Warren Buffett Life Lessons

“Conduct yourself in life so other people trust you. It helps even more if they’re right to trust you.”

~Charlie Munger, 2011 Berkshire Meeting

Last Saturday I spent the day with Warren Buffett, Charlie Munger and Bill Gates (and a few other pretty successful guys).

I wish I could say it was just us but there were about 41,000 others in the same room. Attending the Berkshire Hathaway Annual meeting has become an annual tradition. This was my fifth consecutive. And you can be sure I’ll be attending as long as Warren is hosting.

Not only is it why I started my investment partnership a few years back, but it’s also one of the best venues I’ve found for surrounding myself with passionate people.

There’s a lot you can learn from spending 7 hrs in possibly the most powerful, smart and wealthy room in the world.

The best part is you’ll learn more about life than you will about investing.

I wish people realized this before they decided not to attend. Consider it a PhD-level education in life, career, relationships and passion, with some value investing sprinkled on top.

By the end of the meeting, I was left with 16 pages of notes. Some lessons new, some old. All gold.

I’ve whittled down the most widely applicable and intentionally left out those related to deep finance and investing – those are more appropriately saved for one of our fund’s quarterly letters (let me know if you’d like to be on the list). Plus I’m sure someone will do a better job with the technical stuff, not to mention the life philosophies are the real juice of these meetings as far as I’m concerned – the rest can be learned in a book or two.

Let’s hit it!

25 Unmissable Life Lessons from Warren and Charlie:

1. Lose money for the firm and I will be understanding. Lose a shred of reputation and I will be ruthless. Money and things can always be replaced and recovered. Reputation cannot. There is no price worth trading down in what others think of you. This is reiterated every year. If ever in doubt, imagine whatever you do will be reported by an informed reporter the following day in your local newspaper for your family, children and closest friends to read. Should make actions a little more obvious.

2. Choose the best who will have you. In other words, marry up! But it doesn’t stop at finding a husband or wife. Take this approach with every one of your relationships-business partners, friends, employers, teachers. Time and relationships are precious. Aim high and don’t accept anyone who doesn’t make you better.

3. It’s a mistake to think rationality will always hold up, even in able people. David Sokol, one of Berkshire’s most highly touted former managers, reminded us all of this a few weeks back. Buffett and Munger handled what could have easily been a smear session, with class and grace. Don’t expect even the very best and most considerate of people to do right all the time. It’s not human. When it happens, deal with it as you would hope someone would deal with you when in the wrong.

When asked why they weren’t more ‘ruthless’ in their reaction to the situation, Charlie said “I don’t think it’s wrong to remember all he did right in addition to his errors.” Buffett even told a little-known story about David years ago voluntarily offering $12m of his bonus to his colleague because David thought it most fair. Buffett had no obligation to bring this up, especially regarding someone who had just done him wrong. It takes a special man to see the full picture.

4. You can always tell a man to go to hell tomorrow if it turns out to be such a good idea. Why risk being distasteful today if you don’t have to? I bet there’s a better way to handle it. Do your best to avoid making decisions when angry.

5. Don’t worry about the fact that you’re going to fail. If you’re not failing here and there, you’re likely not giving the world all you have. It’s going to happen. Allow it to make you better.

6. You can be cheerful even if things are deteriorating. Sure there’s all kinds of things to worry about with the economy, environment and all else. It’s on you to find the things that inspire and motivate you. They’re out there regardless how dark it may look out your window.

Warren is about as rationally optimistic as they come. He recalls how he was born in the heart of the Great Depression. Most people, if given a choice, would have said ‘no way’ to wanting to be born when all those banks were failing, unemployment’s through roof and the markets through the floor. But all that’s really happened in the 80 years since then is the standard of living has improved. Yet a dollar in 1930 is worth $0.06 today. That’s six cents! And still look what happened. Keep your focus where it belongs. This generally means seeing the big long-term picture, not just what’s in front of your face. As in investing is in life.

7. Continuous learning is absolutely required to have any significant achievement in the world. After last week’s post, you know how I feel about investing in yourself. These guys are obsessed.

