Tag: Warren Buffett

When Things Go Wrong: The Warren Buffett Way to Handle Problems

Warren Buffett

“Get it right, get it fast, get it out, get it over.”

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In an interview with Jeff Cunningham, Warren Buffett hits on two principles that elude most of us.

Interviewer: I was reading a Lincoln quote the other day, “With public sentiment, nothing can fail. Without it, nothing can succeed.” Of course, he was talking about what led to the Emancipation Proclamation. When I think about your world, 330,000 people who are employees of Berkshire Hathaway or its subsidiaries, how do you send the message that they are being scrutinized under the microscope by the media at all times?

Buffett: I send a message to their managers. Those 330,000 people work for maybe 70 or so CEOs and in turn work for me. My job is to have those 70 CEOs sending out the right message. Every two years, I write them a very simple letter. It’s a page-and-a-half. I don’t believe in 200-page manuals because if you put out a 200-page manual, everybody’s looking for loopholes basically.

Page-and-a-half, it’s very hard for them to argue about what I’m talking about. I tell them that my reputation, Berkshire’s reputation, is in their hands. We’ve got all the money we need. We’d like to make more money but we’ve got all the money we need. We don’t have an ounce of reputation beyond what we need. We can’t afford to lose it. We never will trade reputation away for money.

They’re the ones that are the guardians of that. I want them to not only do what’s legal obviously, but I want them to judge every action by how it would appear on the front page of their local paper written by a smart but semi-unfriendly reporter who really understood it to be read by their family, their neighbors, their friends.

It has to pass that test as well. I tell them I don’t want anything around the lines. I tell them there’s plenty of money to be made in the center of the court. I’m 84. My eyes aren’t that good anymore. I can’t quite see the lines that well. Just keep it in the center of the court. If they have any questions, call me.

As for advice on what to do when you face a problem …

Interviewer: Even the occasional dust-up at Berkshire is big news. I’ll pick on Salomon only because it’s history now. It’s got a lot of time to reflect on that. When you think about what you went through there, what advice do you have for a CEO who’s on the media hot seat because of a similar situation?

Buffett: There are a couple pieces of advice on that. The first is that when you find out a bad news, correct that and if it’s necessary to report it, then the authorities report it to the media. The big problem with Salomon was not what a fellow named Mozer did which was to defy the US government, not ever a very good idea. But that could have been handled, but he reported…He didn’t report it.

John Meriwether, his supervisor, picked up on it in late April of 1991 and went to the president, the chairman and the chief legal counsel of Salomon and said, “Here’s what this fellow Mozer has been doing.” They all agreed it was wrong. They all agreed it was reportable to the Federal Reserve promptly. Unfortunately, nobody did anything.

In the middle of May, Mozer went out and did it again. Now, you’ve got a terrible problem because you knew the guy was a bad actor a few weeks earlier and he hadn’t reported it and that compounded there. Then, you’re in a real pickle.

When you find bad news, I say get it right, get it fast, get it out, get it over. Get it right is important. When they questioned, Mozer had done it there. But the get it fast and get it out, they missed on.

You’re going to get bad news. I got 330,000 people. I will guarantee you that probably dozens of them are doing something wrong right now. I just hope I find out about it early and the person below me finds out and lets me know if it’s bad enough and that they stop it.

You can’t have a city of 330,000 without an occasional [laughs] crime of some sort. It’s going to happen. You’ve got to do something about it fast when it does happen.

The Education of a Value Investor: A Quest for Wealth, Wisdom, and Enlightenment

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I read Guy Spier’s book, The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment, in a single sitting.

The section of the book I was most interested in reading was on his charity lunch with Warren Buffett. While details of what transpires at these lunches are fairly scant, there is a whole chapter on it in this book. I tore into that chapter first, eager to find out the pearl of wisdom that eluded me. Finding no secret, I flipped to the front and fell into the story.

