This paper only starts in 1976, so it skips the first 20 years of Buffett's career when he used virtually no leverage and had his highest returns.
It also has problems with the classifications of his investments. It's a common problem for academic analysis of investing, if value investing works then I should be able to outperform solely buy purchasing stocks at low PE ratios, right? This doesn't work, so value investing "can't" work.
The truth is it's a skill. You have to be able to find businesses with long term competitive advantages selling at a substantial discount to their intrinsic value. You have to have the courage of your conviction through market cycles and not abandon your purchases even cheaper. You have to eliminate sources of bias in your analysis (Buffett won't look at it's price before he analyses a business so his valuation isn't affected). If you read Buffett there are a ton of things he does to limit bias in his job.
This is well covered by Charles Ellis: The stock market has changed dramatically since the 70s, when most money was invested with almost no information. Getting key information well ahead of the market was relatively easy. A lot of people made a lot of money then, until the amount of 'smart' money rapidly increased.
It's still possible to get better returns than average on the market: After all, most of congress does this. But the one way to do it is precisely like congress does, by having information that the market is unaware of.
This is what make people move money into venture capital: It's a way to invest into things most of the market is unaware of, and whee the number of players is small enough that it's still possible to get privileged information.
Buffet's current plan is only doable because he has access to more information, and has such a gigantic bundle of money that any effort to get an edge will be multiplies by investment size.
Where does the wealth of the richest people in the world come from? Tremendously risky bets, going heavily into a single, extremely successful venture that they had special access to. But what makes their ventures win, vs those of second players that did badly in the same industry? Non replicable things, distributed in a way you could call luck.
Isn't in general, before the Internet , making money in business was much easier, hence qualititavely different, and maybe skill played a bigger role then ?
It is, but it's similar to covering a start-up after their initial hockey stick growth. How to maintain growth is interesting, but definitely not the whole story.
It also has problems with the classifications of his investments. It's a common problem for academic analysis of investing, if value investing works then I should be able to outperform solely buy purchasing stocks at low PE ratios, right? This doesn't work, so value investing "can't" work.
The truth is it's a skill. You have to be able to find businesses with long term competitive advantages selling at a substantial discount to their intrinsic value. You have to have the courage of your conviction through market cycles and not abandon your purchases even cheaper. You have to eliminate sources of bias in your analysis (Buffett won't look at it's price before he analyses a business so his valuation isn't affected). If you read Buffett there are a ton of things he does to limit bias in his job.
None of this can be academically measured.