Here's What The World's Best Investor, Warren Buffett, Taught Me About Living A Good Life

Nic Liberman :businessinsider:23 Oct 2014 at 4:39pm

Nic Liberman is a Melbourne-based investor whose fascination with the way Warren Buffett views the world inspired him to write his first book, Warren Buffett: Life Lessons from a Cheerful Billionaire. In this guest post, Nic explains what he learnt about how to approach investing from studying how one of the world’s richest men approached life in general.

If, as the old saying goes, the love of money is the root of all evil, then it’s surprising or perhaps reassuring that we can turn to someone who has pursued money so vigorously for good advice on how to live.

In researching Warren Buffett for my book, Being Warren Buffett: Life Lessons from a Cheerful Billionaire, I discovered that Buffett has within him, by his very nature, the perfect combination of helpful qualities that you could ever wish to bring together in an ideal investor. He has a charismatic personality, a wonderful way with words, irresistible charm and an enormous intellect. His equal would be difficult to find.

Does this necessarily mean that all “investment hopefuls” should pack up and go home? Or is there something to be learned from the essential features that make up Buffett’s brilliance as an investor, while still remaining ourselves? Is there some way in which we can understand the nature of his exceptional ability and integrate it into our own natural style, without simply mimicking him?

In seeking an answer to these questions, I interrogated the Buffett that is revealed through his writings. I sought to discover what the essential qualities of his genius are and how they interact to create a certain kind of whole. I did this because it had always struck me as odd that so few commentators have paid any heed to his personality structure − the foundation of the man that is Warren Buffett and the source of his acclaimed actions in the world. For me, the lack of attention to these aspects reflects a widespread tendency to overlook the journey of the self – of who one really is and what one’s life is really about.

It seems to me that there is great danger in rushing to take advice without placing it within the context of the individual personalities giving and receiving it. Let’s take a piece of ‘technical advice’ to illustrate what I mean. Buffett suggests that it is important to have the capacity to survive a 50 per cent drop in price in a stock one owns. This advice works only when the person taking the advice is, like Buffett, extremely diligent and rigorous in his understanding of his stocks and the market; and not sloppy, ill-informed and prone to having a beer while watching his stocks decline by another 50 per cent, heeding the essence of Buffett’s advice with ease.

If we want to be successful investors, it is not sufficient to take Buffett’s advice. We need to discover who we are by questioning ourselves, looking into ourselves and finding an investing style that is respectful of who we are. This is no small challenge but is undoubtedly a worthwhile one because, if we do not understand who Buffett is and who we ourselves are, we cannot fully digest his advice.

Indeed, the avoidance of this kind of exercise could go some way to explaining why Buffett’s generous advice has not helped anyone achieve close to his level of success.
If we can come to know ourselves and find a way of investing that is honest and reflective of who we really are, we have a much greater chance of succeeding. We can then feel at home there – committed, connected and engaged − to spend sufficient time developing our mastery without distractedly looking elsewhere at what the rest of the world is doing. The significance of finding a place where we belong shouldn’t be underestimated. It has the capacity to hold us to our work in a powerfully connected way and also to energise us with the level of intensity that is required for major achievements.

A further surprising benefit of studying Buffett was the realisation that I was learning something more than how Buffett’s qualities facilitate the way he invests: I was learning how to live a good life. And so, in many ways, my book equally hints at what qualities promote a good life, such as loving people, being loyal, thinking independently and accepting our limits.

I have no interest in making judgements about how people should live and what should be important to each individual, and do not suggest that we should emulate Buffett, but it has struck me that there is much to be gained from the way Buffett deals with some of the biggest and most important issues in life.

Buffett’s overall level of emotional maturity – his ability to accept life as it is and people as they are – is also reflected in the way he invests. And it is because he invests in this way, attuned to who he is, that he is so successful.

While I support the idea of knowing who we are and finding a way of investing that is in tune with our personalities, I am not suggesting that it is always helpful to just be the way we are. It is regrettably true that the ‘way we are’ is sometimes very unhelpful or destructive.