I had the serendipitous pleasure of running into Guy at the Omaha airport earlier this year. What I loved about him – and his book – is that he’s open about his struggles. In a world where so many of us, myself included, are closed and guarded about things we don’t want other people to know or see, Guy is an open book. He has struggles. He’s human. He’s real. Things are not black and white. He didn’t come out of the womb fully formed with uncompromising ethics.

He’s a testament to the fact that we can make mistakes, admit them, and get better. We can change. We can even change our nature. We can find ourselves in compromising positions – be they professional, moral, or ethical – and recognize that we’ve made poor choices and find a better path forward. Guy is living proof that we can teeter on a moral cliff and change the path we are on. First, however, we must stop digging. That requires recognition that what we’re doing or about to do is wrong. “These moments of clarity are so rare in life,” he writes, “and even the people closest to us may question whether we should act on such instincts.” We only have a few of these moments in life, we must learn to recognize them and act. “If you’re going to do something, it’s best to commit to it with wholehearted gusto.”

And Guy did commit to changing himself. “When you begin to change yourself internally,” he writes, “the world around you responds.”

I hope this idea resonates because it’s important—more important, perhaps, than the fact that I had lunch with Warren Buffett. As I hope you can see from my experience, when your consciousness or mental attitude shifts, remarkable things begin to happen. That shift is the ultimate business tool and life tool.

But the question worth exploring at this point is how you go about changing yourself? It sounds so simple, doesn’t it? I want to change and poof. Change. It doesn’t work like that.

One lesson that Guy reinforces is that your environment matters to the decisions you make.

“It’s important,” he writes, “to discuss just how easy it is for any of us to get caught up in things that might seem unthinkable—to get sucked into the wrong environment and make more compromises that can tarnish us terribly.” While we think that we change our environment, it changes us.

Part of the problem (of working on Wall Street) was that the competition was so fierce. This led to the belief that, if I wasn’t willing to do something, someone else would quickly step in to do it. This kind of environment is perfectly designed to get people to push the boundaries in order to succeed. It’s a pattern that’s repeated again and again on Wall Street. Through ambition, greed, arrogance, or naïveté, many bright, hard-working people have strayed into grey areas.

One non-intuitive way to improve your environment is to choose the right teachers that have already discovered the truths you want to learn.

There is wisdom here that goes far beyond the narrow world of investing. What I’m about to tell you may be the single most important secret I’ve discovered in all my decades of studying and stumbling. If you truly apply this lesson, I’m certain that you will have a much better life, even if you ignore everything else I write.

What I stumbled upon was this. Desperate to figure out how to lead a life that was more like his, I began constantly to ask myself one simple question: “What would Warren Buffett do if he were in my shoes?”

I didn’t ask this question idly while sitting in a coffee shop sipping a cappuccino. No. I sat down at my desk and actively imagined that I was Buffett. I imagined what the first thing would be that he would do if he were in my shoes, sitting at my desk.

Self-help guru Tony Robbins calls this “modeling” our heroes. “The key,” Spier writes, “is to be as precise as possible, picturing them in as much detail as we can. A related technique that he teaches is called matching and mirroring, which might involve changing the way you move or even breathe to match the other person’s movement or breathing. In my experience, you start to feel what they feel and you even start to think like them.”

A few other lessons from the book are worth noting, one of which is the fundamental nature of Guy’s approach to life (not investing.)

I’ve come to see that this is a smart strategy for life: whenever I have the choice of doing something with an uncertain but potentially high upside, I try to do it. The payoffs may be infrequent, but sometimes they are huge. And the more often I pick up these lottery tickets, the more likely I am to hit the jackpot.

Remind you of anyone? That’s an approach that Nassim Taleb employs. It’s also the one that investor Mohnish Pabrai describes in his book The Dhandho Investor: The Low-Risk Value Method to High Returns. As Pabrai puts it, “Heads I win. Tails I don’t lose much.”

