10 things we can learn from Warren Buffett that have nothing to do with money
Last year, I started a Thanksgiving tradition of sharing reasons for investment gratitude. This year, I’m dedicating my Turkey Day column to Warren Buffett, who’s soon taking early retirement (at age 95). As a longtime Berkshire Hathaway BRK.A shareholder and occasional attendee of annual meetings in Omaha, I’m grateful not just for Buffett’s investment prowess but also for the life lessons he imparted.
Long after I’ve forgotten the details of the OxyChem deal, I will remember the virtues he stood for, often conveyed through memorable aphorisms (my favorite being: “Only when the tide goes out do you discover who’s been swimming naked.”). His recent Thanksgiving letter to shareholders was, unsurprising, chock full of wisdom.
Here are 10 things we can all learn from Warren Buffett that don’t have anything to do with money:
1. Be kind. “Kindness is costless but also priceless,” Buffett writes in his recent letter. “Whether you’re religious or not, it’s hard to beat The Golden Rule as a guide to behavior.” Buffett has long been known for his decency. I’ve watched him at shareholder meetings handling dissenters, however rambling, with the utmost respect. “Praise by name. Criticize by category,” he says. It’s one of the lessons he absorbed early in life from Dale Carnegie’s How to Win Friends and Influence People. Kindness has also been good for business. “We don’t do unfriendly deals,” Buffett once wrote to a prospective acquiree. “If you want to pursue a merger, call me.” Many business owners have called over the years. “He treated our family with respect and let us keep doing things our way. That meant a lot,” said the Blumkins, whose matriarch Rose sold Nebraska Furniture Mart to Berkshire Hathaway in 1983. Lavishing praise on employees and associates also breeds loyalty. “Write your own obituary and reverse-engineer it,” are words to live by.
2. Have integrity. “It takes 20 years to build a reputation and five minutes to ruin it,” Buffett once said. To many, Buffett stands for midwestern values of honesty, plainspokenness, and fairness. “Warren is the fairest person I’ve ever dealt with,” said Tom Murphy, who ran Capital Cities Communications, which partnered with Berkshire Hathaway to buy ABC in 1985. “He never tried to take advantage of us. He always wanted both sides to feel good about the deal.” Though he could be a hard-nosed negotiator, Buffett built a reputation for rectitude that served him and Berkshire shareholders well. As an example, the US Department of the Treasury entrusted him to take over scandal-ridden Salomon Brothers in 1991. He testified to Congress that his marching orders would be: “Lose money for the firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.” Another quote that should hang from every cubicle: “Ask yourself if you would be willing to have your actions appear on the pages of a newspaper the next day.”
3. Practice patience. When asked why few copy his investment approach, Buffett answered, “Because no one wants to get rich slow.” In a world of ever-shrinking attention spans, a 24-hour news cycle, and everything one click away, it’s easy to lose sight of the all-important long game. “Life is like a snowball,” Buffett once said. “The important thing is finding wet snow and a really long hill.” It’s a beautiful metaphor for the principle of compounding but applies more broadly. In her biography The Snowball, Alice Schroeder quotes Buffett saying, “I don’t just mean compounding money either. It’s in terms of understanding the world and what kinds of friends you accumulate.” In investing, Buffett avoided taking action for action’s sake, biding his time until opportunity struck. During other periods, he made a virtue out of inaction. “When in doubt keep holding,” he has said. “I’ve made most of my money sitting on my ass.” Investors are advised to start young, avoid debt, and eschew excessive trading. According to Buffett, “The stock market is a device for transferring money from the impatient to the patient.”
4. Use caution. “Margin of safety” was a concept Buffett learned from his professor, mentor, and boss Benjamin Graham, considered the father of value investing. Though Buffett’s thinking later evolved—influenced by Phil Fisher and Charlie Munger, he came to believe that “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”—his thriftiness remained. A “Fort Knox balance sheet” enabled Buffett to take advantage of undervalued opportunities and act as a “lender of last resort.” But Berkshire’s current stash of $358 billion also assures it won’t be “swimming naked.” Buffett avoided leverage and famously called derivatives “financial weapons of mass destruction.” His postfinancial crisis reflection, “You absolutely never want to be in a position where tomorrow morning you have to depend on the kindness of strangers,” applies generally. Preparedness is critical. “Predicting rain doesn’t count,” Buffett said. “Building arks does.”
