Look Like a Genius By Sticking To What You Know

Image credit: Hyoung Chang;
The Denver Post

Yesterday, I stumbled across a 2008 opinion piece written by none other than Warren Buffett. In the piece, he publicly states his commitment to move from 100% US government bonds to 100% US stocks. Now if you recall, 2008 was not a good year for anyone aspiring to be just like Mr. Buffett. The markets were tumbling, financial institutions were going up in smoke like a pack of escaping ninjas, and every week my boss was calling his broker to move another 10% of his portfolio into cash. Good times. Real good times.

In the midst of this, a ballsy Buffett comes out and basically tells everyone, "Hey, I know there have been quite a few people eaten by sharks swimming out here, and many of you are scared to get in the water. You know, historically speaking, swimming is not very likely to get you eaten by a shark, so I'm not worried about it. I just wanted to let you know I'm about to do a kick-ass swan dive." At which point he stripped down to a resplendent yellow Speedo and jumped in like the help at Casa Bonita.

Ten days later or so, I bookmarked a Motley Fool article titled "What to do when the DOW hits 7500" (this from a 2007 high of 14,000+). I still have that bookmark on the main navbar in my browser. Why?

Because it was great advice. Knowing what is correct is a different animal than doing what is correct. Doing is always harder and riskier. Despite the blood in the streets, Buffett and the Fool writers spoke to what they knew to be true. They didn't make any bold predictions; in fact, if you read Buffett's piece he admits this ignorance.

I took Buffett's advice and exposed myself to more equities and fewer bonds. And I got dealt an immediate 10% loss.

But look what happened in the US markets since Buffett's opinion piece: Up 114%.

Source: Yahoo Finance (3/11/2014)

For me, the recession was a wonderful thing. Somehow I managed to earn a 18.2% annualized rate of return over the past five years. My retirement accounts have ten times the amount of money I had in Spring of 2009 (regular contributions certainly helped).

Five and a half years later, Buffett looks like a genius, once again. What did he do? Nothing, really. He simply held his convictions and wasn't afraid to share them with the public.

You can learn from this anecdote. If you have expert-level understanding of a topic, speak up. Be heard. If you're not the speaking-up type, save it until it is critically important, but not too late to avert disaster. When you do speak up, if you're 100% sure of your position, don't be afraid to be loud. Get in people's heads. Especially if they disagree. When you're proven correct, don't lord it over people. 

Over time, speaking up about what you know to be true (and sometimes only what you know) can help you look like a genius with tons of foresight. You might not always be correct, but if you quickly admit your misses, you can move on to another month's worth of accurate hits. Think before you speak and don't let your newly-discovered awesomeness go to your head. It's the quickest way to tarnish up your genius appeal. Instead, you'll just look like a pompous ass.

No one wants that.