Another lesson is that small differences in behavior over time can lead to incredible impacts. Sending thank-you notes is A Simple Act of Gratitude, with profound benefits:

At first my letter-writing experiment was quite calculated, since I did it with an explicit desire to improve my business. I had a clear expectation of what the results would be. But it started to feel really good, and I became addicted to the positive emotions that this activity stirred in me. As I looked for more opportunities to thank people, I found that I truly did become more thankful. And the more I expressed goodwill, the more I began to feel it. There was something magical about this process of getting outside myself and focusing on other people.

[…]

In sending out this cascade of letters, I began to open up to people in a way that I never had before, and I started to see everyone around me as someone I can learn from. As I now understand, this habit of writing letters is an incredibly effective way of compounding goodwill and relationships instead of merely compounding money. Einstein is often said to have called compounding the eighth wonder of the world. But the narrow financial application of compounding may be the least valuable and least interesting aspect of this phenomenon.

In the end, the biggest lesson that I took away from meeting with Guy and reading his book is that we need to stop living our life through other people. I can play basketball every day for 18 hours, and I’m never going to be Michael Jordan. I can study financial reports until I’m blue in the face and I’m never going to be the next Warren Buffett.

The Education of a Value Investor, is an important reminder that the being who we are not who we are supposed to be matters. We need to do what is right for us, and that might not be what is right for others. We need to stop pretending to be other people and compromising our internal standards or ethics. We need to find who we are and how we want to live. “Instead of trying to compete with Buffett,” Guy writes, “I should focus on the real opportunity, which is to become the best version of Guy Spier that I can be.”

What makes Warren Buffett a great investor? Intelligence or Discipline?

I thought this excerpt from Warren Buffett’s 2011 interview in India was relevant to not only investing but also decision making. A member of the audience says to Buffett: “As we all know, you are an extremely intelligent person. At the same time, you are very disciplined with your investing approach. What makes Warren Buffett a great investor? Is it the intelligence or the discipline?”

Here is Warren’s response.

Warren: The good news I can tell you is that to be a great investor you don’t have to have a terrific IQ.

If you’ve got 160 IQ, sell 30 points to somebody else because you won’t need it in investing. What you do need is the right temperament. You need to be able to detach yourself from the views of others or the opinions of others.

You need to be able to look at the facts about a business, about an industry, and evaluate a business unaffected by what other people think. That is very difficult for most people.

Most people have, sometimes, a herd mentality which can, under certain circumstances, develop into delusional behavior. You saw that in the Internet craze and so on. I’m sure everybody in this room has the intelligence to do extremely well in investments.

Moderator: They’re all 160 IQs.

Warren: They don’t need it. I’m disappointed they haven’t sold off some already. The 160s won’t beat the 130s at all necessarily. They may, but they do not have a big edge. The ones that have the edge are the ones who really have the temperament to look at a business, look at an industry and not care what the person next to them thinks about it, not care what they read about it in the newspaper, not care what they hear about it on the television, not listen to people who say, “This is going to happen,” or, “That’s going to happen.”

You have to come to your own conclusions, and you have to do it based on facts that are available. If you don’t have enough facts to reach a conclusion, you forget it. You go on to the next one. You have to also have the willingness to walk away from things that other people think are very simple.

A lot of people don’t have that. I don’t know why it is. I’ve been asked a lot of times whether that was something that you’re born with or something you learn. I’m not sure I know the answer. Temperament’s important.

Moderator: That’s very good advice, to be detached from all the noise. You shouldn’t go with the herd.

Warren: If you don’t know the answer yourself don’t expect somebody else to tell you. If you don’t know the answer yourself and somebody else says they know the answer, don’t let that fact push you into coming to a conclusion about something that you don’t know enough to come to a conclusion on.

Stocks go up and down, there is no game where the odds are in your favor. But to win at this game, and most people can’t, you need discipline to form your own opinions and the right temperament, which is more important than IQ.

Pascal said it best: “All men’s miseries derive from not being able to sit in a quiet room alone.”

Warren: If you look at the typical stock on the New York Stock Exchange, its high will be, perhaps, for the last 12 months will be 150 percent of its low so they’re bobbing all over the place. All you have to do is sit there and wait until something is really attractive that you understand.