Buffett is lucky. He is lucky in the sense that he has the personality that enables him to be a good investor. He can simply “be himself” because all the qualities he has and the way they hang together are conducive to being a great investor. Most of us are not so lucky and need to struggle to overcome those aspects of our selves that prevent us from being successful investors, whether they be our impatience, our ruthlessness or niceness. But even if it’s not our natural inclination and even if we can only achieve some partial approximation in this struggle, we may give ourselves a better chance of a good life.

Of course one cannot overlook the hard work, the time and energy that Buffett has put into cultivating his gifts. But it is also true that many of us could apply ourselves with equal determination and still fall far short.

I have learned an enormous amount from Buffett and through him I have begun the lifelong journey of understanding myself. My hope is that we can all be ourselves but be real with ourselves. To acknowledge our strengths but to equally understand that some parts of who we naturally develop to be might hinder us on our path to success
and contentment.

Ultimately, the qualities I have described in Buffett exist in all of us, in one way or another. Perhaps it is through our understanding of the way in which these qualities exist and interact within Buffett that we can discover how to both harness and battle these qualities in ourselves to become the kinds of investors that most naturally suit our personalities.

Warren Buffett's owner's manual

 

BL :19 JAN 2014

In his letters especially from the earlier years, Buffett had followed the practice of putting out a list of key points that a company needs to satisfy if it wished to get acquired by his investment vehicle Berkshire Hathaway.

The reproduction of those key points will act as a perfect conclusion to our report as it also summarises the key points covered in this report.

However, it should be borne in mind that investing is not a perfect science and hence, mistakes cannot be completely eliminated. A few of them might creep in every now and then.

In fact, even Buffett has acknowledged that he has made quite a few mistakes in his investment career. In a section titled 'Mistakes of the First Twenty-five Years' from the 1989 letter to shareholders, Buffett has reviewed some of the major investment related mistakes that he has made in the twenty-five years preceding 1989. These are the conclusions that he has drawn from them.

Laid out below are the key points that Buffett has mentioned in most of his earlier letters to shareholders. He looks to invest in companies, which have -

1. Demonstrated consistent earning power (future projections are of little interest to him, nor are 'turnaround' situations),

2. Businesses earning good returns on equity while employing little or no debt,

3. Management in place (Buffett says that he can't supply it),

4. Simple businesses (if there is lots of technology, Buffett will not understand it),

5. An offering price (Buffett will not like to waste his time or that of the seller by talking, even preliminarily, about a transaction when price is unknown).

Since all the above points are self-explanatory, we do not intend to add anything more except for a small quote from Buffett, which you should go through so many times that it remains forever etched in your memory.

Mr. Buffett once famously said: "Only follow two rules in investing: Rule#1: Do not lose money, and Rule#2: Do not forget Rule no. 1"

If one devotes his investment lifetime to strictly following what we have outlined in this note and also Buffett's rule, he is likely to emerge a much wealthier person than most of his peers.

This article has been authored by Equitymaster, which is known for its well-researched, unbiased and honest opinions on the Indian stock markets.

We Love What Warren Buffett Says About Life, Luck, And Winning

 B I  :JOE WEISENTHAL    DEC. 10, 2013, 5:04 AM

Warren Buffett recently met with a group of MBA students.

A student asked him what shaped his political views (Buffett is a Democrat). The famous investor offered a great through experiment, which helped him think through the kind of world he wants to live in. In it he characterizes something he calls the 'Ovarian Lottery':

My political views were formed by this process.  Just imagine that it is 24 hours before you are born. A genie comes and says to you in the womb, “You look like an extraordinarily responsible, intelligent, potential human being. Going to emerge in 24 hours and it is an enormous responsibility I am going to assign to you – determination of the political, economic and social system into which you are going to emerge. You set the rules, any political system, democracy, parliamentary, anything you wish, can set the economic structure, communistic, capitalistic, set anything in motion and I guarantee you that when you emerge this world will exist for you, your children and grandchildren.

