What Do Benjamin Graham and Thoroughbred Horseracing Have in Common? Warren Buffett
When reading Warren Buffett’s authorized biography, The Snowball: Warren Buffett and the Business of Life, several years ago, I was surprised to learn that the world’s most famous investor is an avid, life-long horseracing handicapper. In hindsight, I shouldn’t have been. As it happens, the process behind picking a winner – when dealing with either investments or thoroughbreds – is strikingly similar.
At the tender age of 13, Buffett ran two paper routes and published a horseracing tip sheet called Stableboy Selections. The latter gained enough traction that he was able to give up his paper routes and focus his efforts on the much more profitable handicapping publication. Buffett’s uncanny skill and success at the racetrack earned him $53,000 – by the time he turned 16.
Fast-forward a few years and Buffett began closely studying the renowned Benjamin Graham, widely regarded as the father of modern securities analysis. The rest, as they say, is history.
''I was always interested in statistics,'' recalled Buffett, who developed a precocious and lasting taste for horse handicapping. ''There are a lot of similarities between handicapping and investing. There are speed handicappers and class handicappers. The speed handicapper says you try and figure out how fast the horse can run. A class handicapper says a $10,000 horse will beat a $6,000 horse. Ben Graham said, 'Buy any stock cheap enough and it will work.' That was the speed handicapper. And other people said, 'Buy the best company, and it will work.' That's class handicapping.''
Now 88 years young, Buffett still uses handicapping in his investment decisions and, of course, at the racetrack. He remains a fixture at Horsemen’s Park in Omaha, Nebraska.