Bernard Baruch was an American investor who successfully navigated major market booms and busts, including the great depression in the 1930s. Lessons from his investing career may help us during our present difficult times.
Baruch was born in 1870 and as a young man wanted to get a job on Wall Street. However, his father was a doctor and the family had no connections to anyone in finance. By chance, Baruch’s mother met a broker, Julius Kohn, on the local New York train. Kohn said that he was looking for a serious-minded, dependable, hard-working young man with “no bad habits” to work in his office. Baruch’s mother immediately suggested her son, Bernard Baruch.
Julius Kohn agreed to take on Baruch as an apprentice but paid Baruch nothing, saying that he was teaching Baruch how to be a businessman for free! This was how Baruch entered and learned about Wall Street. By the time Baruch was 30, he had become one of the wealthiest people in the USA.
Key Investment Lessons
Continuously search out the real data and facts
“There [is great] importance in getting the facts of a situation free from tips, inside dope, or wishful thinking. In every assignment that was given me I would begin with a relentless search for the facts of the situation.”. Baruch was called “Dr. Facts” by President Woodrow Wilson. Baruch also felt that getting these facts is a continuous job that requires eternal vigilance. The constant challenge is to “disentangle the cold hard facts from the warm feelings of people dealing with these facts. The main obstacle is our own emotions.”
Stay steady at times of booms and busts
Why do we fall victim to such madness as the frenzy of the stock market gambling shows? Baruch felt this was largely a reflection of the curious psychology of crowds. Booms and busts “occur so frequently that they must reflect some deeply rooted trait of human nature.”
Baruch said that “when hopes are soaring, I always repeat to myself – two and two still make four and no one has invented a way of getting something for nothing. When the outlook is steeped in pessimism, I remind myself – two and two still make four and you can’t keep mankind down for long.”
In his initial years, Baruch made and lost money very rapidly. One day he borrowed money from his father and then very soon thereafter lost this money in a trade. This was a turning point for Baruch. From that time on he began a habit of carefully analyzing his losses to determine where he made his mistakes.
Baruch said that he subjected himself to critical self-appraisal. Failure, said Baruch, is a far better teacher than success. After each major undertaking, especially a failure, he would “shake loose from Wall Street and go off to some quiet place” where he could review what he had done and where he went wrong. Baruch was focused on guarding against a repetition of the same error.
Never give up
When he was young Baruch learned boxing. His boxing teacher taught him that “A fight is never over until one man is out. As long as you ain’t that man you have a chance. To be a champion you have to learn to take it or you can’t give it.”. To reach the top in any endeavor you must learn to accept and work through the pain of your disappointments and must keep persevering.
Baruch was consulted by US Presidents and advised both Woodrow Wilson and Franklin Roosevelt. Baruch said that merely giving money to philanthropic causes did not fill the emptiness within him. He said that it was when he put in personal efforts and time to some worthy cause that he felt at ease.
We now think that our era is the only time when mankind experienced great technological innovations. However, Baruch lived through the advent of electricity, telephones, the motor car (he was one of the first buyers), and the airplane. His view on technology was that “During my life, I have witnessed a whole succession of technological revolutions. But none of them has done away with the need for character in the individual or the ability to think?”
Baruch said that he always kept in mind the advice his father gave him when he started on Wall Street. This may be the best advice we can all keep in mind:
- Baruch’s father said that it was not so important where you came from but where you were going.
- When Baruch started his own office, his father gave him an inscription “Let unswerving integrity always be your watchword”.
© Kaikhushru Taraporevala