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George Frost, CFA
George Frost, CFA

"My Journey to Buffett"

April 09, 2008

Warren Buffett took me, and two of his old U. of Penn. pals, to dinner at Gorat's on Wednesday, August 30, 2006 . 

Just by happenstance, it was the night before Buffett's 76th birthday, and of Warren 's unannounced marriage to longtime companion, Astrid Menks. It was also, as it turns out, a life-changing event for me. 

I'd retired from Wall Street in 2001, at age 44, after a very mediocre career as a portfolio manager and securities analyst. With plenty of new-found time on my hands, I decided to study someone who's actually been supremely successful at my business: Warren Buffett. 

I started by reading pretty much everything Buffett ever wrote, or had recommended reading. I also read pretty much everything everyone else had ever written about him. Slowly, my fog of stupidity lifted. It was finally oh-so-clear: I'd been a damn fool to get my CFA, and then to spend my entire professional investing career managing money in "the traditional way." 

Sitting in Buffett's small office at Kiewit Plaza before heading out to dinner, I distinctly remember saying to Warren that: "When it comes to investing, I've made every mistake in the book, including selling short, buying on margin, and even day-trading." I said it with considerable embarrassment, and with a tremble in my voice. But, I had never made a confession more true, nor more heartfelt. Buffett was gracious, even kind. For me, it was a transformational moment. 

Since that August evening, I've tried to forget pretty much everything I "learned" along the way to becoming a Chartered Financial Analyst. Now, I keep CNBC on mute, and I focus exclusively on Buffett.

This is just the first in a series of columns that I'll be writing for GuruFocus. All will concentrate on the patience, discipline, and focus required of anyone who aspires to be a great investor. I hope that you'll join me on my journey to Buffett.


George Frost, CFA, is a retired portfolio manager and securities analyst living on the coast of Maine.

About the author:

George Frost, CFA
Charlie Tian, Ph.D. - Founder of GuruFocus. You can now pre-order his book Invest Like a Guru on Amazon.

Rating: 4.1/5 (37 votes)


Aiming_high - 8 years ago    Report SPAM

Welcome to Gurufocus. After 44 yrs I am sure you are in a better position to put all what buffett has said in the right perspective. Some people,including me, say they follow Buffett but they dont really follow him to the word.........bcoz its just too damn hard. Needs a lot of patience, self control and ability to think independently.

I am 27 yr old and just started investing a year ago. So I am sure I would have lots to learn from you and your perception of Buffett's philosophy.

Jmn3813 - 8 years ago    Report SPAM

Great to hear you have converted from the darkside. I am a 21 year old senior in college and I am sitting for Level 1 of the CFA in June. The only reason I am sitting is that I hope to gain some recognition as I do not attend a school that is widely known for business excellence. I would love to talk with you about your journey and maybe I could even offer some wisdom from my journey to Buffettism. We look forward to hearing more from you....

Sonymordechai premium member - 8 years ago
Welcome on board, brother...

DeepValue - 8 years ago    Report SPAM

The CFA program offers a lot to individuals who want to pursue Buffett style investing. You will learn a lot that is applicable to value investing. Just knowing the language of accounting will be a huge benefit.
Equityguy - 8 years ago    Report SPAM
Mr. Frost, I am agreeable to your comments regarding the CFA program. I know of several other people who have been through the program (successfully and unsuccessfully) who believe that overall, it was not helpful other than as a resume builder. I sat for the first exam last year and do not intend to continue the program. After obtaining my undergraduate degree with an emphasis in finance, I have had to "unlearn" almost everything I studied in my finance classes. Outside of financial ratios/metrics and the accounting classes the curriculum was mostly a waste, and my experience with Level 1 CFA was not different. Not to say that some of the concepts weren't a good refresher, but overall it simply was not worth it and it certainly did not emphasize techniques and concepts that are required for successful value investing.

