Warren Buffett and Bill Gates once shared the secret to their success — why IQ alone might not matter

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It’s common knowledge that Warren Buffett and Bill Gates are two of the most successful men in the world. Back in 1998, Buffett gave a lecture alongside Gates at the University of Washington, where they shared how crucial forming good habits early on was to their current success.

Buffett’s company, Berkshire Hathaway, consistently outperforms the S&P 500 in returns. For instance, Berkshire Hathaway’s compounded annual gain over the last 60 years was 19.9%, almost doubling the S&P 500’s 10.4% annual return in that same period, according to the company’s 2024 annual report. (1)

Gates co-founded Microsoft in 1975 with his friends, believing that chip technology would allow everyone to someday own a computer at home, and now we can’t imagine our lives without a computer in our pocket at all times.

It’s no surprise that their advice to students decades ago still resonates with investors today.

Warren Buffett’s advice — build good habits from those you admire

Buffett was clear in his advice: IQ doesn’t matter as much as you think it does when it comes to success.

“Everybody in this room has more than enough IQ to do my job,” Buffett said. “The big thing is rationality. I always look at IQ and talent as sort of representing the horsepower of the motor.”

In other words, you can be the smartest, most talented person in the room, but if your habits are poor, you won’t get far:

“In terms of the output — the efficiency with which the motor works — that depends on rationality because a lot of people start out with 400-horsepower motors and get 100-horsepower of output. It’s way better to have a 200-horsepower motor and get it all into output.”

Buffett reiterated that anyone in the room can achieve what he has in his career, but that some won’t “because you’ll get in your own way — it won’t be because the world doesn’t allow you to — it’ll be because you don’t allow yourself.”

He suggested the students take a look around the room and find the peer they respect the most, and write down the qualities they truly admire about that person.

He then suggested following that up by doing the opposite — find the person they “can stand the least in the whole group” and write down the qualities about that person that rub them the wrong way.

Once you know what those good qualities are, you can build up strong habits that bring those qualities forward in you, and put to rest the bad qualities within yourself that remind you of the person you don’t want to emulate. This is how you convert all your horsepower into output.

“So I just suggest that you look at the habits you admire in others, or the behavior you admire in others, and make those your own habits,” Buffett said.

If Buffett is the investor you admire most, it could be wise to emulate his investing habits.

Buffett’s favorite piece of retail investing advice is to invest as early and often as you can in a simple, low-cost index fund like the S&P 500, and hold it. (2) But many people struggle to start investing, as it can sometimes feel like you need a lot of money saved up before you begin.

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Buffett also famously said, “Price is what you pay, value is what you get,” and this is an important principle to keep in mind when assessing companies worth investing in. (3)

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Bill Gates agrees — it takes “incredible focus” to be successful

When Buffett handed the audience to Bill Gates, he agreed that strong habits built early on were the key to Microsoft’s success.

He spoke about the early vision he had with friends, to get together as a team and see what kind of tool “the information age” could be.

“And by pursuing that with a pretty incredible focus, and being there at the very beginning of the industry, we were able to build a company that has played a very central role in what’s been a pretty big revolution,” Gates said.

At the time, in 1998, computers were starting to enter homes, but they were not yet as ubiquitous as Gates had hoped they’d be when Microsoft began back in 1975.

“Fortunately, the revolution is still at the beginning,” he continued. “It was 23 years ago when we started the company, but there’s no doubt that taking the habits we formed and sticking with those — which would be hard to change — the next 23 years are gonna give us a lot more potential and maybe even get us pretty close to that original vision, which was a computer on every desk and in every home.”

And his dream of having a computer on every desk and in every home came true long before 2021.

His good habits not only made computers the tool our lives now revolve around, but they also made him incredibly wealthy. Bill Gates was the richest man in the world for many years, though he has recently slipped to number 15 on that list. (4)

His investment habits are no secret.

Gates invests heavily in real estate, with massive properties in Seattle and Florida, as well as an island off the coast of Belize, according to Investopedia. (5)

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Gates is also known for investing in fine art. Over the years, he’s bought many valuable pieces, including Andrew Wyeth’s “Distant Thunder” for $7 million, Winslow Homer’s “Lost on The Grand Banks” for $36 million, George Bellow’s “Polo Crowd” for $28 million, William Merritt Chase’s “The Nursery” for $10 million and Frederick Childe Hassam’s work “Room of Flowers” for $20 million, based on the same Investopedia report. (5)

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Berkshire Hathaway (1); CNBC (2); Scrum (3); Bloomberg (4); Investopedia (5)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.