8. Own a business that requires very little capital to grow. Ok so I guess I found one investing-related lesson worthy of inclusion here, as it applies to all of us, especially entrepreneurs. A business that requires very little money to grow is better than one that requires a ton. Simple enough right? But very few companies end up qualifying.

It just so happens that a blog is a business that costs almost nothing to grow. If I had 20,000 new subscribers join tomorrow (spread the word!), my cost and time investment in the business wouldn’t change a bit (except for a few more comments to reply to). The same goes for all kinds of information product businesses, which I know a lot of you run or are considering running.

Imagine what would be involved in Walmart doubling their current store base from 9,000 to 18,000? It’s a fantastic business, but talk about a headache. It would cost a fortune. Stick with simple businesses that don’t cost much to run. You’ll have a lot more hair ten years from now.

9. Don’t be in a hurry. Whether you’re starting a business or learning a new skill, you never want to be in too big of a rush. You may miss something important and you’ll surely miss some of the fun. Entrepreneurs are notorious for this (I know I am). Always wanting to get to the next spot. Goals and milestones are great but they are not meant to wish away today. Remember to slow down.

10. Conduct yourself in life so other people trust you. It helps even more if they’re right to trust you. It’s a simple process. Do one then the other. No other asset is more powerful than others having unconditional trust in you. Takes a lifetime to build and an instant to erase.

11. Think about how you want to be remembered. Act accordingly. For Charlie it’s “A fortune fairly won and wisely used.” For Warren it’s “A teacher”. Possibly the understatement of the year.

12. Reduced expectations is the best defense an investor has. This goes for anything in life. Most anger, disappointment and frustration comes from poorly managed expectations. Charlie jokingly said “I’m big on lowering expectations – that’s how I got married, my wife lowered hers.” Expect everything of yourself and nothing of the world and you will always be pleasantly surprised.

Warren and Charlie

Charlie and Warren

13. The problem with rules is people break them. The spirit of rules extends beyond them. They are not meant to be danced around. You know when you’re doing something you shouldn’t. You have to self regulate. If in doubt, refer to #1 above.

14. There are no grey areas when it comes to integrity. No explanation needed.

15. It’s so much fun when you’re trusted and worthy of trust. Earn it and keep it.

16. We’re here to go to bed a little wiser than when we woke up. Warren reminded us how he spent 4 or 5 years of his life in the Omaha Public Library until he was about 10. Hearing things like this make it a little more obvious why he’s where he is. If you enjoy learning it, regard it as important and soak in all you can.

17. I think generally speaking, serving on a lot of different boards is for the birds. Charlie was referring to company boards but the rule holds up in any space. There are serious diminishing returns as you start to get involved in too many projects. Your mind can only focus and be useful with so many things. For me it’s 2-3 max. I don’t care if you can fit them into your schedule. Your mind can’t handle it. Do all you can to keep insane focus.

18. It’s more fun to create partnerships with people to do meaningful things than try to outsmart other people out of money. With most things we work on, there’s room for others. Create a community around the success you intend on producing. Share it with others. They’ll share back.

19. The secret to success in a field is learning all you can about it. Noticing a trend here?

20. Don’t give your kids the idea they’re special just because their parents are rich or powerful. Don’t encourage them to outdo their parents in a field their parents are best at. If your child feels entitled to something, you’re probably the one at fault, not them. Kids who are very interested in learning will continue working regardless of how rich or privileged they are.

21. Someone has to be the exemplar of not grabbing all that he can. Warren’s salary is still $100k. Many bankers out of college get paid more. He’s also pledged his $40+ billion net worth to charity. He could do anything he wants with his wealth. Anything. He’s decided to share it. Don’t be greedy just because you can. Don’t give back just because it looks good. Do it because it matters. It’s all of our job to set an example.

22. Reading fast is a huge advantage. Do all you can to enhance this skill. Warren didn’t know much about speed reading programs but he suggested finding the most effective one out there and taking it. Learn the best techniques young. Tony Robbins did the same thing. Then he read over 700 books on psychology and became the leader in a field he never officially went to school for. I looked into every speed reading program I could find a few years back. The best one I came across was Iris Reading. I now teach some of the classes.