And you can forget about everything else. That is a wonderful game to play in. There’s almost nothing where the game is stacked in your favor like the stock market.

What happens is people start listening to everybody talk on television or whatever it may be or read the paper, and they take what is a fundamental advantage and turn it into a disadvantage. There’s no easier game than stocks. You have to be sure you don’t play it too often.

You need the discipline to say no.

Ajit: The discipline to say no, if you have that and you’re not willing to let people steamroll you into saying yes. If you have that discipline, that’s more than 50 percent of the battle.

Warren: Don’t do anything in life where, if somebody asks you the reason why you are doing it, the answer is “Everybody else is doing it.” I mean, if you cancel that as a rationale for doing an activity in life, you’ll live a better life whether it’s in the stock market or any place else.

I’ve seen more dumb things, and sometimes even illegal things, justified (rationalized) on the basis of “Everybody else is doing it.” You don’t need to do what everybody else is doing. It’s maddening, during the Internet craze when the bubble was going on.

Here’s your neighbor who’s got an IQ of 50 points below you, and he’s making all this easy money and your wife is telling you “This jerk next door is making money, and you’re smarter than he is. Why aren’t you making money?”

You have to forget about all those things. You have to do what works, what you understand, and if you don’t understand it and somebody else is doing it, don’t get envious or anything of the sort. Just go on and wait until you find something you understand.

From this video, a watermarked transcript of which is available for purchase.

12 Books Every Investor Should Read

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If you’re looking for something to read that will improve your ability as an investor, I’d recommend any of the books below. All 12 of them are deeply informative and will leave an impact on you.

1. The Intelligent Investor by Benjamin Graham
Described as “by far the best book on investing ever written” by none other than Warren Buffett. “Chapters 8 and 20 have been the bedrock of my investing activities for more than 60 years,” he says. “I suggest that all investors read those chapters and reread them every time the market has been especially strong or weak.”

2. The Little Book that Beats the Market by Joel Greenblatt
As Buffett says, investing is simple but not easy. This book focuses on the simplicity of investing. Greenblatt, who has average annualized returns of about 40% for over 20 years, explains investing using 6th grade math and plain language. Putting it into practice is another story.

3. Fooled by Randomness by Nassim Taleb
The core of Taleb’s other books — The Black Swan and Antifragile — can be found in this early work. One of the best parts, for me, was the notion of alternative histories. “Mother Nature,” he writes, “does not tell you how many holes there are on the roulette table.” This book teaches you how to look at the world probabilistically. After you start doing that, nothing is ever the same again.

4. The Most Important Thing by Howard Marks
“This is a rarity,” Buffett writes of Howard Marks’ book, “a useful book.” More than teaching you the keys to successful investment, it will teach you about critical thinking.

5. Poor Charlie’s Almanack by Charlie Munger
Charlie Munger is perhaps the smartest man I don’t know. This book is a curated collection of his speeches and talks that can’t help but leave you smarter. Munger’s wit and wisdom come across on every page. This book will improve your thinking and decisions. It will also shine light upon psychological forces that make you a one-legged man in an ass-kicking contest. Read and re-read.

6. Common Stocks and Uncommon Profits by Philip Fisher
Buffett used to say that he was 85% Benjamin Graham and 15% Phil Fisher. That was a long time ago, the Buffett of today resembles more Fisher than Graham. Maybe there is something to buying and holding great companies.

7. The Dao of Capital by Mark Spitznagel
Spitznagel presents the methodology of Austrian Investing, where one looks for positional advantage. Nassim Taleb, commenting on the book wrote: “At last, a real book by a real risk-taking practitioner. You cannot afford not to read this!”

8. Buffett: The Making of an American Capitalist by Roger Lowenstein
This book, perhaps more than any other, has changed the lives of many of my friends and investors because this is how many of them first discovered Warren Buffett and value investing.

9. The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success
An outstanding book detailing eight extraordinary CEOs and the unconventional methods they used for capital allocation. One of them, Henry Singleton, had a unique view on strategic planning.