5. Be positive. “Our stock price will move capriciously,” Buffet writes in his recent shareholder letter, “occasionally falling 50% or so as has happened three times in 60 years under present management. Don’t despair; America will come back and so will Berkshire shares.” Underpinning his investment success is Buffett’s enduring belief in capitalism, in human ingenuity, and in America. To be fair, Buffett’s experience living through decades of economic growth and asset price appreciation colored his outlook. Ben Graham’s caution, by contrast, was bred from the economic depressions and financial panics he witnessed. Still, optimism has generally rewarded investors. And Buffett’s positive demeanor, a refusal to dwell, and his habit of “tap dancing to work” have likely contributed to his longevity. Or is it his diet of See’s Candies, Cherry Coke, and Omaha steak?
6. Think independently. “Be fearful when others are greedy; be greedy when others are fearful” exemplifies Buffett’s contrarianism. In 1999, at the peak of the technology, media, and telecom bubble, he warned that stock prices were too high. In October 2008, as a global financial crisis was sending the market plummeting, Buffett wrote a New York Times op-ed entitled “Buy American. I am.” Neither 1999 nor 2008 was the first time Buffett went against the grain. He famously shut down an investment partnership after the boom of the late 1960s left him “not attuned to this market environment.” Then, during the bear market of the 1970s, he used the failing textile business Berkshire Hathaway to load up on cheap assets like GEICO and the Washington Post. A voracious reader who Charlie Munger described as a “learning machine,” Buffett told biographer Alice Schroeder, “You are neither right nor wrong because people agree with you. You’re right because your facts and reasoning are right.”
7. Exhibit humility. “Circle of competence” is a foundational Buffett concept. Buffett has always been one to acknowledge his limitations and play to his strengths. For decades, it kept him out of technology investments, though a purchase of Apple AAPL stock on the grounds that it’s really a consumer business earned Berkshire handsome profits. “Risk comes from not knowing what you are doing,” he explained. Buffett has always acknowledged investment mistakes, including a company he nicknamed “Cleveland’s Worst Mill,” US Air, the original Berkshire Hathaway, and many more “sins of omission.” He has also admitted shortcomings as a husband and father. “Humility disarms,” wrote biographer Alice Schroeder of Buffett in The Snowball. It’s a lesson he learned from Dale Carnegie, who counseled, “If you are wrong, admit it quickly and emphatically.” In his recent shareholder letter, Buffett writes: “Don’t beat yourself up over past mistakes. Learn at least a little from them and move on.”
8. Be content. “Envy is the only one of the 7 deadly sins that it’s no fun to commit,” Buffett has said. Comparing yourself to others is a recipe for dissatisfaction. Especially in this age of social media, images of happiness and success are ubiquitous. It’s easy to feel inadequate in comparison to ideals, which are often illusions. Though he spent his life accumulating great wealth, Buffett has stressed that happiness doesn’t come from money, fame, and power. “The purpose of life is to be loved by as many people as possible among those you want to have love you,” he told students. As cliché as it sounds, Buffett taught that the best things in life are free.
9. Value continuity. Buffett has put people in place to ensure Berkshire continues to thrive without him. The new CEO, Greg Abel, is described by Buffett as “a great manager, a tireless worker, and an honest communicator.” Beyond Abel, insurance guru Ajit Jain remains a key figure, as do Todd Combs and Ted Weschler. In his recent letter, Buffett announces his intentions to retain a significant ownership stake “until Berkshire shareholders develop the comfort with Greg that Charlie and I long enjoyed.” On the philanthropic side, he has given to the Gates Foundation and announced that he will step up donations to the philanthropies of his three children. “Ruling from the grave does not have a great record,” Buffett acknowledges. “I have never had the urge to do so.”
10. Practice gratitude. “I was born in 1930, healthy, reasonably intelligent, white, male, and in America. Wow! Thank you, Lady Luck,” Buffett writes in his recent letter. It’s what he has called “winning the Ovarian lottery.” Buffett’s Thanksgiving letter is a testament to gratitude—for surviving childhood illness, being raised well, specifically in his beloved Omaha, and partnering with the great Munger, among many other friends and colleagues. It’s a reminder to count our blessings and acknowledge our good fortune. As Buffett says: “Someone is sitting in the shade today of a tree planted a long time ago.”
Readers will note correctly that this column is an uncritical paean. I realize Buffett is human, with shortcomings like all the rest of us. His investment record isn’t perfect, and he has his character flaws. That said, I think we have much to learn from his example and his teachings.