23. Learn to communicate. Warren said the best diploma he has is from a Dale Carnegie public speaking couse he took in 1951 for $100. The return he’s gotten on it is incalculable. How can you not take a course like this with an endorsement like that? The world revolves around personal connection. That starts with communication. Toastmasters is also worth a look.

24. Send letters to people you respect. A new investment manager, Todd Combs, was recently hired for Berkshire to help take over when Warren and Charlie are gone. You can only imagine the competition for this role. When asked how they found him, Charlie said Todd simply wrote him a letter.

Few people step out and try to contact people they admire. So many of us assume everyone else is doing it that in reality few people are. It makes the competition for the really wild and crazy goals not quite so intense. I wrote a letter to Warren two years ago and he sent me one back the very next day. Start writing letters and create world-class connections.

25. Never trade something you have and need for something you don’t have and don’t need, even if you really want it. People make the wrong decision on this everyday. We get tempted to buy all kinds of crap hundreds of time a day. As a result much of the western world has ended up in debt and a lot of trouble all for an extra room or two in their house, a few more horsepower in their car or a certain label on their jeans. Most things you think you ‘need’ are actually wants in disguise. Know the difference and don’t overextend. This goes as much for debt as it does for relationships and all else. Greed is dangerous.

Allow Yourself to be Taught

This weekend and the people that have become a part of my life as a result deserve huge credit for how I approach life and the investment fund I’ve found that my partner and I love running. That’s priceless, yet the cost of attending this 7-hour no-holds-barred Q&A session is free.

I now go out to Omaha each year and see 50-100 rock star people I know. Friends who get to connect once a year and make each other better.

Events like this are everywhere. Don’t underestimate the ripple effect a casual weekend can have. Most the time the only thing that keeps you from experiencing them is having the interest in the first place.

If anyone would like to join me next year, leave a comment below and I’ll see to it that you get the same warm welcome I did.

Start Learning Early

Warren and Charlie are some of the best teachers the world has seen. Few people are more open and generous with their life philosophies, successes and failures. They do it all for free. All you have to do is want to listen.

On Sunday afternoon, before heading to the airport, I ran into a father and his two kids. John, the father, and I got to talking about what we’d learned in the past few days, how I ran my business and the enjoyment of being around people like all of us.

He then introduced me to his son and daughter. They peppered me with questions that people twice my age often don’t think to ask (I knew about half the answers…). They couldn’t have been older than 14. I started coming when I was 24. I couldn’t help but wonder how things would be different if I started 10 years prior…

It’s never too early and it’s never too late. All that matters is you start.

Warren and Charlie, thank you both for the ongoing education of a lifetime. I’ll do my best to pay it forward.

What are the most educational events you attend each year? What’s the biggest lesson your mentor has taught you? Share in the comments and make us all better.

Who else would enjoy this?

Please email this to one person who’d like it and Tweet to any and all fellow learners using the links below. Thanks!


  • http://www.perfectingparenthood.com Perfecting Dad

    Great post. I love the themes of respect, integrity, learning. Warren Buffett is a top calibre person. I also love the point about not letting your kids feel superior!

    Did he really say not to build a business that requires much capital? That seems surprising.

  • http://liveyourlegend.net Scott

    Thanks! He didn’t say not to build a business that requires much capital but he did say to beware of the business that requires a lot of capital to keep up. He would much prefer to own a See’s Candy vs a tractor company or something. At the end of the year See’s has their capital in cash from candy sold whereas the tractor co has their capital in a bunch of old tractors. Unfortunately will how big Buffett now is, he is forced to go after more capital intensive businesses, like Burlington Northern and others. When he was smaller he invested in much fewer of these types of businesses. The best business requires no capital (or hardly any) to grow. The more scalable the better.

  • http://www.perfectingparenthood.com Perfecting Dad

    Typically though, the low capital intensity businesses cannot make much margin because the barrier to entry is so low — unless it has other barriers like patents or some unique advantage. If the candy store was making $10 per lollipop, there would be many other candy stores until the profit per lollipop was much closer to the cost.

