At a charity dinner last month the investor seated next to me proceeded to give a long
soliloquy about his investment outlook and his portfolio, concluding with the proclamation
that every investor should be ‘all-in’ on technology and artificial intelligence, and have no
less than 50% of their portfolio in Nvidia.
Surprised that after listening but did not ask any questions, he finally asked me what I
thought.
“Good luck. Nvidia may not exist 20 years from now, so you better have an exit plan if things
don’t go the way you expect” I replied.
“I want the highest returns possible. Don’t you?” the investor said.
“No, I don’t want the highest return possible. I want the best return that can be sustained for
the longest period of time.” I added. “Half of all stocks eventually go bankrupt; 96%
underperform cash. By investing this way you’re making a long-term bet based on what we
see now that Nvidia is in the special 4% category of all stocks in history. You may well be
right, but the odds are starkly against you.”
This conversation reminded me about Warren Buffett, widely seen as the most successful
investor in history. With a net worth of over US$140 billion, even after making large
charitable donations, there is no other investor that comes close. Investment skill definitely
played a part in this success – Berkshire Hathaway, Buffett’s investment vehicle, has gained
4,384,748% since Buffett acquired it, compared with the S&P500’s 31,223% return.
Berkshire just crossed the US$1 trillion market cap mark, the first non-technology company
to do so.
But investment skill is not the primary reason for his success.
Over 98% of his net worth was accumulated after the age of 65, when most people are
contemplating retirement. The primary reason for his success is investment longevity,
achieved by never interrupting the compounding of returns of his investment portfolio. A rush
to compound faster inevitably leads to taking too much risk. An investor may be successful
in this in the short term, but with a long enough time horizon it will inevitably lead to a fatal
mistake. Howard Marks, another billionaire investor, quotes the saying of the 6-foot man
who drowned crossing a river that was 5 feet deep on average. Investment survival on
average is a useless concept; you must survive all the time, every single day. One critical
mistake, one margin call, is all that is required to sink you.
Investment longevity requires avoiding unnecessary risks, not maximising portfolios for
gains, but minimising for fatal downside risk.
Many investors only start an investment portfolio when they enter their prime earning years
of their career, usually in their thirties as they break free from entry-level jobs and start to
save more significant amounts of money. Starting earlier makes an enormous difference. An
extra $100,000 of net worth in your 20s can push your net worth from average to the top 5%.
To achieve the same jump in your 30s requires an additional $390,000. The earlier you start,
the easier it is to make that jump.
In his HBO documentary from 2017, Buffett reminisces on the start of his investing career at
the age of 10, by saving money from his newspaper delivery route. At 15 years old he had a
net worth of US$6,000. By the age of 30 he had grown it to US$1 million after years of

running a successful hedge fund, putting him in the 99.99% percentile of all people his age.
He crossed the $1 billion mark at 56 years of age.
What if he delayed his investment start by two decades, with the exact same track record? If
we put him at age 30 in the 90 th percentile, he would have had a net worth of $34,000. Fast
forward to today, he would be worth around US$1.5 billion. Still impressive, but not far
ahead of the pack compared to many other successful investors. With this kind of result, we
might never have even heard of Buffett.
The longevity principle that benefitted Buffett can also be seen in individual stocks. What is
the best performing stock over the last 100 years? It’s not Berkshire Hathaway, not Apple,
Microsoft, Google, nor Amazon. In fact none of these stocks even make the top 30 of all-time
best performing stocks. Even ChatGPT doesn’t give you the correct answer. The answer is
Altria, formerly known as the tobacco company Philip Morris, where $1 invested would be
worth $2.6 million today. A similar dollar invested in Berkshire Hathaway (which is
ChatGPT’s answer as the best performing stock in history) when Buffett took over would be
worth $43,848 today. In annualised returns Berkshire comes out slightly ahead, but Altria
has been doing it for much longer. Time will tell whether the technology stock darlings of
today will still be around 75 years from now, and whether they will beat Altria’s record.
Chances are they will not.
Too many investors focus on the top performing fund or the top performing stock. Buffett
and Munger had a third partner who is not well known, because he was in a hurry to get rich
and suffered a fatal margin call in the bear market of the 1970s. Buffett stayed patient and
kept compounding consistently for 84 years, becoming the richest investor in history in the
process. Wise investors can adopt the same principles for long term success in their
investments.