- Warren Buffett has a favorite riddle about a dog that he attributes to Abraham Lincoln.
- Buffett claims the answer to the riddle may help you make better investing decisions.
- Newcomers and veterans to investing may find it helpful when making important choices.
Whether you’re veteran or a newcomer to the industry, anyone who has questions about the world of investing will, at some point or another, look to Warren Buffett for guidance.
The Berkshire Hathaway CEO’s fortune is valued at $96 billion, according to Forbes.
The “Oracle of Omaha” is among the world’s richest people on the planet just through buying and selling stocks.
Sometimes, however, the billionaire’s advice isn’t in plain sight — you have to dig deep into his anecdotes and interviews to find hidden pearls of wisdom.
One of his favorites comes in the form of a timeless riddle from Abraham Lincoln, according to CNBC Make It, and it may help you find more success both in the world of investing as well as in day-to-day life in life.
The dog riddle
Though Buffett more recently explained in an annual shareholder letter why he loves this riddle, it’s not the first time he’s written about it.
“Managers thinking about account issues should never forget one of Abraham Lincoln’s favorite riddles,” Buffett wrote about the same riddle in Berkshire Hathaway’s annual letter in 1992.
In his more recent shareholder letter, he explained that it stuck with him since he first read it.
“Abraham Lincoln once posed the question: ‘If you call a dog’s tail a leg, how many legs does it have?'” Buffet wrote.
Why the answer to the riddle may help investors
There’s a reason it may be useful to bear the riddle in mind when making big decisions in investing, as well as in other areas of life.
It serves as a reminder of something rather simple, but that we often forget about — Lincoln’s riddle underscores the importance of distinguishing between illusion and fact.
The answer to the riddle is “four.”
“[He] then answered his own query: ‘Four, because calling a tail a leg doesn’t make it one,'” Buffett wrote in his annual shareholder letter.
The message he was trying to convey is that defining something differently won’t change reality. It’s useful to be wary — and often skeptical — of anything that may seem too good to be true.
Buffett went on in his letter to reflect on bankers and CEOs.
Often, they may present their “earnings” in a way that isn’t entirely transparent, where costs, financial gaps, or information that may harm the companies they represent may be omitted.
One key piece of advice he offers is to do your homework: never rely on a single source but, rather, collect several.
It’s easy to trust experts but you should do some digging to truly and objectively understand their background and, ultimately, to find out if they can really be trusted.