Common Sense Secrets of the Success of Warren Buffett

Warren Buffett And BofA CEO Brian Moynihan Speak At Georgetown UniversityIt is often said that one way to improve one’s odds of success is to choose a successful person to emulate. There are many great, successful achievers in the world, but arguably one of the legendary American success stories is that of Warren Buffett, who is likely the best-known investment strategist of them all, and a billionaire in his own right many times over. If your goal is to reach a level of success in your endeavors that equals or at least approaches that of Warren Buffett, the logical place to start is to take advice from the man himself. Here are some tips for life and investing from Warren Buffett:

1. Make your living doing what makes you happy

Warren Buffett has been a billionaire for most of his life. He clearly doesn’t need to invest in the stock market to put a roof over his head at this point. He has been quoted as saying that it’s not the money that makes him happy, but the earning and growing of it. He compares himself to baseball legend Ted Williams, saying that if Williams had been paid exorbitantly but had a mediocre batting average, he would likely not have been nearly as happy as he would have been with a much lower wage, but a higher batting average. From Warren Buffet: Master of the Market by Jay Steele.

2. When choosing an investment, look for a durable competitive advantage.

One of the first things that Warren Buffett discovered when he began to closely study investing is that a competitive advantage is what allows one company or business to attract and keep more customers than its direct competitors. The trick in choosing a sound business in which to invest is not only to find one with a competitive advantage (a new technology, a new approach to business, or some other benefit on which the company has a monopoly), but with a competitive advantage that is likely to remain for a very long time – one that is durable. From Warren Buffet and the Interpretation of Financial Statements: The Search for the Company With a Durable Competitive Advantage by Mary Buffett and David Clark.

3. Temperament far outweighs IQ when it comes to investing.

Warren Buffett has been quoted as saying that while a person with a below-average IQ might not be expected to make the soundest stock choices, anyone with average intelligence can do well by exercising a calm, independent temperament. That is, the investor should not be of the mindset that one must be for or against a particular trend or crowd. An even temperament will allow an investor to resist the impulsive, knee-jerk buying and selling behaviors that get others into so much hot water. Some things that come into play with keeping the proper temperament include thinking long-term on investments, not short-term, avoiding taking excessive risks, not going into debt to invest, the ability to visualize long-term consequences of bad choices, and avoiding the temptation to try to make a profit from others. From Warren Buffett Invests Like a Girl: And Why You Should, Too by LouAnn Lofton and The Motley Fool Staff.

4. Start from a negotiating position that gives you room to move.

According to Warren Buffett, those in business should never be afraid to ask a high price when selling goods or services, or to offer a low price when buying goods or services. Many customers, investors or others involved in any financial dealings are afraid that they may look like opportunistic vultures if they ask to sell high, or skin flints if they want to buy low. It’s actually prudent to begin at one of these extremes, depending on whether you are buying or selling, because it leaves you room to come down on your sales price or add to your offer when you are negotiating a sale. Starting at your last-ditch position puts you into a situation where you have no options and the outcome will be more extreme than you desire. From The Tao of Warren Buffett: Warren Buffett’s Words of Wisdom: Quotations and Interpretations to Help Guide You to Billionaire Wealth and Enlightened Business Management by Mary Buffett and David Clark.

5. Find your passion in life as early as possible.

This allows you to confirm that your direction is a good one for you, and to learn about your goal and how to achieve it without being forced to gamble on it in desperation later. In the case of Warren Buffett, he made his first investment at the age of eleven. The stock he chose first dipped and then rallied, making him a small profit. After he sold, this same stock went through the roof, causing him to reflect that patience in investing is definitely a virtue. From The Tao of Warren Buffett: Warren Buffett’s Words of Wisdom: Quotations and Interpretations to Help Guide You to Billionaire Wealth and Enlightened Business Management by Mary Buffett and David Clark.

6. One final piece of advice from Warren Buffett is just this

If you feel that you cannot trust a person or business, don’t make a deal. There is no way to benefit from an association with a person or business that lacks it. In Buffett’s case, he was once on the board of directors of a company that badly wanted to make a deal with a notorious media figure whose financial dealings were never stable or aboveboard. The deal moved forward, the media figure passed away at some point in the proceedings, and the company and its board of directors who made the bad deal were left holding the bag. Buffett maintains that anyone who doesn’t hold your trust in the beginning will not grow to earn it in the end, either. From The Tao of Warren Buffett: Warren Buffett’s Words of Wisdom: Quotations and Interpretations to Help Guide You to Billionaire Wealth and Enlightened Business Management by Mary Buffett and David Clark.

It is interesting to note that some of these books full of Warren Buffett’s wisdom and advice have been compiled by people close to him. This speaks to the trustworthiness of the material. Warren Buffett’s great business success and incredible bottom line speak to the trustworthiness of the man and his willingness to help others find their way on the road to success in business and in life.

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