On the Similarities of Underwriting and Investing

In 1999 Warren Buffet wrote, “In Ajit, we have an underwriter equipped with the intelligence to properly rate most risks; the realism to forget about those he can’t evaluate; the courage to write huge policies when the premium is appropriate; and the discipline to reject even the smallest risk when the premium is inadequate. It is rare to find a person possessing any one of these talents. For one person to have them all is remarkable.”

It is interesting that these qualities parallel those required to be a successful investor.

A successful investor must:

  1. properly assess the future prospects of a business;
  2. quickly pass on those businesses he cannot understand;
  3. have the courage to make a large bet when the odds are in his favor;
  4. not invest if the margin of safety is too small.

You can infer from Buffett’s comments that finding (or becoming) an investor with these traits is difficult.

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