What’s the catch? One catch – just before you emerge you have to go through a huge bucket with 7 billion slips, one for each human. Dip your hand in and that is what you get – you could be born intelligent or not intelligent, born healthy or disabled, born black or white, born in the US or in Bangladesh, etc. You have no idea which slip you will get. Not knowing which slip you are going to get, how would you design the world? Do you want men to push around females? It’s a 50/50 chance you get female. If you think about the political world, you want a system that gets what people want. You want more and more output because you’ll have more wealth to share around.

The US is a great system, turns out $50,000 GDP per capita, 6 times the amount when I was born in just one lifetime. But not knowing what slip you get, you want a system that once it produces output, you don’t want anyone to be left behind. You want to incentivize the top performers, don’t want equality in results, but do want something that those who get the bad tickets still have a decent life. You also don’t want fear in people’s minds – fear of lack of money in old age, fear of cost of health care.  I call this the “Ovarian Lottery”.

My sisters didn’t get the same ticket. Expectations for them were that they would marry well, or if they work, would work as a nurse, teacher, etc. If you are designing the world knowing 50/50 male or female, you don’t want this type of world for women – you could get female. Design your world this way; this should be your philosophy. I look at Forbes 400, look at their figures and see how it’s gone up in the last 30 years. Americans at the bottom are also improving, and that is great, but we don’t want that degree of inequality. Only governments can correct that. Right way to look at it is the standpoint of how you would view the world if you didn’t know who you would be. If you’re not willing to gamble with your slip out of 100 random slips, you are lucky! The top 1% of 7 billion people. Everyone is wired differently. You can’t say you do everything yourself. We all have teachers, and people before us who led us to where we are. We can’t let people fall too far behind. You all definitely got good slips.

Even if you don't buy Buffett's idea that only government can alleviate certain forms of inequality, one thing that's great about Buffett is his appreciation of luck, and the realization that he won a lottery ticket by dint of his birth. So many of our elites can't stop talking about how hard they worked, or the importance of taking risk and all that. Buffett readily acknowledges that he had incredible fortune from the moment he was born.

At the same event, Warren Buffett also explained why he thought George W. Bush said the greatest economic statement of all time.

Warren Buffett

Warren Buffett
Buffett speaking to students from the University of Kansas School of Business, May 6, 2005
Born	Warren Edward Buffett August 30, 1930 (age 82) Omaha, Nebraska, U.S.
Nationality	United States
Alma mater	University of Nebraska–Lincoln Columbia University
Occupation	Chairman & CEO of Berkshire Hathaway
Years active	1951–present
Salary	US$100,000[1]
Net worth	US$ 53.5 billion (2013)[2]
Religion	Agnostic[3]
Spouse(s)	Susan Thompson Buffett(m. 1952–2004) Astrid Menks (m. 2006)[4]
Children	Susan Alice Buffett Howard Graham Buffett Peter Andrew Buffett
Signature

Warren Buffett is the chairman and CEO of a Berkshire Hathaway, a holding company based in Nebraska. 

He is also the company's primary shareholder.

 Buffett is one of the wealthiest people in the world, with a fortune of over $45 billion. 

The octogenarian is often dubbed the "Oracle of Omaha." 

Buffett graduated with a B.S. in economics from the University of Nebraska in 1950. He subsequently attended the Wharton School of Finance at the University of Pennsylvania.

He established his first investment business, Buffett Partnership, in 1956.

Buffett began investing in Berkshire Hathaway in the early sixties and became the company's chairman in 1970.

 Under his leadership, the firm acquired stocks in companies like the Washington Post, ABC, Salomon and Coca-Cola.

Buffett became a billionaire in 1990.

During the financial crisis of 2008, Buffett bought stocks of Goldman Sachs and GE, both troubled companies.

He announced in 2006 that 83% of his fortune should go to the Bill and Melinda Gates Foundation. 

Then, in 2010, he joined with Gates in declaring that 99% of his fortune would be donated to charity on or before his death.

