On August 30, 1930, Leila Buffett brought into the world a baby who would one day be admired as the “Oracle of Omaha.” The father, Howard, was a stockbroker and would eventually gain notoriety in his own right as a Congressman.
The child, Warren Edward, wasn’t the couple’s first, and he wouldn’t be their last. Early on, he demonstrated the thrift and ingenuity by which he has developed a legendary reputation. He saw a ready opportunity for profit if he would only serve as a distributor of Coke from his grandfather’s grocery store.
A six-pack cost a quarter, so Buffett gained a discount by buying in bulk and then resold each bottle for a nickel, gaining a tidy 20% profit when he sold off the full contents of the six-pack. He was always ambitious, resourceful and creative. He demonstrated his work ethic and entrepreneurial instincts by delivering newspapers and selling lemonade.
As the story goes, his first investment taught him an important lesson about patience, a character quality that has become a hallmark of his investing philosophy. He bought three shares for $38 each, a significant sum for anyone in 1941. He agonized when the share price dropped, and when it rebounded to $40, he got out, selling off his shares. Soon enough, the share price spiked to $200.
If only he had waited… After graduating from high school in 1947, where his high school yearbook photo caption proclaimed, “loves math; a budding stockbroker,” Warren Buffett attended the Wharton School of Business at the University of Pennsylvania for two years. When his family relocated to Omaha he went to the University of Nebraska.
In early 1950, he applied to Harvard Business School. He was rejected as being too young. He was greatly dejected. He joined Columbia’s Business School where Ben Graham and David Dodd taught.
Today, investors worldwide adore and idolize him for his fiscal prudence and skill in value investing. His personal frugality impresses all. Since 1970, the year of its inception, he is the largest shareholder and CEO of Berkshire Hathaway.
Warren Buffett’s Inspirations
There are umpteen lists of books recommended by Warren Buffett out in cyberspace. There are many common denominators. Perhaps Buffett’s most basic advice related to reading, though, is simply to do it. He says, “Read 500 pages a day. That’s how knowledge works. It builds up, like compound interest.
All of you can do it, but I guarantee not many of you will do it”. In his case, this isn’t just empty advice. The same article reports that by the time Buffett was ten years old, he had read every book about investing that the Omaha public library held—twice. With that habit in mind, here are two groups of books that Buffett identifies as important.
The first set consists of books that impacted his own development. The second set are more recent offerings that he recommends for aspiring investors and financially minded folks. In either case, such lists are commonly found with a simple internet search. Influential books
3). Security Analysis by Graham and David Dodd (especially the 1934 edition, with notes by co-author David Dodd in the margins)
4). Common Stocks and Uncommon Profits by Philip Fisher
5). One Thousand Ways to Make $1000 by F.C. Minaker
1). The Clash of Cultures by John C. Bogle
2). Stress Test by Timothy Geithner
3). Jack Welch’s Jack: Straight from the Gut
4). The Outsiders by William Thorndike
5). Graham Allison’s Nuclear Terrorism
As much as Buffett sought the mentorship of books and their authors, he also profited greatly from the mentoring relationships he had early in his career. No individual, other than his father, had a greater impact than Benjamin Graham.
Warren Buffett was greatly impressed with Graham’s profound investment principles like “intrinsic” business value, which is a measure of a business’s true worth independent of the stock price. When Warren discovered that his mentor was the chairman of an insurance company called GEICO, he offered to work for the Graham partnership for free. This offer was turned down.
A shocked Buffett wanted to know why. The reason Graham told him was that he wanted his firm to be Jewish-friendly and Buffett wasn’t a Jew. In order to conquer his intense fear of public speaking, Warren took a $100 course from Dale Carnegie in public speaking that greatly impacted his subsequent success and changed his life drastically.
He started his teaching career at the University of Omaha. To his great joy, his long-awaited dream became a reality when Ben Graham called one day, inviting him to join his company. His key to success was his persistence. Buffett kept on pitching ideas to his mentor until he eventually hired him.
Warren Buffett Lessons For Success in Business
1. Invest in yourself
For him success in business has little to do with stock portfolios or profit and loss statements. He has often said, “Invest in yourself.” By this, he means:
First, you must improve your communication skills, both verbal and written.