My suggestion to anyone wanting to further their investing prowess is to take the advice of Munger and Buffett. Study accounting intensely, then study various other fields to build "mental models". Many of the world's most successful investors have no formal finance education (Shelby Davis studied history I believe, and told his sons to do the same because accounting can be learned on your own time; Charlie Munger and Mohnish Pabrai have never taken a formal business class; Buffett has said some of his friends who have had successful investing careers probably do not even know of common terms used in current portfolio management curriculum, such as "Beta" and "efficient frontier").

Advanced statistics, calculus etc is a time-waster (and it is a good chunk of the CFA curriculum under the "quantitative" and "derivatives" sections if I remember correctly). Buffett himself has stated that anything beyond basic addition, subtraction, division, and multiplication is unnecessary.

CFA does have some material that is good for any investor to know (ethics, accounting, financial statement analysis, economics, and so on), but I found that most useful knowledge can be easily obtained via self-study outside of the program. The CFA program cites its founding by none other than Ben Graham, but my exprience is that The Intelligent Investor and Security Analysis were far more eye-opening than the CFA curriculum. Also, the CFA is extremely time-consuming, and for me the cost/benefit just didn't make sense. Of course this is just one man's opinion. Your mileage may vary. If you want to pursue a career on Wall Street, it will likely be helpful. If you want to become a great investor, you can skip the CFA.
Pigsgetrich premium member - 8 years ago
Wow - that was a real humble letter. I rarely read many on here, but think that you may be on to something. I wonder how many "Guru's" have a CFA or will have a CFA in the future? My guess - not many...
Oboist - 8 years ago    Report SPAM
I have to agree that the CFA is not very useful to a successful investment career. It looks good on a resume but thats about it. Its a stepping stone to a corporate career in investments. It does demonstrate a certain intelligence, drive and focus. And it does cover some useful topics such as corporate accounting and the time value of money. But it goes heavily academic covering the efficient market hypothesis, portfolio balancing and other broad statistical nonsense. Ever met an academic who is REALLY rich ? Comfortable and tenured - yes, but RICH ? Very few indeed. Considering the time and effort spent to pass all three exams its simply not worth it. Better to spend all that valuable time studying the PROVEN value investment masters like Buffet, Munger, Pabrai, Lampert, etc.

Welcome aboard and thank you for sharing your journey. I am looking forward to your writings. You are performing a fine public service.
Kfh227 - 8 years ago    Report SPAM
In engineering (my degree) what you truely learn by obtaining a degree is how to learn things, especially complex things. After you enter industry, you quickly forget 95% of what you learned. But you gained the ability to learn.

Is this similar to what is goin on with the CFA programs? It sounds like you don't need it but as a side effect does it make you a more efficient thinker?
Kfh227 - 8 years ago    Report SPAM
Also, what were the circumstances that landed you the dinner?
Sabonis premium member - 8 years ago
I'd love to hear more details about the dinner...what exactly did you talk about (besides the food)?

Did it live up to your expectations?

Questions for others: after a basic freshman college level accounting class (and alot of business experience) what would you suggest as reading material to become an "expert" on accounting? Not necessarily to become a value investor since I know where to go for that, more along the lines of being able to look at financial statements, etc. and pick them apart.
Equityguy - 8 years ago    Report SPAM
Sabonis, I suggest reading every accounting book you can get your hands on. Outside of college textbooks, the single best book I've read is probably "Creative Cash Flow Reporting" by Mulford & Comiskey. Other good ones include "Investment Valuation" by Damodaran, "Valuation" by Koller/Goedhart/Wessels @ McKinsey & Co, and "Analysis of Financial Statements" by Bernstein and Wild. But read as much as you can, because there is a lot of noise to filter out in every book, and every one makes a couple of good points that are overlooked in other books.
Danielw - 8 years ago    Report SPAM

Can't agree with Equityguy's comments here more. Very good suggestions...
Frankiwa - 8 years ago    Report SPAM
If I may chime in, I'd like to say that I am sitting for Level III of the CFA this June and think it is a very quality program. I've attained quite a bit of accounting knowledge, useful methods of forecasting and modeling, fixed income analysis, international equity analysis, corporate finance analysis, etc. I highly recommend it.

