You’re no Warren Buffett! 6 reasons why the Buffett approach won’t work for you

2. Tax-efficient investment structures (ongoing since 1967)

Buffett prefers not to pay dividends, allowing Berkshire Hathaway to retain earnings and compound wealth tax-efficiently. Not all average investors can afford to compound their returns over a 60-year investing career without having to take any out to live on!

3. Asymmetric upside through custom deals (ongoing since 1967)

Many of Buffett's deals include warrants and preferred shares with terms that provided Berkshire Hathaway with significant upside but very limited risk – structures not available to retail investors who instead must invest in riskier common stock. Billions of Buffett’s profits were accumulated in this fashion.

4. Direct Access to Policymakers (1991, 2008–2009, and arguably since)

Throughout his career, Buffett has had access to policymakers and financial government agency officials that the average investor couldn’t even hope to have. Some examples that arguably assisted in building his present wealth include:

• Salomon Brothers Scandal (1991) – Buffett stepped in as interim chairman during a major trading scandal, helping the firm avoid harsher regulatory punishment. His reputation and direct access to Treasury officials (including a then Assistant Secretary of the Treasury, Jerome Powell), stabilised the company – something no average investor could ever hope to do. Buffett had $700 million on the line here, and by his own account of the matter, believes he could have been ruined reputationally by Salomon’s failure – which was a very real proposition at the time. The Treasury made statements that helped stabilise trading in Salomon’s shares, and the company was later sold to Travelers Group, netting Buffett a $1 billion profit. Would we still be talking about Mr. Buffett in the same terms if the Treasury had not stepped in to his aid in 1991?

• GFC Market Meltdown (2008-2009) – Buffett was in regular contact with Treasury Secretary Hank Paulson and later President Obama, gaining insights and shaping interventions as the financial crisis unfolded.

• Ongoing since the 1980s – Buffett’s companies, such as BNSF and his utilities, have benefited from policies shaped in part by industry lobbying. Berkshire has influence in Washington and Wall Street circles far beyond the average investor’s reach.

Nick, this is the most important day of my life.

Don't worry, Warren, we'll get through this.

5. Access to private placements and preferential treatment (ongoing since 1967, with examples below)

Buffett routinely accesses private placements in distressed companies, securing favourable terms unavailable to retail investors. For example:

• GE Capital Rescue (2008) – Buffett invested $3 billion in preferred GE stock yielding 10% annually, with added warrants. Ordinary investors got none of these protective features.

• Goldman Sachs Bailout (2008) – Buffett invested $5 billion in preferred stock with a 10% dividend and warrants to buy shares at $115. His name alone restored confidence in Goldman.

• Harley-Davidson Loan (2009) – Buffett loaned $300 million to Harley-Davidson during the GFC at an interest rate of 15%. Retail investors didn’t have access to these terms or yield.

• BNSF Railway Acquisition (2009) – Buffett purchased the entire company for $44 billion. The sheer scale and tax-efficient structure of this deal were far beyond anything a typical investor could replicate.

• Citigroup “No-Deal” Signal (2008–2009) – Buffett declined to invest this time, but his mere consideration arguably stabilised market sentiment toward the company at the time. The mere power of Buffett’s reputation moved the market this time, not his capital.

• Bank of America Deal (2011) – Buffett negotiated a private $5 billion deal with BofA: preferred shares yielding 6% and warrants to buy 700 million common shares at $7.14. It wasn’t available to the public.

• Kraft Heinz Deal (2015) – Alongside 3G Capital, Buffett structured a merger between Kraft and Heinz that included a $16.50 per share special dividend. The average investor just saw their shares swapped – Buffett wrote the terms.

• Snowflake IPO Allocation (2020) – Buffett secured a rare pre-IPO allocation in Snowflake – a tech firm no less – under terms inaccessible to public buyers, especially at the IPO price reach.

6. Reputation as a force multiplier

The Buffett brand is so powerful, and his followership so widespread, that the mere mention of his investment in a company sends its stock soaring – therefore padding his returns and further growing his reputation. On the other hand, you post what you just bought on your favourite social media platform and…crickets chirping!

Brilliant, bully, or bloody lucky?

This isn’t to say that Buffett’s investing approach is all smoke and mirrors. Quite the opposite – his discipline, temperament, and long-term focus are legendary. But it's equally arguable his greatest returns were made decades ago, and that his post-1990s returns were heavily reliant on reputation, access, and scale – not just investment skill.

This matters for anyone reading this article – all of us “Not Warren Buffetts”. Because every time we’re told to “be like Buffett”, there’s little mention that we have very little chance in reality to be like him. Buffett’s terms are fundamentally different to what we’re going to get. Quite simply: We’re no Warren Buffett.

Warren Buffett’s retirement marks the end of an era – and the risk is that, as a result, the inevitable deluge of headlines surrounding his unique success are erroneously extrapolated to similar potential held by average investors.

It’s time the financial media and mainstream investing fraternity finally acknowledge that what worked for Buffett won’t automatically work for us. That, for all the Buffett-isms hailed by his disciples, Warren Buffett’s results came from reputation, privilege, access, and hard-fought strategic advantage, and not simply buying and holding undervalued stocks.

On that final item – not even I can argue Buffett’s shrewd business acumen – applied almost unerringly (um, Salomon’s!) over a career that spanned six decades. This alludes to perhaps one final advantage that Mr. Buffett has enjoyed over many of us - is his sheer longevity.

This article first appeared on Market Index on Monday 5 May, 2025.