Foresight - Warren Buffett

Information usage describes the information which is collected. Foresight is used to interpret the information. People & networks describes characteristics of individual employees and networks used by the organization to acquire and disseminate information on change. Organization describes how information is gathered, interpreted and used in the organization. Culture describes the extent to which the corporate culture is supportive to the organizational future orientation.

We can take Warren Buffet as an example. Warren Buffett’s Berkshire Hathaway Inc. was extraordinary by its performance because of perfect foresight of Warren Buffet. Investors didn’t see the foresight as a whole but some investors saw Buffett’s performance with foresight. We use this evidence to highlight the pitfalls of hindsight in the assessment of investment foresight. Berkshire Hathaway’s stock has been extraordinary performance. A share of Berkshire Hathaway stock could have been bought for $18 on May 10, 1965, the day Warren Buffett took control of the company (Lowenstein 1995). That share could have been sold for $71,000 on December 31, 2000. The annualized return of Berkshire Hathaway’s stock during the period was 26.18 percent, more than double the 11.69 percent of the S&P 500 Index. Samuelson (1989), who called Buffett a genius, also noted the difference between foresight and hindsight: “When Berkshire Hathaway, Buffett’s fund, bought into the Washington Post, it was anything but clear that this would turn out marvelously well”. Samuelson did not trust his foresight at the time he wrote this comment any more than he had trusted his foresight before. Although he offered neither a recommendation to buy nor a recommendation to sell shares of Berkshire Hathaway, Buffet understands well the distinction between hindsight and foresight. Lowenstein, writing in his biography of Buffett about the events surrounding the increase in the DJIA beyond 1,000 in early 1966 and its subsequent decline by spring, noted that some of Buffett’s partners called to warn him that the market might decline further.