10. The Misbehavior of Markets: A Fractal View of Financial Turbulence by Benoit Mandelbrot
A critique of modern finance theories, which usually gets built on the underlying assumption that distributions are normal. Nassim Taleb calls this “the most realistic finance book ever published.”

11. Why Stocks Go Up (and Down) by William Pike
This is a basics book on the fundamentals of equity and bond investing – financial statements, cash flows, etc. A good place to start on the nuts and bolts. If you’re looking to learn accounting also check out The Accounting Game: Basic Accounting Fresh from the Lemonade Stand, I’m serious. This is the book I recommended to classmates in business school with no accounting background to get them up to speed quickly.

12. Bull: A History of the Boom and Bust, 1982-2004 by Maggie Mahar
The first and perhaps best book written on the market’s historic run, which started in 1982 and ended in the early 2000s. Mahar reminds readers that euphoria and blindness are a regular part of bull markets – lessons we should have learned from studying history.

Keep in mind that if investing were as easy as buying a book and reading it, we’d all be rich.

The Six Books Bill Gates Thinks You Should Read This Summer

Bill Gates Summer 2014 Reading List

Bill Gates is out with his annual summer reading list and, while shorter than last year’s, it’s nonetheless full of interesting reads.

I ended up ordering two of them, one of which is considered to be “the best business book I’ve ever read” by both Warren Buffett and Gates.

Gates writes “I read them all earlier this year and think each one is terrific. Only one, The Rosie Project, qualifies as a typical beach read. But all six are deeply informative and beautifully written.”

1. Business Adventures, by John Brooks.

Warren Buffett recommended this book to me back in 1991, and it’s still the best business book I’ve ever read. Even though Brooks wrote more than four decades ago, he offers sharp insights into timeless fundamentals of business, like the challenge of building a large organization, hiring people with the right skills, and listening to customers’ feedback. He is also a masterful storyteller, peppering his articles with compelling portraits of everyone from General Electric executives to the founder of Piggly Wiggly groceries. His article on the fate of the Ford Motor Company’s Edsel is a classic. Business Adventures is out of print in hardcover and paperback (not true, after a recommendation from Gates they ran another print, which is due out in Sept.), but you can now buy it in e-book form. And you can download chapter 5, “Xerox Xerox Xerox Xerox,” free. I wish all business writing were half as good.

2. Stress Test, by Timothy F. Geithner.

The central irony of Stress Test is that a guy who was accused of being a lousy communicator as U.S. Treasury Secretary has penned a book that is such a good read. Geithner paints a compelling human portrait of what it was like to be fighting a global financial meltdown while at the same time fighting critics inside and outside the Administration as well as his own severe guilt over his near-total absence from his family. The politics of fighting financial crises will always be ugly. But it helps if the public knows a little more about the subject—what’s at stake, what the options are, what has worked in similar situations—so that the loud talkers resonate a bit less and the knowledgeable ones a bit more. …

3. The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism, by Doris Kearns Goodwin.

I read a lot about Teddy Roosevelt last year, around the time Melinda and I took our kids to the Panama Canal. He was instrumental in getting the canal built, and I’d assumed it was the highlight of his career. But it wasn’t. It’s a testament to the breadth and depth of Roosevelt’s accomplishments that the canal warrants only a handful of mentions in this biography. There’s just too much other fascinating material competing for space, from Roosevelt’s relationship with the press and his friendship with William Howard Taft (who was brilliant in his own right) to his efforts to fight corruption and reform the political system.

I’m especially interested in the central question that Goodwin raises: How does social change happen? Can it be driven by a single inspirational leader, or do other factors have to lay the groundwork first? Sometimes a single leader can make a big difference: In the field of global health, Jim Grant almost singlehandedly created a global constituency for children, sparking a movement to double vaccination rates and save millions of lives. But Roosevelt’s case was different. Although he tried to push through a number of political reforms earlier in his career, he wasn’t really successful until journalists at McClure’s and other publications had rallied public support for change.