Early life

Buffett was born in 1930 in Omaha, Nebraska, the second of three children and only son of businessman & politician, Howard Buffett, and his wife Leila (née Stahl). Buffett began his education at Rose Hill Elementary School in Omaha.

 In 1942, his father was elected to the first of four terms in the United States Congress, and after moving with his family to Washington, D.C., Warren finished elementary school, attended Alice Deal Junior High School, and graduated from Woodrow Wilson High School in 1947, where his SR yearbook picture read: "likes math; a future stock broker."

Buffett's interest in the stock market and investing also dated to his childhood, to the days he spent in the customers' lounge of a regional stock brokerage near the office of his father's own brokerage company. 

On a trip to New York City at the age of ten, he made a point to visit the New York Stock Exchange. At the age of 11, he bought 3 shares of Cities Service Preferred for himself, and 3 for his sister. 

While in high school he invested in a business owned by his father and bought a farm worked by a tenant farmer. By the time he finished college, Buffett had accumulated more than $90,000 in savings measured in 2009 dollars.

Buffett entered college in 1947 at the Wharton School of the University of Pennsylvania (1947–49).

 After two years he transferred to the University of Nebraska–Lincoln, where in 1950, at the age of nineteen, he finished his studies for a B.S. in Economics. Buffett enrolled at Columbia Business School after learning that Benjamin Graham (author of "The Intelligent Investor" - one of his favorite books on investing) and David Dodd, two well-known securities analysts, taught there. He received a M.S. in Economics from Columbia Business School in 1951.

Career

Warren Buffett was employed from 1951–54 at Buffett-Falk & Co., Omaha as an Investment Salesman, from 1954–1956 at Graham-Newman Corp., New York as a Securities Analyst, from 1956–1969 at Buffett Partnership, Ltd., Omaha as a General Partner and from 1970 – Present at Berkshire Hathaway Inc, Omaha as its Chairman, CEO.

Buffett worked as a stockbroker while taking a Dale Carnegie public speaking course. Using what he learned, he felt confident enough to teach an "Investment Principles" night class at the University of Nebraska-Omaha.

 The average age of his students was more than twice his own. During this time he also purchased a Sinclair Texaco gas station as a side investment.

In 1952 Buffett married Susan Thompson at Dundee Presbyterian Church and the next year they had their first child, Susan Alice Buffett. In 1954, Buffett accepted a job at Benjamin Graham's partnership.

 His starting salary was $12,000 a year (approximately $97,000 adjusted to 2008 dollars). There he worked closely with Walter Schloss. Graham was a tough man to work for. He was adamant that stocks provide a wide margin of safety after weighting the trade-off between their price and their intrinsic value. 

The argument made sense to Buffett but he questioned whether the criteria were too stringent and caused the company to miss out on big winners that had more qualitative values.

In 1956 he started Buffett Partnership Ltd., an investment partnership in Omaha.

In 1957, Buffett had three partnerships operating the entire year. He purchased a five-bedroom stucco house in Omaha, where he still lives, for $31,500. In 1958 Buffett operated five partnerships the entire year.

In 1959, the company grew to six partnerships operating the entire year and Buffett was introduced to Charlie Munger. By 1960, Buffett had seven partnerships operating: Buffett Associates, Buffett Fund, Dacee, Emdee, Glenoff, Mo-Buff and Underwood.

 He asked one of his partners, a doctor, to find ten other doctors willing to invest $10,000 each in his partnership. 

Eventually eleven agreed, and Buffett pooled their money with a mere $100 original investment of his own. In 1961, Buffett revealed that Sanborn Map Company accounted for 35% of the partnership's assets.

In 1962, Buffett became a millionaire, and merged all partnerships into one partnership. Buffett invested in and eventually took control of a textile manufacturing firm, Berkshire Hathaway. Buffett's partnerships began purchasing shares at $7.60 per share.

In 1965, when Buffett's partnerships aggressively began purchasing Berkshire, they paid $14.86 per share while the company had working capital of $19 per share. 

