Warren Buffett Generated Double The Market’s Returns—Until Regulation Changed The Game
- Finance
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- 4 minutes read
Social Capital founder Chamath Palihapitiya highlighted a striking pattern in Warren Buffett‘s investment performance, revealing how regulatory changes fundamentally altered returns for even the world’s best investors.
Speaking with Jason Calacanis on the All-In Podcast episode released Saturday, Palihapitiya shared data showing that Warren Buffett generated twice the market’s returns before the implementation of Regulation Fair Disclosure in 2000.
“Markets thrive when there’s asymmetry,” Palihapitiya stated, explaining how information advantages drove superior performance.
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Reg FD prohibited corporate executives from selectively disclosing material information to individual investors, a practice that was not illegal before 2000.
Palihapitiya described how investors previously operated through “networks of information arbitrage,” with CFOs sharing undisclosed quarterly results in private conversations before such practices became illegal.
The Canadian-American venture capitalist stated that following the regulation’s implementation, Buffett’s performance advantage vanished.
“The minute that it became illegal and you had to basically act on the same edge as everybody else, his returns went to the market return. He generated zero alpha. In fact, he probably on the margins lost a little bit,” Palihapitiya said, describing Buffett as the single best investor in the world.
“This is what happens when you have information symmetry.”
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Palihapitiya used the Buffett example to explain how prediction markets will operate, arguing “billions and billions of dollars will be made in asymmetry.”
Photo: Shutterstock
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