What Can Warren Buffett Teach Us About Elon's Twitter Purchase?

Last week, news of Elon Musk dropping $44 billion to acquire Twitter dominated headlines. Of course, when one of the world’s richest men decides to buy the world’s loudest and most influential social media platform, the world is bound to take notice.

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But what does this have to do with Warren Buffet?

Warren Buffet often uses baseball to explain investing concepts, and his “no called strikes” analogy is particularly pertinent as we watch the Elon/Twitter saga unfold. According to Buffet, investing is kind of like baseball in that you receive pitches as a batter—or investment options as an investor—but it doesn’t mean you have to swing at them. If you don’t like the pitch, don’t swing. You can stand at the plate, with the bat on your shoulder, doing nothing but waiting for the perfect pitch.

In 1974, Buffet relayed this simple message of patience: “I call investing the greatest business in the world,” he says, “because you never have to swing. You stand at the plate; the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There’s no penalty except opportunity lost. You wait for the pitch you like, then when the fielders are asleep, you step up and hit it.”

It pays to wait for a great opportunity as an investor rather than risk striking out on inferior options. Just because the pitch is thrown, something presents itself as an investment option, doesn’t mean it’s a good one, and doesn’t mean you have to swing at it. In fact, not swinging (or waiting for the perfect pitch) gives you the chance to continue earning new returns while taking as little risk as possible.

Let the News Be News

So, what will happen with Elon? Twitter? The shareholders? Tesla? Is Elon going to be distracted? Will Tesla shareholders lose confidence? Who knows. 

When news like this comes out, news that shakes people up and garners our attention in the financial world, we don’t have to have an opinion. We don’t have to take action. It can just be news that is undoubtedly interesting to follow but doesn’t affect our well-laid plans.

The Importance of Doing Nothing

There are no limits to the number of investment pitches you see, unlike baseball. There’s no umpire there to judge the quality of the pitch, either. Passing one up or acting on it is entirely up to you. But in a world dominated by so much noise, it’s more critical than ever to recognize the importance of doing nothing.

When you open your inbox in the morning or turn on your television and see what’s going on in the world each day, remember that those headlines aren’t fat pitches. They are headlines designed to capture your attention and make money doing so. They should have very little (if any) impact on your investment decisions long-term.

If you’re itching to do something, do this:

• Focus on what you can control
• Know what you own
• Understand how your holdings are relevant to the goals of your long-term portfolio

If you don’t like a pitch, don’t swing.