Who is the Next Warren Buffett? Warren Buffett, often referred to as the Oracle of Omaha, is nothing short of a legend in the world of investing. He has an extraordinary ability to see through marketplace clutter and pluck out businesses that deliver strong rewards to shareholders.
Through his holding company, Berkshire Hathaway [BRK.A], Buffett has amassed a fortune valued at $71.5 billion. This puts him in 5th place on the Bloomberg Billionaires Index, behind big names like Jeff Bezos, Bill Gates, and Mark Zuckerberg – but well ahead of brilliant entrepreneurs like Elon Musk.
All sorts of analysts, financial experts, and scientists in search of a secret to success have studied Buffett’s story. They have examined everything from his education and work experience to his breakfast habits.
While no one has created a reliable formula that can match Buffett’s ability to predict the future of given organizations, researchers have made a few discoveries.
In particular, Buffett was able to make the most of his exceptional talents because of his circumstances. He was in the right place, with the right skills, at the right time to create an empire.
The Ovarian Lottery
Buffett doesn’t consider it an insult when people point out that circumstances played a role in his success. In fact, he has said on multiple occasions that he “won the ovarian lottery”.
In one memorable meeting of Berkshire Hathaway shareholders, he spoke about this concept and explained that “many of the advantages you get in life, such as your nationality or your health, are determined by chance.”
He has also mentioned that he doesn’t believe he could have achieved the same success if he hadn’t been born both white and male.
These advantages, in conjunction with other factors like his father’s experience as a stockbroker, a supportive family, early access to business-related information available at his city’s well-stocked library, and a relationship with mentor Benjamin Graham, gave Buffett a head start.
He understood value before the vast majority of his peers, and he led the way in capitalizing on that knowledge.
Over time, a small collection of investors have learned the principles of intelligent investing from Buffett and other masters, and they have had success in building fortunes of their own. Every so often, one is mentioned as having potential to be the “next Warren Buffett”.
Will any of these picks live up to the challenge and match Buffett’s success, or will the real “next Warren Buffett” come from somewhere else entirely?
Is Seth Klarman the Next Warren Buffett?
Seth Klarman has adopted many of Buffett’s value investing techniques, along with a few of his own.
As a result, he has amassed his own multi-billion-dollar fortune, and he heads the Baupost Group – a long-only hedge fund that was founded in 1982. Some of the guiding principles Klarman adheres to include:
- Focus on the acquisition of bargain-priced assets
- Choose investments based on the quality of the company and its leadership
- Diversify strategically
- Cultivate patience
- A bad investment is worse than no investment
- There is no need to take on excessive levels of risk to reap strong rewards
Perhaps most telling of all, Klarman is affectionately known as the Oracle of Boston, illustrating that the investing world has taken notice of the similarities between Klarman and the great Warren Buffett.
But will he really be the “next Warren Buffett”? After all, there is stiff competition for the title.
The Next Warren Buffett: Eddie Lampert?
It’s true that Eddie Lampert has fallen from grace, but at one time, he was seen as the obvious answer to the question, “who is the next Warren Buffett?”
Lampert spent his early years rubbing elbows with men who would later become movers and shakers in the business and political worlds. For example, Secretary of the Treasury Steve Mnuchin was once Lampert’s college roommate, and they later worked together on some of Lampert’s most successful projects.
In the late 1980s, Lampert founded a hedge fund he named ESL Investments, and he rapidly gained a reputation as a stock market savant.
The fund achieved annual gains that averaged approximately 30 percent per year in its first 15 years, which easily topped almost every competitor. In 1998, Lampert further wowed the business world by returning the struggling AutoZone to profitability.
Unfortunately, Lampert discovered that success wasn’t always a given after he attempted to turn the iconic Sears company around. Unfortunately, Sears’ situation has only gotten worse, taking Lampert’s reputation – and his hedge fund – down, too.
Could Eddie Lampert still be the next Warren Buffett? For the moment, it doesn’t appear so. However, many look to his past successes and wonder if he may pull off a comeback. When it comes to investing, anything is possible.
The Next Warren Buffett Will Be a Computer Algorithm
Some people have an instinctive understanding of the market, and they use proven investment principles to maximize their returns.
From the outside, investors like Warren Buffett, Seth Klarman, and Eddie Lampert appear almost magical in their ability to generate massive wealth.
Buffett pioneered value investing, and he has had tremendous influence on those new to the industry. He set the standard for success, so it is inevitable that he is considered the standard against which all others are measured.
The competition between professional investors is more fierce than ever before. The thing is, when observers measure today’s movers and shakers, they are forgetting a very important fact. Advances in technology, particularly around big data, machine learning, and artificial intelligence, will completely transform the market.
People simply can’t collect and analyze data at the rate computers can, and there is more information available than ever before.
The “next Warren Buffett” won’t be a person who uses traditional models to make investment decisions.
Instead, algorithms will take over the decision-making process, and the ones who develop and apply the most effective algorithm will emerge as the winners.
That dramatically changes the list of candidates with potential to be the next Warren Buffett – and in fact, the title is likely to go to a computer algorithm in the end.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.