The Sage of Omaha

RAM NIDUMOLU JANUARY 24, 2020

One of the most famous sages in business is Warren Buffett, the legendary US investor and once the second-richest person in America. He is called the Sage of Omaha for the great foresight he has shown over the many decades he has been in business in picking the right stocks. How does he stack up against the requirements of a living sage, according to Beingful leadership?

Buffett’s investment results show clearly that he is the example par excellence of long term investing. During 1965–2012, the per share book value of Berkshire Hathaway grew by over 587,000% , compared to the S&P 500 growth of almost 7,400%. This means that if you had invested a mere $200 in Buffett’s company in 1965, you would have become a millionaire in 2012, compared to having gained around $15,000 if you had invested in the S&P 500.

Buffett has perfected the technique of value investing, where investors look for stocks whose external valuation is low compared to their intrinsic value. Berkshire Hathaway is one of the very few US public companies that has followed and stayed with a longterm shareholder value model.

Buffett’s unique skill is in consistently locating companies with high intrinsic value that go unrecognised by other investors. See’s Candy is a remarkable example of Buffett’s ability to identify longterm opportunities and stay with them. An initial investment of $25 million in 1972 to purchase the company outright, followed by additional investments of $32 million, resulted in over $1.3 billion in pre-tax earnings by 2007.

Aside from creating wealth for everyone he’s been associated with, Buffett is also an incomparable humanist and a man of great integrity. His decision to give away all his wealth to charity after his death, his active efforts to get billionaires to give away half of their wealth to social and other causes, and his public support for bringing more equity into the tax code (the “Buffett Rule”) are all examples of a profoundly wise and generous humanist. It is a tragedy that while many claim to worship him, far fewer follow his investment approach.

Buffett is a wonderful role model for a sage who thinks long-term, cares about all his stakeholders, and feels a strong connection to humanity. But one important thing is missing. For a man of Buffett’s prodigious wisdom, talents, and foresight, its absence is remarkable. The environment is hardly ever explicitly discussed, and while much long-term strategy is undeniably behind Buffett’s work, the impact of business decisions on our already fragile ecosystems represents a hole in his great vision. It is something I just cannot explain.

Looking through Buffett’s famous reports to shareholders, it is hard to see a real discussion of the risks of climate change or ecosystem loss, even though these risks are very real for many of Berkshire Hathaway’s businesses. One of the industries hardest hit by climate change disruptions will be insurance services, and Berkshire owns some of the best and largest of these companies.

But Buffett has very little to say about nature in his hugely anticipated annual reports to shareholders. For example, here’s what he had to say in his March 1, 2013, report about possible insurance losses for the reinsurance group that is one of the stars of his portfolio: “If the insurance industry should experience a $250 billion loss from some mega catastrophe, a loss about triple anything it has ever experienced Berkshire as a whole would likely record a significant profit for the year because it has so many streams of earnings.”

This is similar to what he had said in previous years. It’s striking because it does not discuss any of the likely causes of these insurance losses, such as climate change, ecosystem destruction, or loss in asset values due to future concerns or regulations about the impacts of business on nature. Many of these impacts will occur within the next decade, a timeline well within Buffett’s long-range horizon. 

For this wise and generous sage who says, “I try to look out ten or twenty years when making an acquisition, but sometimes my eye sight has been poor,” this lack of explicit recognition of the risks from the loss of nature is a brilliantly visible blind spot. I find it hard to understand. If Buffett were a far more active steward of nature than he is now, he may well have been the foremost leader-sage among all modern business leaders.

Perfection is hard to expect, even in a modern oracle. But I know that when Omaha’s sage puts on his battle gear to also do nature’s battle or sound its trumpets, a great number of business leaders will follow.