Ask Rick Guerin The Cost of Patience
A Lesson On The Virtue
A Lesson On The Virtue
Charlie Munger and Warren Buffett are well known for their partnership, investments and money made. Back in the ’70s they had a third partner named Rick Guerin. Rick had his own thing going on (Pacific Partners) to manage, he worked with Buffett and Munger to buy controlling stakes in companies. Buffett really respected Rick and included Rick in his “superinvestors” list in 1984.
Why wouldn’t he include Rick in the list and work with him? Rick’s Pacific Partners had a return of 22,000% from 1969 to 1983 compared to 316% generated by S&P 500 in that same window of time. A little after Buffett put Rick’s name on the list of “superinvestors,” Rick vanished!
Update: (that reminds of of the TV show Unsolved Mysteries) more than 30 years later we would find out what happened.
“Charlie and I always knew that we would become incredibly wealthy. We were not in a hurry to get wealthy; we knew it would happen. Rick was just as smart as us, but he was in a hurry. And so actually what happened — some of this is public — was that in the ’73, ’74 downturn, Rick was levered with margin loans. And the stock market went down almost 70% in those two years, and so he got margin calls out the yin-yang, and he sold his Berkshire stock to me. I bought Rick’s Berkshire stock at under $40 a piece, and so Rick was forced to sell shares at … $40 apiece because he was levered.” - Warren Buffett on his partnership with Rick
The Berkshire stock Rick sold for $40 per share to Warren Buffett to pay for his margin loans is now worth more than $450K (~1100x). Rick’s name could have been up there in the list of legendary investors with Buffett and Munger, but, he was impatient. Rick wanted it fast. He wanted it now. He could not delay his gratification. (FOMO — fear of missing out)
Does that remind you of anything or anyone? People chasing get rich quick schemes, putting their money in things they do not understand and not willing to simply do what actually works.
Dan Roman is a Husband, Father, and writer that releases a daily blog. A quick read on money, marriage, parenting, self-improvement, development and his thoughts. Dan is also Founder/Creator of Roman Solutions, a Personal Finance Firm that currently provides coaching and education.
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