I loved Goodwin’s Team of Rivals and highly recommend this one too.

4. The Rosie Project: A Novel, by Graeme Simsion.

Melinda picked up this novel earlier this year, and she loved it so much that she kept stopping to read passages to me. I started it myself at 11 p.m. one Saturday and stayed up with it until 3 the next morning. Anyone who occasionally gets overly logical will identify with the hero, a genetics professor with Asperger’s Syndrome who goes looking for a wife. (Melinda thought I would appreciate the parts where he’s a little too obsessed with optimizing his schedule. She was right.) It’s a funny and profound book about being comfortable with who you are and what you’re good at. I’m sending copies to several friends and hope to re-read it later this year. It is one of the most enjoyable novels I’ve read in a long time.

5. The Sixth Extinction: An Unnatural History, by Elizabeth Kolbert.

Climate change is a big problem—one of the biggest we’ll face this century—but it’s not the only environmental concern on the horizon. Humans are putting down massive amounts of pavement, moving species around the planet, over-fishing and acidifying the oceans, changing the chemical composition of rivers, and more. Natural scientists posit that there have been five extinction events in the Earth’s history (think of the asteroid that wiped out the dinosaurs), and Kolbert makes a compelling case that human activity is leading to the sixth. Unlike a lot of people who write about the environment, Kolbert doesn’t resort to hype. She just lays out the facts and wraps them in memorable anecdotes. It’s a sobering but engaging and informative read.

6. Reinventing American Health Care: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System, by Ezekiel J. Emanuel.

One of the architects of the Affordable Care Act (a.k.a. Obamacare) makes the case for why the U.S. health care system needed reform and how Obamacare sets out to fix the problems. Although he was deeply involved in its creation, Emanuel is good about making it clear when he’s educating you about the history of health care and when he’s advocating for his ideas. He calls out a few things he disagreed with in Obamacare, like the creation of a separate health-insurance exchange for small businesses. And unlike a lot of experts, he’s willing to make predictions about how health care will change in the coming years. …

And Gates also included a video explaining the reads

Warren Buffett on Scorecards, Investing, Friends, and the Family Motto

Farnam Street

This website is named after a street located in Omaha, Nebraska. An amazing place, Omaha is famous for being the home of Warren Buffett, one of the world’s richest men. The headquarters of Berkshire Hathaway — and his house — just happen to be on “Farnam Street.” The name of this website is an homage to both Buffett and his business partner Charlie Munger.

While Buffett is famous for his investing acumen, he’s also full of sage wisdom on life and living.

In October 2009, while the housing crisis was still in full effect, his authorized biography The Snowball: Warren Buffett and the Business of Life hit the shelves.

Here are some of his lessons on life and investing.

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Three Early Lessons in Investing

Having bought three shares of Cities Service Preferred at the age of 11, Buffett learned a valuable lesson. After the stock plunged from $38.25 to $27 a share. His sister Doris reminded him daily on the way to school that her stock was going down. Buffett felt “terribly” responsible. When the stock recovered he sold with a slight $5 profit. Almost immediately after, Cities Service quickly soared to $202 a share.

Warren learned three lessons and would call this episode one of the most important of his life. One lesson was not to overly fixate on what he had paid for a stock. The second was not to rush unthinkingly to grab a small profit. He learned these two lessons by brooding over the $ 492 he would have made had he been more patient. It had taken five years of work, since he was six years old, to save the $ 120 to buy this stock. Based on how much he currently made from selling golf balls or peddling popcorn and peanuts at the ballpark, he realized that it could take years to earn back the profit he had “lost.” He would never, never, never forget this mistake. And there was a third lesson, which was about investing other people’s money. If he made a mistake, it might get somebody upset at him. So he didn’t want to have responsibility for anyone else’s money unless he was sure he could succeed.

***
The Scorecard

This is an important one to keep in mind. If we place too much emphasis on what the world thinks, we end up with an outer scorecard.

