Non-Investment Lessons From 90 Years of Buffett
With Warren Buffett turning 90 this week there are volumes that can be written about his accomplishments.
Most likely, Buffett will leave the largest fortune to charity in the history of the world. Currently, he is worth more than $80 billion—and that is after already giving away $30 billion to charity. Ninety-eight percent of his assets will be left to charity.
The combination of capitalism and Buffett will leave the world a better place and his legacy will be impressive. However, it goes well beyond the field of investing for several reasons.
At 90, Buffett still works six days a week. If Buffett works eight hours on Saturday, he increases his effort over the traditional work week by 20%. If Buffett works ten-hour days, he puts in 50% more effort than average.
This may not seem like much, but knowledge and extra effort grows exponentially over time allowing Buffett to see opportunities, and avoid landmines, others will miss.
The humble billionaire insists on having tremendous time each day just to sit, read and think. He recognizes this causes his brain to become more capable. Expanding upon the accumulation of information, Buffett has said, “The most important investment you can make is in yourself.” The knowledge you gain builds like compound interest. It is a discipline that anyone can do if they are willing to put forth the effort.
For many, the thought of grinding six days a week sounds horrible. However, Buffett has repeatedly encouraged people to find something they are passionate about. If you find that passion, work is not a grind, but rather something that motivates you. Passion is that tailwind that lifts you out of bed, even when you are exhausted.
Buffett didn’t stop at age 65. He knows that judgment and wisdom grow with age. People who have been around-the-block intuitively, and quickly, know a good deal from a bad one and are skilled at avoiding potholes.
Additionally, he recognizes the mind is a muscle just like any other. If exercised regularly, it remains strong, flexible and adaptive. If not challenged, it withers and offers little functionality. At 90 Buffett is the “Mental Mr. Olympia.”
The mid-westerner has also observed that success in business and investing is more about temperament than having a high IQ. A calm demeanor allows someone to rationally assess circumstances and plot a logical course.
A skill like that is invaluable whether you are leading a team of employees or coping with the dynamics of a world-wide pandemic.
This quality allows you to think for yourself despite what crowds on the financial news, social media or elsewhere happen to think.
No matter what is going on in the world, analyze your situation and identify the unique path that is optimal for success.
With interest rates as low as they are, there has rarely been a time in which leverage has been more seductive. However, the conservative Buffett has repeatedly cautioned about avoiding leverage. Borrowed money seems fantastic when everything is going great. However, Buffett has often said, “Only once the tide goes out do you know who is swimming naked.”
The pandemic has exposed hundreds of individuals, businesses and industries that grew complacent and reliant upon debt. Once the pandemic shut the economy down, people and businesses still had to service their debt. The tide had gone out. This rapidly sent many circling the bankruptcy drain.
The nonagenarian has always been looking down the road, dutifully planning and preparing. He has counseled that, “Predicting rain doesn’t count, building the ark does.” Not only must you plan, you must be able to act.
As Buffett has acted, it has been with an underlying theme of “building a margin of safety.” This has been true whether discussing family, business or investing. The goal is to position yourself so you have functionally evaluated the “worst case scenario” and then built systems to withstand the unthinkable—and quite a bit more.
Building a margin of safety has allowed Buffett, and Berkshire Hathaway, to easily withstand events such as the 2008 market collapse and the 2020 pandemic. When the government failed to act in 2008 Buffett’s margin of safety gave him resources necessary to bailout some of the largest businesses in the world. If he had not been there to prop them up, they wouldn’t have opened the next day and hundreds of thousands of employees would have been harmed.
Throughout the years the folksy Nebraskan has been wise in surrounding himself with good people. Buffett has stated, “Surround yourself with the best and brightest and it will elevate you as well. Surround yourself with laziness and pessimism, and you’ll gravitate that way. It’s your choice.”
He has also advised that it takes decades to build a reputation and minutes to destroy it. Your reputation is your single most valuable asset. Protect it and enhance it.
Long before the invention of the internet or social media, Buffett has been careful about public pronouncements. He has said it is best to praise by name but criticize privately or by category.
Unfortunately, knee-jerk tweets or comments on social media cause tremendous harm that can rarely be undone. Instead, take the time to speak with someone in private. Provide the opportunity to make the situation right. Immediately going public with your ridicule rarely helps anyone to improve.
Regardless of who you are, there is something for everyone to learn from Warren Buffett.
Dave Sather is a Certified Financial Planner and the president of the Sather Financial Group a “fee-only” investment management and strategic planning firm.