COMMENTARY: Warren Buffett’s tips for crisis management
Billionaire Warren Buffett is chairman of Berkshire Hathaway, which owns NV Energy. He has seen a crisis or two in his 89 years. As he’s fond of noting, “I bought my first stock in, probably, April of 1942 when I was 11. … World War II didn’t look so good at that time.” The Dow Jones Industrial Average back then was about 1,500. It’s now (still) about 19,200.
Several of Buffett’s principles relating to economic crises are important to consider as the economy is hammered by the coronavirus.
First, remember that America’s economy is incredibly robust. This country has endured and prospered despite major dislocations, including wars, depressions, terror attacks and, just 10 years ago, the near-collapse of the financial system. Keeping the daily headlines in perspective and remembering our strength and resilience will serve us well. “The only thing you had to believe in (April 1942) is that America would win the war and that America would progress as it has ever since 1776,” Buffett explained. “The headlines were terrible every day.”
Second, keep a long-term view. It’s best not to worry about short-term ups and downs in markets, even big ones. America has seen extreme market volatility before. And it will again. Over the long term, however, our markets march in one direction — up. There have been big drops lately, but, as Buffett likes to say, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” Indeed, a swift downward swing in prices is often a long-term opportunity. One of Buffett’s most famous pieces of advice is to “be fearful when others are greedy and to be greedy only when others are fearful.”
Finally, be optimistic. Buffett is known for tap dancing to work and relishing his job. His cheerful and enthusiastic demeanor has fueled his ability to weather the market’s many storms since 1942. Buffett’s friend Melinda Gates put it well in the Bill and Melinda Gates Foundation’s 2017 annual letter: “Optimism is a huge asset. We can always use more of it. But optimism isn’t a belief that things will automatically get better; it’s a conviction that we can make things better. We see this in you, Warren. Your success didn’t create your optimism; your optimism led to your success.”
Staying optimistic, like Buffett, is particularly important during tough economic times. It’s not fun to watch your net worth plunge downward. Nor is it easy to consider the human toll market downturns inevitably inflict, particularly when a global health crisis is the cause. But staying optimistic helps provide the energy and clarity we need to make things better.
These principles are timeless. And remembering how robust our economy is, maintaining a long-term view and staying optimistic are indispensable for navigating the current crisis. Staying true to these principles, Buffett increased his stake in Delta Air Lines earlier this month — purchasing shares in a company that, like other airlines, has been hit hard by the virus. He is, for all to see, being greedy while others are fearful.
While Berkshire Hathaway’s annual meeting will be online this year — instead of before the usual sold-out crowd in Omaha — the principles Buffett espouses remain unchanged. We should hold them close in coming weeks and months.
William Cooper is a freelance journalist. He writes from the Bay Area.