I feel like I’m on my back, and there’s the Sistine Chapel, and I’m painting away. I like it when people say, ‘Gee, that’s a pretty good-looking painting.’ But it’s my painting, and when somebody says, ‘Why don’t you use more red instead of blue?’ Good-bye. It’s my painting. And I don’t care what they sell it for. The painting itself will never be finished. That’s one of the great things about it.

The big question about how people behave is whether they’ve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard. I always pose it this way. I say: ‘Lookit. Would you rather be the world’s greatest lover, but have everyone think you’re the world’s worst lover? Or would you rather be the world’s worst lover but have everyone think you’re the world’s greatest lover?’ Now, that’s an interesting question.

This has implications if you’re a parent: What you put emphasis on matters.

If all the emphasis is on what the world’s going to think about you, forgetting about how you really behave, you’ll wind up with an Outer Scorecard.

***
Hang Around People Better Than You

After graduating from Columbia University, Buffett returned to Omaha to live with his parents. He spent part of that first summer fulfilling his obligation to the National Guard. While he wasn’t a natural, it sure beat going off to fight in Korea. Part of his duties in the guard required him to attend training camp in La Crosse, Wisconsin, for a few weeks. That experience taught him an incredible lesson that he’d carry forward for the rest of his life.

“It’s a very democratic organization. I mean, what you do outside doesn’t mean much. To fit in, all you had to do was be willing to read comic books. About an hour after I got there, I was reading comic books. Everybody else was reading comic books, why shouldn’t I? My vocabulary shrank to about four words, and you can guess what they were.

“I learned that it pays to hang around with people better than you are, because you will float upward a little bit. And if you hang around with people that behave worse than you , pretty soon you’ll start sliding down the pole. It just works that way.”

***
The Buffett Family Motto

As simple as it is powerful.

“Spend less than you make” could, in fact, have been the Buffett family motto, if accompanied by its corollary, “Don’t go into debt.”

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On Why he Wanted Money

Even when he was little he was always fixated on money. He wanted money. Why?

“It could make me independent. Then I could do what I wanted to do with my life. And the biggest thing I wanted to do was work for myself . I didn’t want other people directing me. The idea of doing what I wanted to do every day was important to me.”

***
Principles

In July of 1952, Susie Buffett, having been married only a few months to Warren, went to Chicago with her parents and new in-laws for the Republican convention. The convention was covered on television for the first time in history. Warren, who stayed in Omaha, watched eagerly — “struck by the power of this medium to magnify and influence events.”

The front-runner was Senator Robert Taft, known as “Mr. Integrity.” He wanted three things: (1) small government; (2) pro-business; and (3) eradicate Communism. Taft’s friend and Warren’s father, Howard Buffett, was the head of his presidential campaign. Taft’s main opponent was the moderate and popular war hero General Dwight D. Eisenhower.

While it might have been the first convention covered by television it still lives in the history books as one of the most controversial Republican conventions. Eisenhower backers pushed through a controversial amendment to the rules that handed him the nomination on the first ballot. Taft and his supporters were, of course, outraged.

But Eisenhower soon made peace with them by promising to combat “creeping socialism.” Taft insisted that his followers swallow their outrage and vote for Eisenhower for the sake of regaining the White House. The Republicans united behind him and his running mate, Richard Nixon; “I Like Ike” buttons sprouted everywhere. Everywhere, that is, except on Howard Buffett’s chest. He broke with the party by refusing to endorse Eisenhower.

This was an act of political suicide. His support within the party evaporated overnight. He was left standing on principle— alone. Warren recognized that his father had “painted himself into a corner.” From his earliest childhood, Warren had always tried to avoid broken promises, burned bridges, and confrontation. Now Howard’s struggles branded three principles even deeper into his son: that allies are essential; that commitments are so sacred that by nature they should be rare; and that grandstanding rarely gets anything done.

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Still Curious?

While reading about Buffett won’t make you as smart as he is, you might learn something in the process. Pick up a copy of The Snowball: Warren Buffett and the Business of Life and give it a shot.