Warren Buffett, CEO of Berkshire Hathaway, billionaire, conglomerate king, philanthropist, and the greatest investor of all time. There are numerous lessons you can learn from “The Oracle”. Luckily, he believes that success and great investing doesn’t require too much intelligence (so we’re both in luck). Here are some quotes and lessons we can learn and incorporate:
1. Be King, not the Jack-of-all trades
In various interviews, the legendary investor states:
“You only have to do a very few things right in your life, so long as you don’t do too many things wrong.”
You don’t have to be the best at everything, just one or a few is good enough. Concentrate on your “circle of competence” and know your limitations (be honest and acknowledge what you do not know). In times, concentration is better than diversification.
“Diversification is protection against ignorance. It makes little sense if you know what you are doing.”
– Warren Buffet
2. Make time your friend
Patience (young grasshopper…?). In some cases, it just takes time for good things to unfold. This can be reflected in his Buffett’s long term stock positions; the results in the long-run takes time to come (or else it would be called the short run).
Here’s the magic of patience coupled with a great stock: If you had invested $1000 in Berkshire Hathaway (BRK-A, Buffett’s company) in 1964, and patiently waited 50 years until 2014, you would have $18,261,630 (a whoopin’ 1,826,130% gain).
“No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”
Learning and growing takes time, remember; the expert was once a beginner.
3. Force yourself to form good habits
“Chains of habits are too light to be felt, until they are too heavy to be broken.”
– Warren Buffett
Make it a routine to do small tasks that will contribute to your long term goals. Buffett spends much of his everyday time reading and over the years has built an invaluable habit that contributes to his learning. I suggest the book: The 7 Habits of Highly Effective People by Stephen R. Covey.
4. Learn to value
One of the greatest skill that an investor can develop is the ability to estimate “true” value. Whether it’s a stock, an opportunity or even a relationship, being able to know the true worth of something is always in your benefit.
Buffett states that long ago, his mentor, Ben Graham taught him:
“Price is what you pay. Value is what you get.”
“Whether were talking about socks or stocks, I like buying quality merchandise when they’re marked down”
(good quality at a discounted price; one of the principles of margin of safety)
5. Surround yourself with people who are better than you
One of the best ways to improve your own skill set is to surround yourself with others whom are better than you, and whom you admire. Buffett went straight to work for his mentor, Benjamin Graham, without even knowing what he was gonna get paid. Warren says:
“People always ask me where they should go to work, and I always tell them to work for whom they admire most.”
Here’s an exercise: Think/Pick out people you admire the most (try not to pick yourself) and think of the qualities that make up that person. Now pick out someone you cannot stand and notice the qualities that turn you off.
“The qualities of the one you admire are traits that you, with a little practice, can make your own, and that, if practiced, will become habit-forming.”
– Warren Buffett
It is equally important to pick out great figures and heroes to look up to, for they will provide you with quality guidelines and inspiration for continual self-improvements.
6. Honesty and Integrity are essentials
“Honesty is a very expensive gift, don’t expect it from cheap people.”
It is great to associate yourself with intelligent and hardworking individuals, as it may bring out the best of you, but if they lack honesty and integrity; you may not know when that knife goes in your back.
“…when you hire someone you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. You think about it; it’s true. If you hire someone without (integrity), you really want them to be dumb and lazy.”
– Warren Buffett
It is important to associate yourself with the right people, notably honest ones; so choose your close ones carefully!
7. Always remind yourself of your long term goals
In everything you do, try to see how it will affect your long term goals. Buffett invests in quality stocks at discounted prices for the long term:
“Our favorite holding period is forever.” -Warren Buffett
You do not have to make your long term vision forever, but always plan for it; making sure you’re taking the right steps to reach it.
8. Investing in yourself is invaluable
“The most important investment you can make is in yourself.”
– Warren Buffett
At a young age, Buffett discovered investing and spent much of his time reading books about investing at the library. Knowledge is one of the best investments you can make for yourself. But it’s not the only one, your health is crucial to the equation (arguably even more important), The Oracle says:
“Imagine that you had a car and that was the only car you’d have for your entire lifetime. Of course, you’d care for it well, changing the oil more frequently than necessary, driving carefully, etc. Now, consider that you only have one mind and one body. Prepare them for life, care for them. You can enhance your mind over time. A person’s main asset is themselves, so preserve and enhance yourself.”
“Rule No.1: Never lose money.
Rule No. 2: Never forget rule number 1.”
I would strongly recommend reading “The Intelligent Investor” by Benjamin Graham; it covers the important lessons of value investing, intellectual framework in investing, margin of safety and much more! But don’t take my word for it, Buffett recommends it, as he says that stumbling upon that book was one of his luckiest moments in life.