$90 Billion at 90 — 6 Lessons From Warren Buffett on Wealth Creation
To get to the destination, you must know the path.
“The stock market is a device to transfer money from the impatient to the patient.”
— Warren Buffett
We’re all fascinated by the world’s most famous billionaires and wish to have even a small part of their fortune, if not all of it. Warren Buffett, along with Bill Gates are probably examples of the quintessential billionaire that everyone aspires to be.
Their positions on the top of the list may have been taken over by Jeff Bezos and Elon Musk more recently, but the length of time that these two veterans have spent in the top 5 of the world’s richest list is astonishing and speaks to their consistency and durability as mega-billionaires.
However, you don’t get to such success without putting in your fair share of hard work, and being patient enough. As Aristotle famously said:
“Patience is bitter, but its fruit is sweet.”
Let us take a look at the patience it took for Warren Buffett to get to his current net worth which sits well north of $90bn and some. If you start with a 9, that number has 10 zeroes after it, in case you’re wondering. There’s probably nothing in the material world that you can’t buy with that sort of money — probably a few thousand times over.
#1 — Starting Early — He bought his first stock at 11 years old
Talk about starting young. Most of us fail to understand the stock market well into our adulthood, and some of us just never understand it, period.
Buffett, however, was playing in stocks, while most of us are busy playing with the fake money of the Monopoly board game. It truly takes a child prodigy in most cases to reach the success he has achieved today.
#2 — Persistence — You won’t always succeed in your first attempt
Buffett’s first purchase was preference shares of Cities Service which he bought at $38. The stock soon went down to $27, and Buffett sold it as soon as it went back up to $40 — making a very modest profit.
However, he wasn’t right in his timing straight away — the stock would later soar to a high of over $200.
#3 — Self-belief — Have a goal, believe in yourself, work towards it
Legend has it that as a teenaged kid, he told a friend or family member that if he wasn’t a millionaire by age 30, he’d jump off the tallest building in Omaha, his hometown.
We’d never know if he would have kept his promise, because, by age 30, Buffett was indeed a millionaire, with a net worth of just over a million. However, he put in the hard yards to get there.
His first job was to deliver newspapers from house to house, and most of the money he made was put into smart investing decisions — ranging from buying farmland to buying a pinball machine and making profits from placing it in a barber’s shop. Buffett was earnestly working towards his goal of being a millionaire from his early teens, if not pre-teens.
#4 — Power of Compounding — Put your money to work
Buffett has long been a proponent of the power of compounding and wealth creation over the longer term. One of his more famous quotes about his focus on the long-term is:
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
Buffett is someone who from a very young age when he only had a limited amount of money to invest was on a constant lookout to find places to invest his money. He wouldn’t just sit on the money and let it earn a meagre savings rate but would put it to work. Some of his earliest investments have made him 10x-100x returns over the years — Geico Insurance is one such company that was one of Buffett’s first investments.
As a student at Columbia, Buffett bought his first share of GEICO stock. When he was 20, he invested more than half his net worth in GEICO stock. Fast forward to 1996, Buffett acquired the remaining outstanding shares of GEICO that his company Berkshire Hathaway already did not own, and the insurance company became a Berkshire subsidiary.
#5 —Your Company Matters — look for intelligence, energy, and integrity
Buffett laid tremendous importance on the integrity of an individual and often believed that it was a trait even more important than intelligence. He notes,
“You’re looking for three things, generally, in a person: intelligence, energy, and integrity. And if they don’t have the last one, don’t even bother with the first two.”
Who we work with and who we hang out with plays a key role in our own development. And if you’re able to identify these traits in a person, you’re likely to learn from them and inculcate some of their best behaviors that will make you a better person both in terms of smartness and integrity.
#6 — Patience is Key — results of hard work aren’t always immediate
Buffett made more than 99% of his wealth after he had turned 50. His net worth was a noted $376 million when he was 52 — while at 91, Buffett today is worth over $90bn.
We’re in a day and age where everyone wants instant gratification and can’t really have the patience to even put in an honest day’s work to make a decent living. Everyone wants the shortcut to success, but the reality is there isn’t any.
Like every truly successful person will tell you that you need to put in the hard yards before you can enjoy the benefits of it all. This patience for some could be a month, a year, a decade, or even more. In the case of Warren Buffett, most of his wealth was created in the latter half of his life.
So if you’re still struggling to save your first $10,000, don’t be disheartened — you could still be on your way to being a millionaire, and maybe a billionaire someday if you do the right things, and luck is on your side!
References:
https://www.forbes.com/sites/zackfriedman/2019/01/22/warren-buffett-owns-these-7-companies/?sh=445e65e05f6d https://www.thebalance.com/warren-buffett-timeline-356439 https://www.ruleoneinvesting.com/blog/how-to-invest/warren-buffett-quotes-on-investing-success/ https://www.inc.com/marcel-schwantes/warren-buffett-told-a-teenager-his-secret-to-success-15-years-ago-its-still-best-advice-youll-hear-today.html https://www.entrepreneur.com/article/290381