Nobody Wants to Get Rich Slow

It's Monday, May fourth, and welcome to HigherIQ. Yesterday in Omaha, Warren Buffett sat in the audience of the Berkshire Hathaway annual meeting for the first time instead of on stage. Greg Abel, who took over as CEO in January, ran the show. Buffett, now ninety five years old, spoke briefly. He praised Abel. He told Apple CEO Tim Cook to take a bow. And he said something that cut through the noise of everything else happening in markets right now: "We've never had people in a more gambling mood than now." That line, from the most successful investor in history, a man who turned nineteen dollars per share into over seven hundred thousand dollars over six decades, is worth sitting with. Buffett's strategy sounds so simple it barely qualifies as a strategy. Buy good businesses. Hold them forever. Be patient when everyone else is panicking. But if it's that simple, why can't anyone replicate it? The answer involves compound interest, an insurance trick most people have never heard of, and a psychological discipline that almost nobody can sustain. In 1964, Berkshire Hathaway was a failing textile company worth eighteen million dollars. Today it's worth over a trillion. Its stock has returned 6.1 million percent. Not a typo. Six point one million percent. The S&P 500 over the same period returned about forty six thousand percent. Buffett didn't just beat the market. He beat it by a factor of more than a hundred and thirty. The engine behind that performance is compound interest, and the reason most people don't understand its power is that human brains don't think exponentially. If you invest a thousand dollars at twenty percent annual returns, after ten years you have about six thousand two hundred dollars. That's nice. After twenty years, you have about thirty eight thousand. After thirty years, you have about two hundred and thirty seven thousand. After sixty years, you have fifty six million dollars. The same return, applied over a longer time horizon, produces results that feel impossible. Buffett bought his first stock at eleven years old. He's been compounding for eighty four years. Over ninety nine percent of his current net worth was accumulated after his sixtieth birthday. He didn't get rich fast. He got rich for a very long time. Buffett described this himself with a metaphor he's returned to throughout his career: "Life is like a snowball. The important thing is finding wet snow and a really long hill." The wet snow is a good rate of return. The long hill is time. Most investors focus on finding wetter snow. Buffett focused on never getting off the hill. His investment philosophy is rooted in value investing, a framework he learned from his professor Benjamin Graham at Columbia University. The approach is to buy businesses trading below their intrinsic value, companies whose stock price is lower than what the underlying business is actually worth. Buffett looks for what he calls a "moat," a durable competitive advantage that protects a company from competitors. Coca-Cola's brand is a moat. Geico's low-cost direct-to-consumer insurance model is a moat. Apple's ecosystem is a moat. Once he finds a business with a wide moat and a reasonable price, he buys it and holds it. He bought Coca-Cola in 1988 and still owns it. He bought American Express in the early 1990s and still owns it. He bought Apple starting in 2016, turning roughly forty billion dollars into a position that peaked at over a hundred and sixty billion. If the strategy is buy good companies and hold them forever, why can't everyone do it? Part of the answer is psychological. Holding stocks through crashes requires a discipline that most people, including most professional fund managers, cannot sustain. When the market drops forty percent, knowing intellectually that you should hold is very different from actually holding while watching your portfolio lose hundreds of thousands of dollars in real time. Buffett's famous line, "The stock market is a device for transferring money from the impatient to the patient," is easy to quote and almost impossible to live. But the deeper answer is structural, and it's the part of the Buffett story that most people miss. Berkshire Hathaway is an insurance company. Insurance companies collect premiums from customers upfront and pay claims later, sometimes months or years later. The money sitting between collection and payout is called "float." It's other people's money that Berkshire gets to invest, for free, for as long as the claims remain unpaid. In 1970, Berkshire's insurance float was two hundred and thirty seven million dollars. By 2025, it had grown to over a hundred and seventy one billion. That's a hundred and seventy one billion dollars of other people's money that Buffett has been investing at no cost. The float functions like a permanent, interest-free loan. A normal investor who borrows money to invest pays interest on the loan, which eats into returns. Buffett's insurance float has actually made money on the underwriting side, meaning Berkshire was being paid to hold other people's money and invest it. As Buffett himself has written: "This collect-now, pay-later model leaves us holding large sums that will eventually go to others. In the meantime, we get to invest this float for Berkshire's benefit." This is the structural advantage that separates Buffett from every retail investor who reads his annual letters and tries to replicate his approach. You can follow his philosophy. You can buy the same stocks. You can hold them for decades. But you don't have a hundred and seventy one billion dollars of free money amplifying your returns. When Buffett tells ordinary investors to just buy an S&P 500 index fund and leave it alone, he's giving genuinely good advice. He's also acknowledging that his own strategy requires a capital structure that nobody else has access to. The humility is real. The playing field isn't level. Yesterday's annual meeting was Greg Abel's first as CEO, and the contrasts with the Buffett era were visible. Several thousand seats in the arena were empty. The folksy stories and one-liners were replaced with detailed operational discussions. Abel is competent, disciplined, and deeply experienced after twenty five years at Berkshire. He is not Warren Buffett, and he knows it. Nobody is. Buffett's comment about the gambling mood connects to something broader than markets. Americans can now bet on sports from their phones in most states. Meme stocks and crypto tokens trade on momentum and social media rather than fundamentals. Zero-commission trading apps have made it possible to buy and sell stocks dozens of times a day with no friction. The line between investing and gambling has blurred to the point where many people under forty have never seen a clear distinction. Buffett has been saying versions of the same thing for decades: most people would be better off buying an index fund and checking it once a year. The advice has never been less popular. Berkshire Hathaway is currently sitting on roughly three hundred and thirty four billion dollars in cash. That's more cash than the GDP of most countries. Buffett has been accumulating it for years because he can't find businesses worth buying at current prices. Critics point out that the market kept going up while Buffett sat on the sidelines, which means the opportunity cost of holding cash was enormous. The S&P 500 has outperformed Berkshire over the past decade. The counterargument, which Buffett has made repeatedly, is that patience isn't a cost. It's the strategy. He would rather hold cash and wait for a crisis to produce bargain prices than overpay for a company in a market he considers overheated. Every great Berkshire investment, Geico, Coca-Cola, Bank of America, Apple, was made when prices were depressed or the company was undervalued. The cash isn't a mistake. It's ammunition. "It does mean that prices for an awful lot of things will look very silly," he said yesterday. Whether that's a prediction or a warning depends on what happens next. But if there's one thing the last sixty years have demonstrated, it's that betting against the man from Omaha has been, statistically speaking, the worst bet in the history of American finance. So if this comes up in conversation, here's how to think about it. Warren Buffett turned a failing textile company into a trillion dollar conglomerate by buying good businesses, holding them forever, and letting compound interest do the work over sixty years. Over ninety nine percent of his wealth was accumulated after his sixtieth birthday, which tells you that the most important variable in investing isn't what you buy. It's how long you hold it. The part most people miss is that Buffett had a structural advantage nobody else can replicate: a hundred and seventy one billion dollars in insurance float, other people's money that he got to invest for free, amplifying every return. When he tells ordinary investors to buy an index fund and leave it alone, he means it. His own strategy requires capital that no individual investor has. Yesterday, at ninety five, he warned that the market is in the most gambling mood he's ever seen. He's sitting on three hundred and thirty four billion dollars in cash, waiting. The most patient man in finance is still being patient, and the most common mistake in investing is still impatience. Stay informed, stay curious, and we'll see you tomorrow.