Lessons from Warren Buffett

Warren Buffett has always been a character that has fascinated me, a man that it worth over $30billion yet still lives in the same modest house he bought in 1958 and pays himself less than an MP, a man that counts Bill Gates as a close friend but likes nothing more than a night in playing bridge, eating hamburgers and sipping diet coke.  Following my reading of his authorised biography ‘The Snowball’ written by Alice Shroeder I have listed some of the key points I have taken from his life:

  • He always said you should “praise by names, critizise by category”
  • He was fond of Bertrand Russell’s quote “Most men would rather die than think”
  • He never made a promise he couldn’t keep
  • He delegated to the point of abdication
  • He never borrowed more than 25% to invest in something
  • He really, really didn’t like debt
  • In High School he was earning more money than his teachers thanks to his little money making enterprises
  • He was not a “joiner of things”
  • His sister, grandmother and aunt all had mental health problems and Buffett constantly checked his own mental health although he felt that insanity mostly ran on the female side of his family.
  • He always thought of money in terms of the return of capital laid out
  • He definined his specialised skills as thinking and making money

Also interesting to me was the method he employed to make his fortune which followed a relatively predictable course:

  1. Estimate an investments intrinsic value
  2. Handicap its risk
  3. Buy using margin of safety
  4. Concentrate
  5. Stay in the Circle of Competence
  6. Let it roll as compounding interest does the work

Buffett always tried to find managers for his business who were obsessed perfectionists and then he ‘Carnegised them with attention and admiration”.

One quote I particuarly liked was “lose money for the firm and I will be understanding.  Lose a shred of reputation for the firm, and I will be ruthless”.  Another favourite is “Intensity is the Price of Excellence”.

Buffett believed that the most important factor in his success was “FOCUS” and that the miracle of capital is that it works for its owners as if it had a job of its own.  However he took a risk in making his base Omaha instead of New York.  Finally his favourite books were:

  • ‘The Intelligent Investor’ by Benjamin Graham
  • ‘How To Win Friends & Influence People’ by Dale Carnegie
  • ‘Has Man A Future’ by Bertrand Russell

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