Conventionally conservative


Here is an interesting excerpt taken from a Warren Buffett Partnership Letter written in 1964:

"It is unquestionably true that the investment companies have their money more conventionally invested than we do. To many people conventionality is indistinguishable from conservatism. In my view, this represents erroneous thinking. Neither a conventional nor an unconventional approach, per se, is conservative.

Truly conservative actions arise from intelligent hypotheses, correct facts, and sound reasoning. These qualities may lead to conventional acts, but there have been many times when they have led to unorthodoxy. In some corner of the world they are probably still holding regular meetings of the Flat Earth Society.

We derive no comfort because important people, vocal people, or great numbers of people agree with us. Nor do we derive comfort if they don't. A public opinion poll is no substitute for thought. When we really sit back with a smile on our face is when we run into a situation we can understand, where the facts are ascertainable and clear, and the course of action obvious. In that case--whether conventional or unconventional--whether others agree or disagree--we feel we are progressing in a conservative manner."

On an annual compounded basis, the Buffett Partnership returned 23.8 percent/year to limited partners over its history compared to 7.4 percent/year for the Dow Jones Industrial Average. The limited partners only had one year (1958) in which their results failed to match the Dow Industrials.

Whoever is interested to read more about the Buffett Partnership Letter, you can find more information on the following websites:

Original Letters from the Buffett Partnership

Summary of original letters by a Berkshire Hathaway shareholder

Berkshire Hathaway shareholder letters