Then your value increases by 50%. Your ideas will now reach others.
Second, it’s hugely important to invest in yourself. Start taking greater care of your mind and body when still young.
Third, have the right role models. Associate yourself with others who are better than you. Jack Bogle, the founder of the index fund is Buffett’s real hero.
Fourth, the feeling of love. The amount you are loved is the ultimate measure of success in life. When you are loved even in your old age, you’re a success. If you don’t have it, then your life is a disaster. The more you are ready to give love away, the more you get.
2. Time management
The investment icon Warren Buffett owns more than 60 companies with a net worth now over $70 billion. The majority of Warren Buffet’s wealth is tied up in Berkshire Hathaway’s investment portfolio. He is an expert at optimizing his time.
For instance, he bought Nebraska Furniture Mart that was built from scratch by Rose Blumpkin. Buffett expressed his desire to purchase the store and asked her if she was willing to sell it to Berkshire Hathaway. She gave her consent. The deal was sealed with a handshake and a one-page contract drawn up for $60 million.
3. Investment philosophy
The world’s greatest money manager is a consistent and conscientious investor and follows a living investment philosophy. His modus operandi is as follows:
- He invests in quality businesses and is not lured by stock symbols.
- He doesn’t have short-term obsessions and invests for at least ten years.
- He meticulously scans thousands of stocks before choosing an ideal bargain.
- He carefully calculates how well management is managing its money.
- He always stays away from “gleaming” stocks.
- He readily identifies a good investment and knows how to work it out.
- He doesn’t blindly follow an academic model, but personally calculates how much money he can make.
- He always waters the crop after removing the weeds.
- He puts knowledge into practice and buys at his price.
- He selects great companies in minutes.
- He avoids all wealth-destroying companies.
4. Investment rules
Buffett advises investors to invest in stocks steadily over time and cautions them not to try to trade stocks. Here are 10 easy strategies or rules to guide investment decisions for long-term success.
Rule No. 1: Never lose money.
Rule No. 2: Don’t forget the first rule. Study the facts well and then invest.
Rule No. 3: Be fearful when others are greedy.
Rule No. 4: When you make money in the stock market, reinvest the profits.
Rule No. 5: The intrinsic value of a stock should guide your investment.
Rule No. 6: Invest in the business you understand.
Rule No. 7: Don’t borrow to make investments.
Rule No. 8: Avoid taking unnecessary risk.
Rule No. 9: Thumbs up for long term investment in equities.
Rule No. 10: Let your favorite holding period be forever.
His important piece of advice: It takes 20 years to build a reputation and five minutes to ruin it. So be cautious with every step you take.
5. Unconventional work schedule
Buffett minimizes busyness in his schedule because he:
- Doesn’t talk to analysts.
- Seldom talks to the media.
- Keeps away from industry events.
- Has lived in Omaha, Nebraska throughout his career.
- Hardly attends an internal meeting, unlike typical CEOs.
He prioritizes activities and follows scheduling to minimize waste of time. He holds that the real threat to time are those activities that keep you busy. You appear to be working hard, but are not productive.
This strategy followed by Warren Buffet holds good for all areas of life like investments, relationships, priorities, and technologies. As such, he meticulously follows the 20-80 rule (The Pareto Principle). His process for doing so is as follows:
- He notes down his top 25 goals on a piece of paper.
- He prioritizes the top 5. This is 20% of the original 25.
- He ruthlessly cuts out everything else. The remaining 20 are now on his “avoid-at-all-costs” list.
- His total focus and attention rest on succeeding with his top 5.
- 80% of his results typically come from these top 5 goals.
6. Works with the right people
He works only with those with whom he wishes to work forever. Many of his team members have been with him for decades. As a manager, he disregards form and convention and sticks to business principles that are old, simple and few. The qualities he looks for in his managers are that they are likeable, honest and goal-driven.
7. Keeps things simple
It’s his norm in his personal life and professional life. He keeps all complexities at bay. One way that he expresses simplicity is by holding onto his investments for extraordinarily long periods of time. In this way, he need not constantly research new investments as he switches from one to the next. He finds what he knows will work and then sticks with it.
