“Life is like a snowball, all you need is wet snow and a really long hill”, this quote epitomizes Warren Buffett and how he lived his life. Now can we learn a thing or two from Warren Buffett? I definitely hope so! This post is a bit different than what I typically write on this blog. It won’t be a post on analytics and marketing optimization, but rather comments and excerpts from Warren Buffett’s biography. I just recently finished reading his biography – “The Snowball – Warren Buffet and the Business of Life” by Alice Schroeder. I am actually very proud of this accomplishment :), 834 pages! (I don’t remember ever carrying around a book that heavy!). I took some notes and marked a number of quotes that struck a cord with me that I thought to share with our blog readers.
The following excerpts and comments are in no particular order and in a way are fragmented. I just grouped them in terms of what I gathered as Buffett’s perspectives on business, his work ethics, some personal traits and views on philanthropy as well as interesting factoids.
If you want all the details and really want to enjoy the ride, buy the book and read it in its entirety. But meanwhile, check out these excerpts from The Oracle of Omaha, the professional investor that became one the richest men alive who spent his entire life accumulating wealth and then gave most of it to charity as he was convinced that “the one who dies rich, dies disgraced”.
- Buffett regarded rationality and honesty as the highest virtues
- He is very focused and always stays within his circle of competence
- There was nothing he hated more than selling people investments that lost them money, he couldn’t stand disappointing people.
- One of his friends, Peter Kiewit, another Buffett prototype, said: reputation is like fine china, expensive to acquire, and easily broken”. If you are not sure if something is right or wrong, consider whether you’d want it reported in the morning paper.
- He was bloodhound for anything free or cheap. He was known for his frugality and tightfistedness (once made a deal with a local newsstand to buy week-old magazines at a discount!). When he got a car, he only washed it when it was raining, so the rain could do the manual labor of rinsing
- He was an “Inner Scoreboard” type of person: he said “would you rather be the world’s greatest lover, but have everyone think you are the world’s worst lover? Or would you rather be the world’s worst liver but have everyone think you’re the world’s greatest lover? Warren’s father was 100% Inner Scoreboard person and “taught him how life should be lived”
Buffett’s Perspective on Business
- Buffett had a fascination with business as a puzzle worth spending a lifetime to solve
- He pondered the reasons for failure as a way of deducing the rules of success
- “It is always a mistake to pay too much for something you wanted. Impatience is the enemy“
- On investing in high tech: he had a long standing bias against technology companies (he felt they had no margin of safety)
- Ideal business? The one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.. there are very very very few businesses like that … we can move that money around from those businesses to buy more businesses
- He mastered the art of handicapping which is based on information. The key is to have more information that then other guy, then analyzing it right, then using it rationally
- He warned investors that trees don’t grow to the sky, but he never stopped from climbing as fast as he could
- Three roles interested him the most: the relentless collector, expanding his empire of money, people, and the influence. The second was the preacher, sprinkling idealism from the lectern. The third was the cop, foiling the bad guys
- “Cash combined with courage in a crisis is priceless”
- Hard working: it was common in the book to read “I got up at 4:30 in the morning to do such and such”
- Responsible from a young age: as a kid, he delivered newspapers (two routes, in early morning and in the afternoon). He said “I paid my own bills monthly, always on time, I always showed up to deliver the papers”
- Ambition: at 14, he fulfilled his dream of saving $1,000, which was inspired by the book “One Thousand Ways to Make $1,000” (this is a lot of money in the early 1940’s)
- Learning/Reading: when they moved to Washington DC (his father was elected as a congressman), the first thing Warren asked for was access to the library of congress and specifically hundreds of books on horse handicapping, then he would read them all (so he learned how to make money in the horse racetrack). He learned two rules that apply to investment as well “no one goes home after the first race, and you don’t have to make money back the way you lost it”
- More reading: to do his detective work he used the Moody’s manuals, and would sit down to read/research/take notes from files that dated forty or fifty years
- Intensity: looked for partners employees who shared a mutual obsession “Intensity is the price of excellence“
- His favorite concept: stewardship — the lens through which he viewed duty, moral obligation and the responsibility that went along with a position of trust
- People: Dale Carnegie said to “give people a fine reputation to live up to” Buffett learned how to Carnegize heroic accomplishments out of his people. He would sound like “you’re so good at what you do, this won’t take you any time at all, and it won’t cost anything to do.”
