Interpretation of Buffett's 1990 Stanford Law School Speech - The Most Compliant and Strictly Regulated Cryptocurrency Exchange Platform in the World

"Many people believe that management and investment are two completely different things.

In fact,

management and investment are interconnected,

and share many similarities.

If you understand the basic principles of investing,

you will become a better entrepreneur; if you understand the basic principles of management,

you will become a more successful investor.

"

This excerpt from Buffett’s speech,

is similar to what he has said before: when people invest in stocks,

they should think of themselves as business analysts,

not market analysts,

securities analysts, or macroeconomic analysts.

Because I see myself as a business operator,

that’s why I can be an excellent investor; because I see myself as an investor,

that’s why I can be an excellent business manager.

I’m glad I heard this when I was learning value investing,

I think it’s very insightful,

which is also why I see many entrepreneurs who have run physical businesses transition into investing more smoothly than ordinary workers,

especially those who have been successful in their businesses,

they seem more receptive to and able to understand value investing.

Buffett himself is a good example,

I’ve always said: the world’s biggest misconception about Buffett being a stock god is just that—misunderstanding him.

Because, in my view,

he is actually a successful entrepreneur.

Today, Berkshire Hathaway owns 189 wholly owned and controlling subsidiaries,

such as See’s Candies,

GEICO Insurance, and others,

employing over 390,000 people,

with total assets exceeding $1 trillion.

He has also invested in more than 40 listed companies,

such as Apple,

Western Petroleum, and others.

So,

do you still think Buffett is just a stock god who invests?

It’s precisely because Buffett has been managing companies,

operating companies,

acquiring many companies horizontally,

and accumulating extensive business management knowledge and experience,

that,

when he has surplus funds to invest,

the process of finding companies is to use his management mindset to judge whether a company is a good one,

and whether the business model is good.

Basically,

using an entrepreneur’s way of thinking to invest.

Conversely,

when Buffett faces so many of his own subsidiaries,

he needs to think like an investor when managing companies,

for him,

management and investment,

are just two interconnected parts of a whole.

There is no fundamental difference.

My investment approach is also to think of companies as if I were managing them,

considering all aspects of the business,

so sometimes, when fellow investors read my articles,

they notice that I also share my thoughts on some detailed points.

It can be said,

that my many years of running businesses have made it easier for me to think about investments.

Another example is Dao Duan Yongping,

who also exemplifies the success of applying the same thinking from business to investment.

"I believe,

the secret to accumulating wealth lies in persistently doing what is within your ability.

Almost 99% of managers believe,

that if they perform exceptionally well in one field,

they will also perform equally well in others.

In reality,

they are like ducks in a pond: when it rains,

as the pond water rises,

the ducks float up,

but they mistakenly think it’s because of their own effort, not the rising water.

So,

they go to a place where it’s not raining,

sit down heavily,

trying to make their bodies float,

but the result is predictable."

Here, Buffett once again reveals the secret of wealth: persistence + doing what is within your ability.

When the tide recedes,

we find out who was swimming naked.

This is from a third-party perspective to see if others are swimming naked,

but when we invest ourselves,

we need to know whether we are swimming naked.

Doing what is within your ability,

not only refers to investing,

but also applies to many other things.

The path your life takes,

the company and position you choose for your work, etc.,

are all applicable.

Of course,

this leads to two major questions about the capability circle—whether the capability circle is fixed,

unchanging.

The boundary of the capability circle.

First,

we should all understand and accept one point: don’t do what you don’t understand.

This can eliminate many companies you don’t understand,

for example, chip companies with complex processes that you can’t grasp,

then just avoid investing in such companies.

Like the tech bull market in 2025,

if chip companies keep rising,

breaking new highs,

and you don’t buy because you don’t understand,

won’t you suffer a big loss? Even if I don’t understand,

I can make a lot of money by blindly buying individual stocks or Kechuang ETFs.

Alright,

the result of doing so is very likely that you will really make money.

However,

this approach violates the principle of not doing what you don’t understand,

and the cost of violating it—well, this time you made money,

but what about next time? Maybe you’ll tell me,

there is no next time,

I will only do this once.

My reply is: when you find a cockroach in the kitchen,

it’s often not just one.

When you see others making money in fields you don’t understand,

what you need to do is not envy their success,

nor blindly jump to violate the principle of not doing what you don’t understand,

but to choose between two options: one, can I learn to expand my capability circle,

so I can earn more in the future?

Two, stick to your existing capability circle,

do good investments within your ability,

and ignore the noise around you.

This leads to the saying: knowing the boundaries of your capability circle

is more important than the size of the circle itself.

In other words,

for most people,

understanding the boundaries of their capability circle,

not expanding it,

and staying within their circle can lead to good results.

Buffett also said,

you don’t need to be proficient in all companies,

just focus on a few you understand well and make money.

If you don’t understand these words,

it’s okay,

practice and reflection will naturally help you understand.

Of course,

if you believe you have enough energy and learning ability,

you can try to expand your capability circle.

But how far a person’s capability circle can expand,

and what standards to measure this ability—are also artistic questions.

Between understanding and not understanding,

there are often many ambiguous areas,

you say you understand,

but maybe not completely,

you say you don’t understand at all,

but seem to see the business model clearly,

here,

is often the biggest pitfall.

Buffett himself has fallen into the trap of airline companies multiple times,

he is already very cautious,

but still unavoidable to stumble,

what about us? So,

first, practice more,

second, practice carefully on a small scale,

third, learn from others’ mistakes,

and turn them into your lessons.

The last sentence is: investing is not about who makes money faster,

but about who survives longer."