April 17, 2011

But Bill Gates and Warren Buffet Did It!

Is going to Harvard a good idea?   Of course it is.  A Harvard degree is almost a free ticket to a good job that pays well.   Is going to Harvard a good investment?  Definitely. 

Not a typical drop out
It seems that when you have this discussion that eventually some wise guy asks "What about Bill Gates?   He didn't finish college.  He dropped out of Harvard and look at him, now he's a mega billionaire!"   I'm paraphrasing there but something to that effect is the usual argument.   The idea here seems to be that going to college like Harvard isn't necessarily a good idea cause someone like Bill Gates became a wealthy billionaire without a college degree.   If Bill Gates can be so successful without college then why do other people need to go to college?

Point: College is useful.
Response: Bill Gates doesn't have a degree.

Can you make 20% or more a year every year over the long term on your stock investments?   No you can't expect to do that.   Individuals shouldn't expect to get stock returns that are significantly different than the overall market performance over the long term.   Of course theres variations you may be a bit lucky or unlucky and do better or worse. 

Not a typical investor
Point: Don't count on higher than average investment returns.
Response: Warren Buffet gets higher than average returns.

Compare the Bill Gates versus college and Warren Buffet versus investing discussions with the following :

Point: Making a 3 point basket from across half court with 0.5 seconds on the shot clock is very hard.  Don't expect to be able to do it.
Response: LeBron James could do it!  

So?   Who cares if LeBron James can make a half court shot.   He's a basketball super star.  Just because a star athlete can do something doesn't mean that a normal person like you or me can do it.

Not typical at all.
Just because Bill Gates or Warren Buffet achieve unparalleled financial success doesn't mean that anyone else should plan their lives or make decisions using them as an example.    Just because one guy can drop out of Harvard and become a billionaire doesn't mean everyone can.  Other Harvard Dropouts  like the ones in this article "Dropouts" from Harvard Magazine are just as likely to have ended up becoming homeless hippies for a decade and eventually settle into 'normal' jobs with 'normal' levels of success.    For every Warren Buffet there are about 307,006,549 million Americans (and counting) who have had less success with their investments.

For every LeBron James in the world theres millions of normal people like myself who are not particularly good at basketball.
There are exceptions the norm in everything.   Rare extremely talented or gifted individuals can do that which most of us can only dream.    These peoples individual experiences should not be considered relevant to our own individual financial planning.

Gates photo by Domain Barnyard, Buffett photo by Medill DC , James photo by Keith Allison

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