    Capital is a huge source of income potential. Burlington Northern makes a 40% or so profit margin because you can’t easily build another railroad. Trucking, on the other hand, makes maybe 5% margin because you can very easily put another truck on the road.

    • http://liveyourlegend.net Scott

      You make a good point. Ideally you get some strong intellectual advantage or a type of duopoly such as a Christies and Sotheby’s in auctions or Standard and Poors and Moody’s with ratings. Not much capital there but very powerful businesses.

  • http://www.amwayglobal.com/mcig Michael

    Thanks for sharing Scott. Your blog is the best find I’ve had last week. You have a lot lessons that will impact my life and that of many others.

    I’m currently studying about relationships and connecting. If you are not following John Maxwell’s leadership blog, I suggest you take a look at it. You’ll find tons of useful information.

    Once again, thanks and I wish you the best!

    • http://liveyourlegend.net Scott

      My pleasure Michael! I’ll dig into Maxwell a bit. Haven’t heard much of him. Thanks for the rec!

  • Sailaja Kattubadi

    Scott,
    Thanks a ton for sharing this wisdom! You definitely made me richer:)
    I, for sure, will implement some of these right from now!

    Regards
    Sailaja

    • http://liveyourlegend.net Scott

      Awesome! Let us know how you get on with it!

  • http://www.balancingmylifeintechnology.com Abby Butts

    Great post Scott! Choose the best that will have you resonated with me as I always believe I push myself harder when surrounded by those better than I am. I am also going to look into speed reading!

    • http://liveyourlegend.net Scott

      The people around you make all the difference for sure. Check out Iris. They do great reading courses!

  • John Beadle

    Sounds like a great conference! I would love to go next year, let me know what advice you have for a newbie. It’s amazing how many of those ideas are so closely intertwined. Although he is not physically my mentor, Dale Carnegie’s book “How to Win friends and Influence People” has some great advice on human interaction and forming valuable relationships. I would highly recommend the book to anyone who has not yet read it.

    Thanks for the Notes Scott!

    • http://liveyourlegend.net Scott

      Nothing beats How to Win Friends!! Thanks for reminding us John. I’ve probably ready that at least half a dozen times. Super powerful.

      As for newbies, just be a sponge. And enjoy!

  • http://www.amwayglobal.com/mcig Michael

    Scott, I forgot to mention that I’d love to go to this conference next year. Please, send me the details.

    Thanks,
    MC

    • http://liveyourlegend.net Scott

      Great. Next year’s is May 5th I believe. Keep an eye out.

  • http://humbleobserver.net Christopher

    Thank you Scott.

    Do you know of any events or mentors like this in NJ?

    • http://liveyourlegend.net Scott

      I would suggest checking out the Value Investors Congress put on by Whitney Tilson. He does one in New York. He’s a friend and has done a great job for people looking to learn about the value investing space.

      Here you go: http://www.valueinvestingcongress.com/

  • Minah Kim

    It’s my eagerness to inundate myself with actively passionate people that makes me come back to your site again and again. As always, a great an inspiring post! Can you please send me information about the conference? Can’t wait!

    • http://liveyourlegend.net Scott

      Thanks so much Minah. The meeting is May 5th next year. Keep an eye out. Sadly we have to what a whole year until the next one!

  • Heather

    Hi Scott,

    I’d love to go to the conference next year. Sounds like it was pretty amazing. I love your blog!

    Heather

    • http://liveyourlegend.net Scott

      Love to see all these future attendees. See you out there!

  • Mari Scott

    Scott,

    I look forward to Your weekly e-mail of knowledge and enthusiasm. You are like sunshine in a blizzard! I would love to go the conference next year – the opportunity to be around so many encouraging individuals would be delightful!

    Thank You,

    Mari

    • http://liveyourlegend.net Scott

      ‘Sunshine in a Blizzard’– Love it!! Thanks so much Mari.

  • Bunny

    HEy Scott ! I dont think i could have read anything better online today.
    Awsome loved it !

