Warren Buffett's 10 Rules of Success
Always Learn From the Best.
Warren Buffet is most likely the most successful investor of our times, a philanthropist, business tycoon, and a billionaire with a net worth north of 70 billion dollars. In 2019 Warren Buffet was the 4th richest man on the planet.
Wikipedia describes Warren Buffet as:
“Buffett was born in Omaha, Nebraska. He developed an interest in business and investing in his youth, eventually entering the Wharton School of the University of Pennsylvania in 1947 before transferring and graduating from the University of Nebraska at the age of 19.
He graduated from Columbia Business School, where he molded his investment philosophy around the concept of value investing pioneered by Benjamin Graham. He attended the New York Institute of Finance to focus his economics background and began various business partnerships, including Graham.
He created Buffett Partnership, Ltd in 1956, and his firm eventually acquired a textile manufacturing firm called Berkshire Hathaway, assuming its name to create a diversified holding company. In 1978, Charlie Munger joined Buffett and became vice-chairman of the company.”
Meanwhile, Buffets holding company Berkshire Hathaway owns more than 60 companies. His most significant investment in April 2020 is Apple.
But what are the principles that led to Mr. Buffets' success?
Here are his 10 rules for success:
Find your passion
This is a principle that almost every successful person emphasizes. Finding your passion is of utmost priority. Why is that so crucial? Proficiency comes with time invested. Some studies say that it takes 10,000 hours to reach proficiency in any field.
Meaning to become one of the best. It is basically 8 hours of training every single day for 3,5 years. Well, to make money, it is not necessary to become the best expert. A sufficient amount of real-life training is all it takes.
Like investing, the thing is, not every day will be a great day. Life has its obstacles. We are all human. Sometimes we have our moods. The sun is not always shining. In those days, the only thing that keeps us going is our passion. It defines why. When life hits hard, it is still good to remember, “Why am I doing something?”. So let´s listen to Warren Buffet what he says:
Hire well
Nobody ever makes it alone. In the end, we are all the average of the people that we surround ourselves with. Look at your friends you spent the most time with, your colleagues at work, and your family. You are like them. You will find yourself in them. If you do not like where you are, one of the first things to do is change the circle you surround yourself with.
One lesson I got taught in the days when I studied economy at the University of Graz. In one of the clubs, I was a member of, an elderly top manager told me: It is effortless to become a successful person. Find out your ultimate life goal, and then get into clubs where these kinds of people are. Do you want to be a successful manager? Join a management club. Do you want to be successful in chess? Join a chess club.
That is why hiring is so crucial. Getting the wrong person in your inner circle can negatively affect all of your life. What is Warren Buffets' opinion on that?
I don’t care what others think.
Being an entrepreneur means getting a lot of feedback. Much of it will not be presented nicely. An entrepreneur must learn to relax, listen to feedback, smile, and walk away with a cheerful ending.
Just don’t take it too seriously. Sometimes another person wants to help you develop. Listen to the facts and take your learnings with you. Smile. Sometimes a person wants to push your trigger points. Do the same. Listen to the facts and smile. Don’t take it personally or start fighting.
Read, Read, Read
Life is a learning experience. One of the sweet inventions of the human race is writing and reading. Many successful people have put their learnings into their written biographies. Reading allows us to learn from their mistakes and failures as well as successes. If I only get one idea on how to improve my life from a book, it was worth reading.
The same is true for investing. Read annual and quarterly reports. Read analysis. Read chat boards. It helps to understand what companies are really doing. It helps to avoid pitfalls that make you lose money — like Wirecard.
Have a Margin of Safety
When investing, the idea is to grow the value of the portfolio. Buying stock is not just for fun. Doing it right means paying less than the company is worth. This principle is called the margin of safety concept. It boils down to getting more value than you are paying.
These days of the internet economy means looking at a stock with an excellent growth perspective and a moat.
Have a Competitive Advantage
When running a business or investing in the industry, always strive to gain competitive advantages.
If you have invented something great, of course, other parties want to get into your business quickly. You have to be always one step ahead compared to your competition. It is important to build your business into a castle and keep other people from getting it. How? by creating a moat.
There are 3 significant moat strategies I like: Number one is the cost structure by simply being cheaper than the competition customers need to get back to you. I do consider this a short-term strategy. Mostly in the industry, cost structures tend to become similar over time.
The second moat is innovation. In my opinion one of the strongest. By just having more insight into a technology or service industry, everybody who wants to get the best advice needs to get back to you.
The third moat is network effects. By working on connecting your business to the world and placing yourself into the center of it, everybody who wants to access the network needs to address you.
The internet economy made it possible to combine all three moats. Just think about Uber, Amazon, Netflix. Apple has two moats — quality and network. It has become an eco-system by itself.
Build your business — make your team the best in the world — keep your cost at a reasonable level, and the rest will take care of itself.
Schedule for Your Personality
One of the success factors Warren Buffett points out is to build your business around your personality. Not the other way round.
Know yourself, what you need to refill your energy. Plan your daily life around your needs. Don´t let yourself pressure into an outside scheme that goes against your personality. Even when you are working a 9 to 5 job, always create your own spaces to regain your energy.
Always be Competing
Think about the best companies in the world. Apple, Amazon, Facebook, Google, Microsoft, or Netflix.
They are always evolving and changing. Apple started as a company that built and sold computers. Today, Apple is its own eco-system. Selling computers, Phones, Tablets to its customers and giving access to useful services called Apps.
Microsoft — started as a company that produced an operating system. Today, it's Windows, Office, X-Box, Phones — an eco-system on its own.
Successful companies always strive to improve the lives of their customers. They still want to stay one step ahead of their competitors. They never rest on their laurels.
Model Success
Whatever path you might choose in life. You can be sure that somebody already successfully walked it. Instead of re-inventing the wheel, go and find people who already achieved what you want for yourself. And model these successful people. In the days of the internet, it is not necessary to directly meet these people. Read their biographies, listen to their podcast, read their blog.
However, I do recommend working for such people directly. If you are young, ask to become a PA or intern in the company of a successful person.
Give Unconditional Love
In an interview, Warren Buffet was asked about what the best advice was that he has received. Well, I thought, he, of course, will talk about investments.
He didn’t. He said: The best advice he got was to love unconditionally. Like a father who gives the feeling to his child, no matter what he did, right or wrong, he can always come back to his parents. Talk about it, and no matter what, being loved.
So what has that to do with business? Love, in my opinion, is one of the building stones of every company. The minute the leader doesn’t give his employees, shareholders, customers the feeling that they can come with everything to him, it is the minute when the leader turns blind.
I hope you enjoyed the summary of the clips and my opinion on them.
Since 1999 I am an executive, advisor, and coach for companies in various industries. I specialized in Corporate Development and Finance. From seed rounds to IPO level. I am focused on life science since 2006.
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