100 Ways to Beat the Market #16: "Handle the Basics Well"

In his 1994 shareholder letter, Warren Buffett extols the phenomenal performance of Scott Fetzer: it earned an extraordinary return on equity without the benefit of a monopolistic position, leverage or strong cyclical tail winds. Scott Fetzer's return on equity – had it been included in the 1993 Fortune 500 – would have earned it a number 4 ranking. Buffett attributes the company's success to the managerial performance of Ralph Schey, Scott Fetzer's CEO.

But here's the somewhat surprising point. It's not because of any managerial gymnastics on Schey's point. It's because – as Buffett points out – Schey handles the basics extraordinarily well and doesn't allow himself to get diverted.

Schey, “Establishes the right goals and doesn't allow himself to get diverted.”

Buffett explicitly points out that this approach applies not only to the management of a business, but also to investing. Extraordinary things are not necessary to get extraordinary results. Yet, the temptation remains to complicate things. We allow ourselves to be pulled in a million directions, even more so today because of the unlimited potential distractions that the Internet provides.

If you want to beat the market, keep it simple. Decide what your goals are. Put in place a rational process to achieve them and then work hard.

“Before the gates of excellence, the high gods have placed sweat.” – Hesiod