This did not include the value of fixed assets (factory and equipment). Buffett took control of Berkshire Hathaway at the board meeting and named a new president, Ken Chace, to run the company.

 In 1966, Buffett closed the partnership to new money. Buffett wrote in his letter: "... unless it appears that circumstances have changed (under some conditions added capital would improve results) or unless new partners can bring some asset to the partnership other than simply capital, I intend to admit no additional partners to BPL."

In a second letter, Buffett announced his first investment in a private business — Hochschild, Kohn and Co, a privately owned Baltimore department store. In 1967, Berkshire paid out its first and only dividend of 10 cents.

 In 1969, following his most successful year, Buffett liquidated the partnership and transferred their assets to his partners. Among the assets paid out were shares of Berkshire Hathaway. In 1970, as chairman of Berkshire Hathaway, Buffett began writing his now-famous annual letters to shareholders.

However, he lived solely on his salary of $50,000 per year, and his outside investment income. In 1979, Berkshire began the year trading at $775 per share, and ended at $1,310. Buffett's net worth reached $620 million, placing him on the Forbes 400 for the first time. In 1988, Buffett began buying stock in Coca-Cola Company, eventually purchasing up to 7 percent of the company for $1.02 billion. It would turn out to be one of Berkshire's most lucrative investments, and one which it still holds.

Personal life

Buffett married Susan Buffett née Thompson in 1952. They had three children, Susie, Howard and Peter. The couple began living separately in 1977, although they remained married until her death in July 2004.

 Their daughter, Susie, lives in Omaha and does charitable work through the Susan A. Buffett Foundation and is a national board member of Girls, Inc. In 2006, on his seventy-sixth birthday, Warren married his never-married longtime-companion, Astrid Menks, who was then sixty years old. She had lived with him since his wife's departure in 1977 to San Francisco.

It was Susan Buffett who arranged for the two to meet before she left Omaha to pursue her singing career. 

All three were close and holiday cards to friends were signed "Warren, Susie and Astrid". Susan Buffett briefly discussed this relationship in an interview on the Charlie Rose Show shortly before her death, in a rare glimpse into Buffett's personal life.

Warren Buffett disowned his son Peter's adopted daughter, Nicole, in 2006 after she participated in the Jamie Johnson documentary, The One Percent. Although his first wife had referred to Nicole as one of her "adored grandchildren", Buffett wrote her a letter stating, "I have not emotionally or legally adopted you as a grandchild, nor have the rest of my family adopted you as a niece or a cousin." He signed the letter "Warren."

He remains an avid player of the card game bridge, which he learned from Sharon Osberg, and plays with her and a Bill Gates.

 He spends twelve hours a week playing the game. In 2006, he sponsored a bridge match for the Buffett Cup. 

Modeled on the Ryder Cup in golf, held immediately before it, and in the same city, a team of twelve bridge players from the United States took on twelve Europeans in the event.

He is a dedicated, lifelong follower of Nebraska football, and attends as many games as his schedule permits.

Warren Buffett worked with Christopher Webber on an animated series with chief Andy Heyward, of DiC Entertainment, and then A Squared Entertainment. 

The series features Buffett and Munger, and teaches children healthy financial habits for life.

Buffett was raised Presbyterian but has since described himself as agnostic when it comes to religious beliefs.

 In December 2006 it was reported that Buffett does not carry a cell phone, does not have a computer at his desk, and drives his own automobile, a Cadillac DTS.

Politics

In addition to other political contributions over the years, Buffett has formally endorsed and made campaign contributions to Barack Obama's presidential campaign.

This page is adapted from the Wikipedia entry of December 7, 2010.

Warren Buffett's Advice To A Columbia University Investing Class

BI :Linette Lopez | Apr. 29, 2013, 1:43 PM 



Investors are constantly looking for nuggets of wisdom from the Oracle of Omaha, Warren 

Buffett, so this tidbit on Omaha.com caught our eye.

It's just one quote from Buffett. 

He was at a 165 person Columbia University investing class, and one of the students asked 

him how to prepare for a career in investing.

