Warren Buffett’s Stocks Went Down

If you are a hedge fund manager, and the stocks that you buy go up, it’s not too hard to write your annual investor letter. “We bought some stocks, they went up, our process works great, now I have a yacht”; it’s all pretty straightforward, and in any case your readers will give you the benefit of the doubt. You have made them money, which is what they really wanted, so if you send them a boring letter it’ll be fine.

On the other hand, if the stocks that you buy go down, that’s when you need to break out the classical quotations, sharp analysis and measured self-deprecation that make your readers think “sure we hired this guy to pick stocks that go up and he picked stocks that went down, but he sounds pretty smart in this letter, let’s give him another chance.” It’s a much harder exercise; you need to state forthrightly that the buck stops with you and that you won’t make any excuses for your poor performance, and then make some pretty good excuses.