Invest … don’t speculate
You don’t buy a farm and then wake up every day to see whether the price of your farm has gone up or down. You look to the farm’s asset to produce the returns. Buying stock hoping it goes up next week is speculation. Look for businesses with intrinsic characteristics, where the management of the business is based on lots of integrity and talent. The Federal Reserve was on the verge of shutting down the investment bank Soloman Brothers, when Buffett was called in to rescue the company. In the end the Fed did not shut down Soloman Brothers because they trusted Warren Buffett to do the right thing. Warrant Buffett repaid that trust in his address to the Soloman Brother employees – ’…lose money, I will be understanding; lose a shred of integrity and I will be ruthless.’
You don’t have to diversify
Stick with what you know. If you have too many interests, you can’t really devote the required attention. He should know what he’s talking about. His company has returned an average 20% per year for over 40 years. This is incredible, most companies would be happy to do this for just a few year.
Be A Business Owner
Being a shareholder is very different to being a business owner.
Allocate Capital Efficiently
Take capital from one business and invest in another if necessary – to make best use of capital. More of this later when he talks about ‘giving it away’.
Don’t Get Into Debt
More smart people has gone broke through leverage than any other activity. Smart people don’t go broke. If you are smart, you don’t need it (leverage). If you are not smart, you’ve got no business using it.
Think Independently
Warren Buffett believes you have to think for yourself. Tune out the bandwagon stuff. Avoid the latest fashion. Unfashionable stuff is what will last. Buffet is everything Wall Street isn’t.
He says ‘ ….the super rich are not as smart as they think. The society has done an awfully lot for them. You ought to have a taxation system and a personal value system where you believe a lot of that should go back to the individuals who got short changed in their life.’
Give It Away
Warren Buffett gave away $31 billion last year to charitable causes. Buffet’s generosity won’t be remembered in the name of the organizations he’s funding. In his own words – ‘…. charities can get money by naming things for people. Why waste the building on me … they are going to get my money anyway – why waste that money on me.’ That, for me, is a man who practice what he preaches – maintaining his ‘allocate capital efficiently’ principle when every fibre of his ego screams out MAKE ME IMMORTAL !!!
Warren Buffett’s Philosophy
- He still only lives in the one house he bought in the 1950s
- He drives just one car at any one time (a pick-up) – and always buy second hand
- He eats at his local diner nights on end – favourite meal is T-bone steak with double hash-brown followed by an ice cream sundae
- His children will not inherit his fortune
- Life is about embracing people, having fun in what you do and doing it with humour.
- If we’ve been more successful than others, is because, we always realise the school of life is always open .. if you weren’t learning more, you would be falling behind.
Warren Buffett doesn’t go out of his way to be different and ‘old fashioned’. He’s quite happy to be unconventional.
The paradox, of course, is that it is ‘old-fashion’ that has brought him success … and it is the old-fashion companies that have survived the economic storm better than others.
differencemakers community blog: Is your leadership missing these timeless lessons from Warren Buffett?
Warren Buffett's simple yet very powerful Principles.
Originally Posted by janvier
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