    • http://liveyourlegend.net Scott

      So glad to hear it Bunny. Thanks.

  • http://freedominacup.wordpress.com Jacque

    I’m so glad that you have chosen to follow this passion of yours. You are bringing such positive passionate inspirational knowledge to the world. Yours is without a doubt the brightest spot I’ve found on the Internet, and I spend a good amount of time here. Awesome advice. I plan to pass this on to my graduating high school senior. What a gift. Thanks!

    • http://liveyourlegend.net Scott

      Wow Jacque. Thank you. Your words are very heart felt. It’s because of all of you why I write and love it so much. Awesome to hear it’s making a difference somewhere out there.

      So great to have you along for the ride!

    • http://skewed-odds.blogspot.com Mervyn

      Hey Scott,

      Would appreciate if you could add me to your letter list.
      Which markets do you focus on? Interested to know how you started.

      Cheers

  • Jennifer

    first time I’ve ever commented on a blog, that’s how good this post was :) I’ve just started investing, and I too would love more information on the conference if possible! thanks in advance!

    • http://liveyourlegend.net Scott

      Well welcome Jennifer and thanks for stepping out and saying something! I’d love to help all I can regarding you picking up investing and all else. More details on the meeting coming next year. Mark May 5th on the calendar for now!

  • http://www.futuremayorofcherryhurst.com Chad Covey

    I appreciate your synopsis of the meeting, Scott. Well put.
    If I recall accurately, Buffet’s point around un-intensive capital businesses was made in light of inflation (i.e., today’s business environment). Business owners that can raise prices commensurate with inflation without having to significantly increase capital investment will maintain an advantage to those which cannot.

    • http://liveyourlegend.net Scott

      No question about it. He raises the price of See’s Candy every year since he bought it. Started around a dollar a pound and is now over $16. Powerful stuff. Good clarification.

  • Stephanie Rogers

    Hey Scott, another great post, as always! I would also love information about the conference for next year. Like you, I love to surround myself with passionate people and this sounds like a great event for that purpose! Thanks for sharing with us.

    • http://liveyourlegend.net Scott

      Looks like I will be putting out a separate post when the meeting rolls around next year so you all can get in on it. Can’t wait!

  • http://www.velocha.com Mark Warren

    Hi Scott,

    Thank you for some great insite to the meeting and look forward to having the opportunity to attend next year. Please send the details when the time comes.

    Thank you
    Mark

    • Scott

      My pleasure Mark. Looks like we’ll have a great RFYS crew out there next year!!

  • Roc Yang

    Outstanding!

  • Scott

    Awesome!

  • http://www.drewdagostino.com Drew D’Agostino

    Reading and learning can’t be emphasized enough. I would love to have a conversation with Warren just to hear the depth of knowledge he has in areas that many would consider “mundane” or “random” (well, I’d like to speak with him for a couple of other reasons too ;). I’m sure it’s way beyond what I even imagine.

    I’m looking into this speedreading course. How much time did you put into it before you got some really good results?

  • Jonathan

    Hey Scott!

    I was really looking forward to this post and you delivered in a big way! I spoke with my fiance about this weekend, and we’re both in for next year! We are continuing to work on our 5 top priorities for the year – so far so good. Please keep us in the loop and I’ll do the same on my end. I’m interested in hearing more about your investment company as well and what kind of investments your involved in.

    Thanks Scott,

    Jonathan

  • Philip

    I couldn’t get to Omaha this year, but went for the first time time last year and your summary was like an echo of the key takeaways I took from that trip. Thanks for the reminder! The thing that really struck me was the level of optimism that both Charlie and Warren had about the future (they had been barraged with a lot of questions about inflation, sovereign defaults etc.).

    If you are happy to share your investment quarterly’s I’d be delighted to be on the list!

    Also speed reading has been added to my to do list! :)

  • Daniel M.

    While I would of course agree that you’re not going to get the margin you would selling candy as you would building railroads, there’s still tons of competitive potential in -how- you sell a low barrier product.

