Long-Term Investing Magic – Isn’t What You Think
I just got back from a family office investment conference where I met dozens of investment officers from all over the country. Different styles, different goals, different philosophies, but one common theme kept surfacing.
I also just finished listening to the Acquired podcast’s three-episode, 11-hour breakdown of Warren Buffett and Berkshire Hathaway. Here’s the world’s most famous investor, arguably the best of the last 75 years, with entire college courses dedicated to his (and Benjamin Graham’s) value investing style. And guess what? The same theme kept popping up, and it had nothing to do with numbers.
I’ve said it before: long-term investment success all comes down to… people. I know, boring, anti-climactic, but 100% true. Let me break it down.
Step 1: Investment Managers Are Hired for Who They Are, Not What They Are
Trust is the currency of the family office world. Every family I spoke to hires people they know, like, and, most importantly, trust.
Not one person said: “We brought this guy in because he was Ivy League, MBA, ex-Goldman.” Instead: capable pros with experience and, most importantly, relationships. Most of them had been connected to the family years before taking on the role.
The takeaway? People get hired because of who they are, not what they are.
Step 2: Fund Managers Are Selected for Drive and Expertise, Not Their Track Record
Most of these managers spend their days underwriting fund managers (PE, VC, hedge funds), and here’s the kicker: the track record actually counts for less than you’d think.
Why? Because track records fade. Managers change. They get complacent, focus more on fees and fundraising than performance. I heard multiple people say they’ll only invest in managers on Funds I–III, raising less than $500 million. Why? Because smaller, hungrier funds outperform bloated, “institutional” vintages. The data backs it up: smaller funds have a wider return range but deliver far better averages, than mega funds.
So what really matters? The how. How managers work with companies. How deep their operating bench is. How well they know their markets. These are soft qualities, but they require hard answers.
Spoiler alert: letting PE into 401(k)s and ETFs is going to be a trainwreck. The managers pounding the table for “retail access” are the ones the “smart money” has already abandoned. They need fresh AUM to keep the lights on.
Step 3: Understand the Business, Bet on the Person
As Midwesterner I’ve always had a deep admiration for Warren Buffett, Charlie Munger and Berkshire Hathaway. I read the annual letters and listened to their interviews, but the Acquired episodes uncovered some amazing and weird things that I had never heard. I had always known that Warren and Charlie were number savants, did deep financial dives, and knew markets better than anyone, but I never knew how much of their investment came from direct relationships.
· GEICO (1940s): 19-year-old Buffett hops a train, shows up unannounced on a Saturday, and talks for hours with Lorimer Davidson, GEICO’s finance head, because his teacher Benjamin Graham is the Chairman. He invests immediately.
· National Indemnity (1967): Buffett buys the Omaha insurer over lunch with Jack Ringwalt, one page, no audited financials. Just trust in Jack. This deal transformed Berkshire.
· Charlie Munger: Introduced by a mutual friend, they became instant allies and lifelong partners.
· Coca-Cola (1988): Reconnected with old Omaha neighbor Don Keough at a White House dinner. Don hands him a Cherry Coke. Buffett eventually invests $1.2B.
Sometimes it doesn’t pan out:
· He missed Intel’s seed round, even though co-founder Robert Noyce sat on Grinnell College’s board with him. The college invested, Warren didn’t.
· He only bought 100 shares of Microsoft despite being best friends with Bill Gates.
The through line? Understand the business, believe in the person.
It’s Not What You Know, It’s Who You Know
We’ve all heard the cliché, but it’s even truer now. Information is everywhere, literally at the push of a talk-to-text button. Analysis is cheap. Relationships aren’t.
What struck me most listening to the podcast wasn’t Buffett’s financial wizardry, it was how many of his biggest investments came straight out of Omaha. Either there’s something in the water, or he cultivated relationships so strong that opportunities found him.
Same goes for me. I’m an introvert, I’d rather do 10 hours of diligence than work a conference floor, but whether it’s a handshake over coffee with a business owner or a referral from someone I trust, the “who” matters far more than the “what”.
At the end of the day, investing isn’t just capital allocation. It’s understanding people, that’s the real long-term magic.