From Omaha.com:

...Buffett thought for a few seconds and then reached for the stack of reports, trade 

publications and other papers he had brought with him.

“Read 500 pages like this every day,” said Buffett, or words to that effect. “That's how 

knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee 

not many of you will do it.”

        Knowledge is power, y'all.

Berkshire Hathaway's Warren Buffett picks another little-known successor

Source : ET :Newyork/boston ::
12 SEP, 2011, 09.55PM IST, REUTERS 

 Berkshire Hathaway Incexpanded its succession plan for Warren Buffett on Monday, saying Virginia fund manager Ted Weschlerwill join the company early next year to help oversee its investments. 

Berkshire said Weschler and Todd Combs, who joined the company last year, would manage its entire equity and debt portfolio after Buffett retires, possibly aided by a third manager. The third manager has not yet been named. For a time Combs and Weschler will run smaller portions of Berkshire's stock holdings. 

Berkshire's equity portfolio totaled $52.36 billion as of June 30, according to an SEC filing. 

Weschler, like Combs before him, has built up an eye-popping investment record, while keeping a low profile far from the canyons of Wall Street. The Virginia-based money manager delivered total gains of 1,236 percent over the last 11 years, according to investors. 

A number of Buffett's best-known biographers, as well as prominent fund managers including Mario Gabelli, all told Reuters Insider they were not familiar with Weschler or his work. The same was true when Combs was appointed last year. 

Moments after one of the biggest personnel mysteries in finance was lifted and Weschler was appointed as one of a likely trio of heirs to Buffett's stock-picking empire, Weschler kept to his usual routine. He was at his desk at Peninsula Capital Advisors -- the hedge fund he founded in Charlottesville, Virginia in 1999 -- dialing investors, his receptionist said. 

On his voicemail, Weschler said he would call back soon. Weschler's interest in Warren Buffett, who is both chief executive officer of the ice-cream-to-insurance conglomerate and its money manager, has been growing for some time. 

SECRET LUNCHES According to journalist Carol Loomis, a long-time friend of and ghost-writer for Buffett, Weschler paid millions of dollars to dine with the "Oracle of Omaha" twice in the last two years. 

But unlike many who bid in the annual charity lunch with Buffett to benefit anti-poverty group Glide, Weschler insisted on anonymity -- wanting his name to be kept out of the headlines and requesting a change of venue from the New York steakhouse where the lunch is usually held. Instead, Weschler, who bid $2.63 million, met Buffett on his home turf in Omaha. 

Over the last years, pressure has mounted on Buffett to put a succession plan into place for the day the 81-year-old will no longer run the company. Buffett's roles of investment manager will be split after he retires; the names on the CEO succession list are secret, however. 

As Buffett has cast his eyes around the world for skillful money managers, Weschler has overseen a very concentrated portfolio with Direct TV, DaVita, which runs kidney dialysis centers, and Liberty Media, ranking among his biggest and most recent holdings. 

In total, he held fewer than a dozen publicly traded U.S. stocks at the end of the second quarter, according to his most recent regulatory filing. He is not required to list stocks he may be shorting or betting against. 

Weschler, 50, earned an undergraduate degree in economics from the Wharton School at the University of Pennsylvania, where Buffett began his own undergraduate career decades ago. 

Before starting his stock-picking career in Virginia, Weschler worked at specialty chemicals and materials company W.R. Grace, where he at one time was assistant to the vice chairman. 

The path for Weschler to join Berkshire was laid at this year's lunch when Buffett pitched the idea of a move to Omaha, Buffett told Loomis. "I very much wanted him to do it, but I didn't expect to get very far with the idea," Buffett said. 

"Ted will no doubt make a lot of money at Berkshire. But he was already making a lot of money with his fund -- you can get an idea of that from the size of his (charity) bids -- so money wasn't a reason for him to come." 

In Charlottesville, a city one-quarter the size of Omaha, Weschler and his wife have supported a number of charities from helping sponsor a youth film festival to donating to one that builds structures for communities in need.