The caveat with the CFA program is that you also have to learn to use "Academic" methods of valuation that I don't belive are helpful whatsoever (and can be destructive if you stick to them), such as the CAPM, beta as a measure of risk, effecient market thoery, and many other methods that only work in theory and not in real world practice.

You have to know which parts you learn are worth using and which are not.

I have learned much more accounting type knowledge in the CFA program than I ever would from great value investing books. However, I've learned which parts are useful and which are not from reading value investing books, by great value investors.

Value investing books won't help you much if you don't understand the language of accounting. And "too much" emphasis on what you learn in the CFA can be harmful, if you don't balance that "academic knowledge" with the real world advice and practices of great value investors.
Kfh227 - 8 years ago    Report SPAM
"The caveat with the CFA program is that you also have to learn to use "Academic" methods of valuation that I don't believe are helpful whatsoever (and can be destructive if you stick to them), such as the CAPM, beta as a measure of risk, efficient market theory, and many other methods that only work in theory and not in real world practice."


This sounds like alot of academic BS so if you mess up the finances of one of your clients, you have something to point at. Even if you are wrong, you are right since you "used industry standard techniques". It's hard to get sued and loose so long as you can prove that you stuck to industry standard practices within your industry, no matter how flawed they may be. "Covering your ass" as we call it in engineering.

JLAnnello - 8 years ago    Report SPAM

A very nice article, and I can't wait to hear more. I was anticipating beginning the CFA program this fall, after spending much time over the past 2 years learning from Buffett and his disciples and teachers. I thought the CFA could give me a more rigorous approach to finance, while keeping in mind the Buffett/Munger framework when it comes to making investment decisions. I'd like to hear your opinion on the program for young students looking to enter the business.
DeepValue - 8 years ago    Report SPAM
Minimizing the CFA program is like minimizing the completion of a marathon. A lot of people think it's easy or no big deal, but they have not and will not ever complete one themselves.

One of the reasons that employers like the CFA is not just the knowledge, it's the bold statement that you are a serious person who is disciplined enough to make it through a tough three year program.

Someone may want to review the Gurus that this board is based on who are Charterholders. I know Bill Miller is one and I think the Longleaf guys are too.
Kbodawala - 8 years ago    Report SPAM
I agree with alot of you when you mention that the CFA is very academic, and completely obsesses over Modern Portfolio Theory. It measures risk a lot differently then the super investors of Graham and Doddsville, namely it states risk is volatility. We all know true risk is the actual loss of capital. Mark to market losses due to irrational market behavior has no bearing on the true performance of your long term holdings. But, like Buffet always says read all you can and then form an independent objective decision. How do you know what is right, unless you know what is wrong also. By participating in the CFA program I have learned alot. I do not always agree with what they emphasize but its good to know how other market participants think. And when you buy stocks the folks that will be the counterparty to your buy and sell decisions will be raised on MPT and will make decisions based on it. If you understand how they think and what motivates them to act the way they do, then you have the informational advantage. Suppose colleges everywhere were to teach the Buffet style of value investing, then there would be fewer opportunities out there for us all. I think MPT is a blessing because it argues that markets are efficient therefore it keeps people stuck to index investing and leaves real opportunities for people who think critically and do the work. Its very notion of market efficiency creates inefficiencies. But shhhhhhh..... don't tell anyone lets just hope to god that MPT has a long academic life.
GeorgeFrost premium member - 8 years ago
Thank you, one and all, for your very thoughtful and intelligent comments, opinions, and questions -- what a great group!

That said, time simply won't permit me to answer individual questions, however much I'd like to do so. And I would! Thanks in advance for your understanding.

The topic of my next GuruFocus column will be based on the wonderful Buffett quote: "Investing is simple, but not easy." Amen to that!

Thanks again for your thoughtful comments. Warmest regards...George.

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