The Oracle of... Monkton?
There are very few wine critics who have attained the success of Robert Parker, Jr. Unlike most critics, Mr. Parker achieved his success by following Foolish principles of diligence, independence of thought, integrity, and general distaste for the traditional way of doing things.
By Ethan Haskel (TMF Cormend)
December 6, 2000
Most Fools are well aware of the well-documented success of Warren Buffett. Buffett, "The Oracle of Omaha," is perhaps this century's greatest investor. But fewer are likely to be familiar with Robert Parker, Jr., a different type of oracle. On the surface, Parker's story has little relevance to that of successful investment analysis. Yet, the roots of Parker's and Buffett's achievements are closely related.
Far removed from Wall Street, Robert Parker inhabits the realm of the grape. Parker currently is one of the most prominent wine critics in the world today. He got there by being very, very Foolish.
I'll admit that I know little about fine wines, and until recently I knew even less about Robert Parker. Virtually all my information is obtained from an extensive cover story by William Langewiesche in this month's The Atlantic Monthly, titled "The Million Dollar Nose."
Both Parker and his nose grew up in rural northern Maryland, about a half hour drive from my hometown of Baltimore. Parker still lives near his childhood home, in a small town called Monkton. Trained as a lawyer, he later discovered his acute gift of smell, and a keen ability to evaluate wines and recall their essential qualities many years afterward.
As a latecomer to the field of oenology, Parker doesn't have sterling wine critic credentials. Unlike traditional revered British critics, for example, he never earned a diploma known as the Master of Wine (M.W.). Such a diploma requires, among other things, arcane knowledge of little-known vintages.
To form his opinions of wines, Parker stands in his Monkton office and tastes them. And tastes them again. About 10,000 wines a year. It's a brutal job, I know. After tasting the wines, Parker rates them numerically, then writes his succinct opinions in his bimonthly newsletter, The Wine Advocate.
The world is full of wine critics. But until Parker came on the scene 22 years ago, the wine world was inhabited by the Wise. It was controlled by wealthy aristocratic families in France, epitomized by the Bordeaux region. Traditionally, a Bordeaux was judged more on its terroir, a term roughly equivalent to pedigree, rather than on its true merits. The top chateaux inherit the "classified growths" of grapes, a nineteenth-century marketing tool described as "a more or less permanent ranking according to traditional perceptions of its relative prestige and quality."
But Parker doesn't give a hoot for a grape's lineage. His ranking system is pretty straightforward. He samples the wine, then decides if it tastes good. "What I've brought is a democratic view. I don't give a [darn] that your family goes back to pre-Revolution and you've got more wealth than I could imagine. If this wine's no good, I'm gonna say so."
Wine qualities are admittedly subjective, so Parker takes great pains to avoid conflicts of interest. Unlike many critics, he doesn't accept gifts of wine or travel accommodations. His newsletter doesn't accept advertisements. He doesn't speculate in wine or take consulting jobs.
Since many wine critics are financially dependent on the largesse of the wineries they review, there's often a strong disincentive to publicly disparage an inferior-tasting wine. Many critics tend to couch their reviews in language described as "varying degrees of 'wonderful.' " But Parker at times has panned even the most reputable wineries. As such, he's made his share of enemies. There are areas in France where Parker fears to tread.
"The Million Dollar Nose" staked his claim in wine circles in the early 1980s when, against the prevailing opinion, he extolled the virtues of the 1982 Bordeaux wines. His opinion was shortly vindicated, and since then Parker's grown to become one of the most influential critics in the world. His "democratization" of wines has fueled a veritable revolution, enabling small, independent vintners to thrive, often at the expense of the large wineries.
Substitute the term "investment analyst" for "wine critic," and you'll realize that Parker's success is based on very Foolish principles.
Too many investment analysts own the proper credentials (translate: M.B.A., and positions in large, venerable firms), but can't independently assess the companies they're paid to evaluate. Their opinions are often shaped by following the crowd. They downgrade stocks after their stock price has fallen, and upgrade them after they've risen.
Because their firm's future ability to underwrite stock offerings is often dependent on maintaining good ties with management, many analysts are loathe to criticize a company or issue sell recommendations. Instead, ratings are couched in terms such as "market perform" or "hold" -- varying degrees of wonderful, if you may.
Like most traditional wine critics, the investment world relies heavily on terroir, or pedigree, to thrive. Traditional brokers work for the top chateaux (translate: investment firms), clinging to an outdated compensation system that relies on trading activity to achieve income. Until recently, these top chateaux were successful in obtaining access to information not readily available to all, through selective disclosure and private conference calls.
And, like the well-established wineries, there is a strong financial interest to maintain the status quo, to discourage individuals to seek information on their own. The venerable investment houses would much rather we rely on the traditional system of trusting in their "classified growths."
Diligence, independent thinking, integrity, and disregard for the status quo. Warren Buffett, working out of Omaha, Nebraska, has used these qualities to enrich himself and many others. Since 1978, a share in his holding company, Berkshire Hathaway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BRK.A)") else Response.Write("(NYSE: BRK.A)") end if %>, has climbed from $152 to $66,000. Robert Parker's success, built on similar principles, has paralleled Buffett's career. Writing from Monkton, Maryland, far removed from traditional centers of the wine powerhouses, Parker has seen the circulation of The Wine Advocate climb from 600 to 40,000 since 1978. We should all be so Foolish.
Beating the S&Pyear-to-date returns
(as of 12-05-00):
Bank One <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ONE)") else Response.Write("(NYSE: ONE)") end if %> +14.0%
PepsiCo <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEP)") else Response.Write("(NYSE: PEP)") end if %> +26.5%
Ford Motor Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %> -11.4%*
Bank of America <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %> -13.9%
Fannie Mae <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FNM)") else Response.Write("(NYSE: FNM)") end if %> +33.2%
Beating the S&P +9.7%
Standard & Poor's 500 Index -6.3%
*Includes Visteon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VC)") else Response.Write("(NYSE: VC)") end if %> spin-off
Compound Annual Growth Rate from 1-2-87:
Beating the S&P +23.4%
S&P 500 +16.2%
$10,000 invested on 1-2-87 now equals:
Beating the S&P $184,100
S&P 500 $80,100
