One of the secrets to Warren Buffett’s success as an investor is big-picture thinking. He doesn’t get caught up in doom-and-gloom headlines or day-to-day fluctuations of any individual stock. Explaining his strategy isn’t easy, which is why Buffett relies on an ancient communication tool to help him articulate it.
Buffett has mastered metaphor–and you should, too, if you want your ideas to catch on.
Using metaphors to help people make sense of abstract concepts is a rhetorical device by which we explain one concept by relating it to another thing that people are familiar with. The communication tactic goes back to ancient Greece. The philosopher Aristotle once wrote, “To be a master of metaphor is the greatest thing by far.”
In Berkshire’s annual letter for 2018 (released on Saturday), Buffett urged his shareholders to focus on Berkshire’s broad portfolio of companies without getting too obsessed with any one stock or business in Berkshire’s vast collection of holdings.
Buffett relied on a metaphor to explain the strategy, one that is familiar to most of us: forest and trees.
Focus on the forest and forget the trees, says Buffett
Buffett said that details of Berkshire’s massive business collection are “trees,” and range from twigs to redwoods. “A few of our trees are diseased and unlikely to be around a decade from now. Many others, though, are destined to grow in size and beauty,” he added.
Buffett divided Berkshire’s portfolio into five “groves” or categories: Non-insurance business (“the most valuable grove in Berkshire’s forest”), marketable equities, controlling interest in several businesses, cash, and insurance.
By creating a metaphor for a complex business, Buffett provides a visual picture for the mind’s eye. It’s a mental shortcut that helps average investors–and even professional ones–think about the company differently.
If Buffett were delivering this presentation as a series of slides, he could easily show one image of a forest, and then zoom in to five clumps–or “groves”– to explain each one. Keep in mind that just as it should be for any valuable presentation, the metaphor and the story must come first. The slides should be designed only after the story elements are thought through.
Buffett revisits the metaphor throughout the letter, which he could carry through a presentation, too. For example, one of those “groves” is Berkshire Hathaway’s large cash position ($112 billion). Some observers want to know why Buffett doesn’t put that money to work by buying a company or investing in one. Buffett admits he’d like to make an “elephant-sized” acquisition but says it’s hard to find a decent company at a reasonable price.
I can already see the face of an elephant peering from behind a tree on a presentation slide.
While Buffett didn’t create a presentation to go along with the letter, I’m making the point that metaphorical thinking lends itself to the graphical representation of your topic. Start with a metaphor and watch your idea come to life.