    Case in point: there is a market of coffee consumers who pick their coffee shop of choice not for the price, but for other factors, whether that be the unique atmosphere, taste preference, etc.

    I bet Starbucks could probably run any local shop into the ground in a price war (if they actually cared), but there are a million and one twists you can add to make your shop unique. Each twist could capture and hold a niche of the total coffee drinker market and be an excellent investment.

    I’ve personally seen Christian coffee shops, coffee shops that double as local art galleries (and commission/sell the art), coffee shops that actively try to build community networks around themselves to get people involved locally, and on and on, and all of them have been successful once they picked their niche.

    In that case, it’s not really the coffee people are buying, but your particular shop’s image/attitude/brand/atmosphere/energy/whatever you want to call it. And that’s virtually free (aside from any training you may feel your employees need to represent that image).

    That’s how I would go about trying to sell a low-margin product in such a way that it’s still a worthwhile investment.

    I’m curious about your comment about Buffett needing to go into more capital intensive businesses now by virtue of how big he is now. Can you explain that a bit more?

  • Gita

    Awesome article, Scott!
    Thank you for sharing these lessons . They’re really powerful.

  • http://www.coinr.com Peter Cooper

    One of the best posts I have ever read. Thank you. @pc0 from @coinr

  • Ginah Kim

    I can’t believe I only recently found out about your blog. Thank you for this amazing post! And I would love to go to this conference next year!

  • jenny williams

    I do a lot of talking, I do a lot of preaching. I’d like to take a break and listen to someone else’s views and perspectives. These will make my character, my words and my outlooks more powerful the next time i choose to speak. I am interested in attending this event event next year.

    Many Thanks,
    Jennifer Williams

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  • http://www.achhikhabar.com/ Gopal Mishra

    Hi Scott

    Last time I visited your site quite some time back. But I forgot to bookmark etc…and wasn’t able to find you again until today…when I found your blog in the top 50 list at CYT.

    Now won’t miss you.I run a Hindi blog, you won’t be able to understand ;) but still can just have a look to give your best wishes….And Merry Christmas & A Happy New Year.

  • Soul

    Hi Scott,

    Just found your site through Zen Habits and I wanted to say thank you for all the amazing information – I’m working my way through it right now!

    I’m based in London, but would love to attend the Berkshire Hathaway Annual meeting which is coming up quite soon I guess. Please do let me know details about it when you have them – my mission is to attend! :-)

    Thanks and take care

    Soul

  • J.D. Bird

    Hey Scott. Great blog, well done. I’m heading to Omaha this weekend for the meeting, and am hugely interested in meeting people with your passion and interest in wisdom. It’d be a pleasure to meet you.

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  • http://www.flickr.com/photos/kconstabile Kerry

    Scott — inspiring post, thank you. Would love to be added to your listserv and also to find out when there are upcoming similar events.

    Thanks, Kerry

  • Anjan

    You are doing a great job here Scott.
    Thanks so much for the inspiration my life was lacking. :D

  • http://www.keepandshare.com/doc/5230238/methods-to-improve-how-you-handle-your-time-and-sasha-mchale-20121210-145858-pdf-81k?dn=y Marta

    Sweet blog! I found it while surfing around on Yahoo News.

    Do you have any suggestions on how to get listed in Yahoo News?

    I’ve been trying for a while but I never seem to get there! Cheers

  • http://www.facebook.com/anikahedstrom Anika Hedstrom

    Scott, I just sent you a separate email and I would LOVE to attend this event for the first time. Just looked and it’s scheduled for May 4th. Is it open to everyone? I would love to join you this year. Hopefully we can connect in San Francisco shortly. Awesome article.

  • Satwant

    Hi Scott, I will like to join you next time, That will be my best day till now.

    Thank You for all the great info.

  • http://www.success-matters.com Claire Boyles

    Thanks for sharing. I wanted to share on twitter, any particular reason why you don’t have a twitter sharing button?

  • Gopinadha Reddy

    Nice collection of 25 points. Reading this helped me to take a decision on a thing which I was in a dilemma for a couple of days. Thanx once again Scott. :)

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