occurred at BHE. Berkshire can sustain financial surprises but we will not knowingly throw good money after bad. I did not anticipate or even consider the adverse developments in regulatory returns and, along with Berkshire’s two partners at BHE, I made a costly mistake in not doing so.

(5) YOU CAN'T DO GOOD BUSINESS WITH BAD PEOPLE. BE CAREFUL WHO YOU TRUST:

"In 1863, Hugh McCulloch, the first Comptroller of the United States, sent a letter to all national banks. His instructions included this warning:

“Never deal with a rascal under the expectation that you can prevent him from cheating you.”

Many bankers who thought they could “manage” the rascal problem have learned the wisdom of Mr. McCulloch’s advice – and I have as well. People are not that easy to read. Sincerity and empathy can easily be faked. That is as true now as it was in 1863.

(6) BE HONEST WITH THE BEST CASE SCENARIO:

There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others. Some we can value; some we can’t. And, if we can, they have to be attractively priced. Outside the U.S., there are essentially no candidates that are meaningful options for capital deployment at Berkshire. All in all, we have no possibility of eye-popping performance. Berkshire should do a bit better than the average American corporation and, more important, should also operate with materially less risk of permanent loss of capital. Anything beyond “slightly better,” though, is wishful thinking. This modest aspiration wasn’t the case when Bertie went all-in on Berkshire – but it is now.

(7) WHEN YOU TAKE OTHERS MONEY, YOU CANNOT TREAT IT AS YOURS:

"We never forget that, though your money is comingled with ours, it does not belong to us."

[SIDE NOTE: I follow this advice to the T. So far in my startup Happy Ratio, I have taken about 1.7 crores from angel investors, some of them friends. I have never taken money out of the company to pay myself. So far I have only put money into the company. Anyone should be able to audit my business at any point in time and find no accounting shenanigans.]

(8) HUMAN NATURE DOES NOT CHANGE:

"Though the stock market is massively larger than it was in our early years, today’s active participants are neither more emotionally stable nor better taught than when I was in school. For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young. The casino now resides in many homes and daily tempts the occupants."

(9) DO YOUR ADVISORS MAKE MONEY BY BUYING AND SELLING OR BY HOLDING?

"One fact of financial life should never be forgotten. Wall Street – to use the term in its figurative sense – would like its customers to make money, but what truly causes its denizens’ juices to flow is feverish activity. At such times, whatever foolishness can be marketed will be vigorously marketed – not by everyone but always by someone."

(10) NEVER RISK PERMANENT CAPITAL LOSS. AVOID SERIOUS MISTAKES:

"One investment rule at Berkshire has not and will not change: Never risk permanent loss of capital. Thanks to the American tailwind and the power of compound interest, the arena in which we operate has been – and will be – rewarding if you make a couple of good decisions during a lifetime and avoid serious mistakes."

(11) ALWAYS BE READY FOR WORSE CASE SCENARIO EVEN IF THE ODDS AS LOW:

"Your company also holds a cash and U.S. Treasury bill position far in excess of what conventional wisdom deems necessary. During the 2008 panic, Berkshire generated cash from operations and did not rely in any manner on commercial paper, bank lines or debt markets. We did not predict the time of an economic paralysis but we were always prepared for one. Berkshire is built to last.”

(12) PRICE IS WHAT YOU PAY. VALUE IS WHAT YOU GET.

"All stock repurchases should be price-dependent. What is sensible at a discount to business-value becomes stupid if done at a premium."

(13) YOU ARE ONLY AS GOOD AS YOUR TEAM:

I will only repeat that our position would not be what it is if Ajit Jain had not joined Berkshire in 1986. Ajit’s achievements since joining Berkshire have been supported by a large cast of hugely-talented insurance executives in our various P/C operations. Their names and faces are unknown to most of the press and the public.

(3) Happiness = Reality - Expectations

"The average person right now has access to more information than the most powerful person did in 1990.

Our quality of life is so dramatically better than the past yet we aren't happy. It's because we keep recalibrating. We keep setting our expectations higher. We keep moving our goal post.

Happiness is reality minus expectations. If our expectations keep rising, our reality has to keep rising too."

Elon Musk said that. It reminded me of what Charlie Munger said about happiness:

"The first rule of a happy life is low expectations. With unrealistic expectations, you're going to be miserable.”

So what should we do? Don't low expectations mean that we aren't driven enough to succeed?

Let's not confuse expectations with intentions. You can have low expectations and end up with incredible success. Similarly you can have high expectations and end up as a failure. Here is how Charlie Munger suggests we think about this:

"Slug it out one inch at a time, day by day. At the end of the day – if you live long enough – most people get what they deserve. It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. The opportunities that are important that are going to come to you will be few. The trick is to prepare yourself for seizing the few that do come."

Let's try to emulate the wisdom of the people we admire. They have walked the path before us. Our path will not be the same but at least we can follow the breadcrumbs.

Harsh Batra

Discussion about this post