- He couldn’t bear conflicts and broken relationships
- He said “we should have people to match our principles, rather than the reverse, but I found out that wasn’t so easy”
- Buffett held strong views on specialization: when asked to donate, his first choice, always, was to donate ideas that would get other people to give money (never labored in volunteering directly for causes no matter how urgent and important). He could use his time more efficiently thinking of ideas and making more money to write bigger checks. He felt no inner conflict about how he spent his time.
- June 26, 2006: Buffett announced that he would give away 85% of his Berkshire Hathaway stocks, worth $37 Billions, to a group of foundations over a number of years 5 out of 6 shares would go to the Bill and Melinda Gates Foundation (to reduce inequities and improve lives around the world in the areas of global health and education
- He didn’t want his children to live on Easy street because of Berkshire Hathaway
- Quoting Andrew Carnegie, “one who dies rich, dies disgraced“. Agreed with Bill Gates that the measurement of accomplishment should be “how many lives you can save with a given amount of money”
- Luck: Buffett always said that he won the “Ovarian Lottery” (as he always credited his success to luck): for example, born in the 1930 (didn’t go to war), he had intelligent parents, he was wired in a way that paid off in this particular society (where capital allocation wiring is important) went to a decent school,etc.. (note: Malcolm Gladwell mentioned a similar thing about Bill Gates and others in his book Outliers”
- Asked about his greatest success: “measure your success by how many of the people that you want to have love you actually do love you .. the trouble with love is that you can’t buy it”
- Advice to students: “start a little bit ahead of the game, it’s so much better than starting out behind the game, and credit cards really get you behind the game”
- He read every biography he could find of people he admired looking for lessons to be learned. Ruled out paying attention to almost anything but business so that he can focus on his passion
- “People ask me where they should go to work, and I say work for the whom you admire the most. Do what you love, and work for whom you admire the most, and you’ve given yourself the best chance in life you can”
- One of his favorite quotes, from Martin Luther King’s speeches: “the laws are not to change the heart, but to restrain the heartless“
- “A football player shouldn’t inherit the starting quarterback position from his father, a former start quarterback. Unearned position and inherited wealth drove Buffett crazy, offended his sense of justice, and disturbed his sense of the universe’s symmetry
- “Around country clubs, you hear people talking about the debilitating aspects of a welfare cycle (food stamps, etc.) and how we are perpetuating the cycle of dependency. These same people are leaving their kids with a lifetime supply of food stamps and beyond. Instead of welfare officer, they have a trust fund officer. You shouldnt’ consume more than you produce”
- “All along I felt money was just claim checks that should be back to society. I am not an enthusiast for dynastic wealth, particularly when th alternative is 6 Billion people we’ve got much poorer hands in life that we have , getting a chance to benefit from the money“
- As his father’s health declined, Warren asked his father to remove him from his will to increase the share left to others (amount of $180,000)
- Once asked by Bill Gates Sr. “what factor did people feel the most important in getting to where they’d gotten in life? And he said “focus“, and Bill Gates said the same thing (and they both shared the same intensity)
- “I follow very simple rule when it comes to food, if a 3-year old doesn’t eat it, I don’t eat it”
- When asked about the business of life: “if a genie appeared and gave you the car of choice (and you love cars), but there is a catch, the is the last care you get in your life. What will you do with it? You’ll read the manual five times, keep it in the grange, fix the least little dent, fixed right away, etc.. ” this is exactly the position you in concerning your mind and body. You only get one mind and one body, and it’s got to last a life time… it’s what you do right now that determines how your mind and body will operate ten, twenty, thirty years from you”
- On Taxes: “I’d have a higher tax at the higher levels of wealth. Passing wealth form generation to generation flies in the face of a meritocratic society”
So here you have it, go out and find some wet snow, a very long hill, and create your own snowball!!!