“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.
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.
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.
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