What Buffett's 1973 Bet Still Teaches Us About Crashes and Compounding

Every few months, financial media obsesses over the latest move from Berkshire Hathaway. This quarter is no different. Headlines have lit up over Berkshire dumping its entire stake in an iconic fintech giant, the surprise concentration of its portfolio in artificial intelligence names, and the lingering mysteries about what he is buying next.

But the most useful Buffett story for everyday investors isn't a 2024 quarterly filing. It's a half-century-old one. In 1973, with markets falling and confidence shattered, Buffett quietly bought shares in The Washington Post Company. That single decision — and the patience that followed it — still explains more about how ordinary people build wealth than any portfolio shuffle the financial press will cover this year.

The 1973 backdrop: a market nobody wanted to touch

The early 1970s were brutal. The Nifty Fifty bubble was deflating, oil prices were about to shock the world economy, inflation was creeping into double digits, and the Dow would eventually lose nearly half its value through 1973–74. It was, in every emotional sense, the wrong time to buy shares.

That is precisely when Buffett did. Berkshire Hathaway accumulated a stake in The Washington Post Company for roughly US$10–11 million. Buffett's logic was almost embarrassingly simple: the business was worth several times what the stock market said it was. The Post owned television stations, a dominant local newspaper monopoly, and generated steady cash. Yet the share price reflected pessimism, not value.

He didn't time the bottom. The stock kept falling after he bought. It took years before the market agreed with him. But by the time he was finished holding (a stake Berkshire kept until 2014, when it was swapped in a deal with Graham Holdings), that initial investment had multiplied into a position worth more than a billion dollars.

Lesson one: crashes are when fortunes are seeded

It is no coincidence that Buffett's most famous winners — American Express in the 1960s salad oil scandal, the Post in 1973, Wells Fargo in the early 1990s recession, financials in 2008–09 — were bought when the consensus said "don't."

The Motley Fool Australia recently picked up this thread, arguing investors should "listen to Warren Buffett and load up on cheap ASX shares" when sentiment is poor. The framing is right, but the lesson is often misapplied. Buffett doesn't buy cheap shares because they are cheap. He buys good businesses when the market mistakenly prices them like bad ones. Those two things only look the same from a distance.

For Australian investors staring at recent volatility on the ASX 200, the Buffett discipline is to ask not "is this down a lot?" but "is this a business I'd happily own all of, at a price below what it is plainly worth?"

Lesson two: concentration, not diversification, builds the big numbers

Modern investing orthodoxy preaches diversification. Buffett's track record argues the opposite, at least for those with conviction and analysis to back it.

Yahoo Finance recently noted that 37.4% of Berkshire Hathaway's roughly US$330 billion equity portfolio sits in just three companies with AI exposure. That is not a diversified index portfolio. That is an enormous bet on a small number of carefully chosen ideas.

The 1973 Washington Post investment was the same blueprint. It wasn't one of 200 names. It was a meaningful slug of Berkshire's capital, in a business Buffett understood deeply (his mentor Benjamin Graham had served on the Post's board years earlier, and Buffett would later join the board himself).

For most retail investors, broad diversification through low-cost index funds is still the right default — Buffett has said as much, repeatedly, when advising people who aren't full-time investors. But the Buffett method, when followed by Buffett himself, depends on concentrating capital where the odds are best, not spreading it everywhere equally.

Lesson three: selling is harder, and more revealing, than buying

The recent headline that Berkshire has dumped its entire position in an iconic fintech name reminds us that even Buffett sells. And CNBC's coverage of "lingering mysteries" in the portfolio update hints that some recent buys are still being kept confidential under SEC rules.

The Washington Post is again instructive. Berkshire held it for around four decades. Most professional fund managers don't hold anything for four years, let alone forty. Buffett's superpower has never been picking the perfect entry; it has been refusing to sell good businesses for cosmetic reasons — volatility, boredom, or because something else looks shinier this quarter.

Conversely, when he does sell — as with the fintech exit — it usually signals a structural rethink, not a tactical trade. The discipline is symmetrical: slow to buy, slow to sell, but decisive when the thesis is broken or fulfilled.

Lesson four: time is the active ingredient

The single biggest reason Buffett's 1973 investment worked wasn't insight. It was duration. A $10 million investment that compounds for 40 years at, say, 12% per year becomes roughly $930 million — without any further capital added.

This is the part most Australians miss when they read about Buffett. Superannuation, our 11.5% employer contribution system, is one of the most powerful Buffett-style structures in the world: it forces small, consistent contributions over multi-decade horizons. The mathematical machinery is the same as the Post investment. The only variables an individual really controls are: how much they contribute, how reasonable the costs are, and whether they panic-sell during the inevitable 1973-style drawdowns.

What this means for an ASX investor in 2025

You are not going to outperform Buffett by guessing which fintech he sold or which AI name makes up part of that 37.4%. That information is already in the price by the time you read about it.

What you can borrow from him is the operating system:

The Berkshire portfolio will keep generating headlines — fintech exits, AI bets, mystery positions. But the most valuable Buffett trade for ordinary investors was placed in 1973, sat for 40 years, and required no special access, no algorithm, and no edge other than patience. That is the part worth copying.

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