Warren Buffett's protégé warns of dangerous speculation in markets — and compares the meme-stock boom to the Dutch tulip bubble

• Warren Buffett's former sidekick warned speculators they risk heavy losses in her annual letter.
• Kanbrick cofounder Tracy Britt Cool compared the meme-stock boom to the Dutch tulip bubble.

Warren Buffett's protégé echoed the billionaire investor's warnings about rampant greed, blind speculation, and predatory salespeople in her second annual letter, published this week.

"Over the last year, we've seen a rise in speculation under the guise of investing, which is similar to having a friend who goes to the local riverboat casino to 'invest'," Tracy Britt Cool and her Kanbrick cofounder, Brian Humphrey, cautioned in the letter.

"While both speculating and gambling can produce great payoffs and a sea of endorphins, heartbreak is almost sure to eventually follow," the pair continued. "Memes and social media are modern inventions, yet our underlying human psychology hasn't evolved much since the Tulip mania of the 1630s."

"The siren song of promoters has just become more sophisticated at separating investors from their wallets," they added.

Buffett has struck a similar chord in letters and interviews over the years. The Berkshire Hathaway CEO has urged investors not to treat the stock market like a gambling parlor, place bets with borrowed money, or fall for the promises of shameless promoters.

Britt Cool joined Berkshire in 2009 as Buffett's financial assistant, and went on to chair the boards of several Berkshire subsidiaries and serve as the CEO of another one, Pampered Chef. She left the conglomerate to launch Kanbrick, a private equity firm that supports and acquires midsized businesses, and struck her first deal in 2020 with the purchase of Thirty-One Gifts.

A mentor's impact

Buffett's influence on Britt Cool pervades her latest letter. She trumpets America's bright outlook, underlines the power of compounding and the importance of a competitive moat, and emphasizes her goal of buying great businesses run by high-quality people.

Like the Berkshire chief, Britt Cool compares her acquisition hunt to waiting for the right baseball pitch to come, strives to explain complex ideas in simple terms, and emphasizes her long-term approach.

"Just like in musical chairs, eventually the music stops and buyers disappear," Britt Cool and Humphrey write, underscoring the risk of purchasing an asset hoping someone else will pay more for it in the near future. "We prefer finding companies that offer some margin of safety instead of hoping to find an empty seat."