8. Focuses on quality and not quantity
He follows a policy of portfolio concentration. It is his practice to make a few well thought-out investments per year. He uses value-focused thinking in both short and long terms.
9. Attitude towards technology
He isn’t overwhelmed by or enamored with the technological revolution. He just keeps things simple. For example:
- He doesn’t have a computer at his office.
- He has never used a stock ticker.
- He doesn’t have a smartphone.
Warren Buffett’s Daily Routine
The Buffett formula is going to bed smarter than when you woke up.
He generally wakes up at 6:45 a.m. and reads six newspapers each day, namely: The Financial Times, The Wall Street Journal, USA Today, The New York Times, American Banker and The Omaha World-Herald. He retires to bed early and sleeps for eight hours.
Buffett’s hobby is playing bridge 12 hours a week. This game is the best intellectual exercise of weighing gain-loss ratios. The game requires good strategy, tactics and a lot of patience. You find yourself in new situations every few minutes. You must do mental calculations all the time.
Buffett’s lifelong hobby is reading. A book is a mine of knowledge. It enriches you, keeps your mind sharp by creating new connections and accumulating new information, and helps build awareness of the world. He is a learning machine. He always sets aside five hours a day for reading, learning and building knowledge.
He eats like a kid. He starts the day with breakfast from McDonald’s. Throughout the day he consumes a lot of soda like Cherry Coke or Diet Coke. He drinks 5 cans of soda a day. He likes fast food and dislikes vegetables.
He attributes his good health to being happy and having a good mind. He exercises to compensate for his unhealthy eating habits. He recognizes that exercise and other forms of self-care are a necessary part of life because “That’s the only car you’re ever going to have in your life”.
Along with self-discipline, patience, focus, consistency and persistence, he possesses the divine virtue of self-compassion. Self-compassion can increase willpower, motivation, and your overall ability to recover from failure. You are more likely to be more optimistic, happy and contented. Follow your passion to have your dream career. Doing what you really love is a major contributor to true happiness in life. So, figure out your passion very soon.
His powerful habits that shaped his life are listed below.
- He enjoys researching and investing money where it will earn the greatest returns.
- He has a sharp and impressive memory.
- He doesn’t use a calculator, computer or smartphone.
- He is wise enough to work within his circle of competence.
- He is open, unconventional and his lifestyle is his choice with minimum stress.
- He is empathetic towards the poor.
- He attributes success to environmental factors rather than personal traits.
- He is extremely rational, witty, humble and friendly and always keeps his emotions in check.
- Always thinks about things in the long term and reaps more benefits.
- Always assesses risks before venturing and knows when to quit.
- He follows the 10,000-hour rule. According to this rule, you can master any skill with 10,000 hours of regular practice.
- On intellectual subjects, he talks with great intensity and speed.
Incredible facts about Warren Buffett
You’ll find the following facts about Warren Buffett incredibly surprising.
- He continues to live in a five-bedroom house he bought for $31,500 in 1956.
- Warren Buffett drives the 2014 Cadillac XTS . When he entertains visitors in town for business, he picks them up himself, and he has been known to feed them at McDonald’s. He even used coupons once to buy food at McDonald’s for his pal, Bill Gates.
- He learned the ukulele to impress his first wife, and he has played a duet with Bon Jovi.
- He dislikes large parties and small talk.
- Nearly 94 percent of his wealth was earned after he turned 60.
In 2010, in collaboration with Bill Gates, he started The Giving Pledge, asking billionaires worldwide to commit to donating half their wealth to charitable causes. He is committed to giving away over 99% of his wealth to philanthropic causes.
Approximately 83% of that will go to the Bill & Melinda Gates Foundation. So far he has donated $35 billion.
Berkshire Hathaway made a momentous announcement of its Charitable Giving Program by which each shareholder could designate charities which would receive $2 for each Berkshire share the shareholder owned.
Many of us are only growing old each day. Warren Buffet, on the other hand, is growing in wisdom, maturity and wealth as he grows older. He is a glorious example and a role model to emulate.