The secret to warren buffett's success


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Everyone knows that Warren Buffett and Charlie Munger are a formidable duo when it comes to smart investments. But what is their secret to being so successful? Read on..

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The secret to warren buffett's success

  1. 1. The secret to Warren Buffetts successEveryone knows that Warren Buffett and Charlie Munger are a formidable duo when it comes tosmart investments. But what is their secret to being so successful? Read on.......Author : iFast Content TeamThere is an article titled The Buffett Formula - How To Get Smarter that has gotten extremelypopular and is doing the rounds on the net. One should not be surprised. Any advice fromBuffett is always welcome. This article throws light on the investing success of two world-renowned investors who work at Berkshire Hathaway- Warren Buffet and Charlie Munger. Ihave culled out a few extracts and noted them here.What is really interesting is that Munger sees his knowledge accumulation as an acquired,rather than natural, genius. And he gives all the credit to the studying he does. “Neither Warrennor I is smart enough to make the decisions with no time to think,” Munger once told a reporter.“We make actual decisions very rapidly because we’ve spent so much time preparing ourselvesby quietly sitting and reading and thinking.”So lets look at the Buffett formula, named after Buffett and his longtime business partnerMunger. Not only are they an extraordinary combination of minds but are also learningmachines. They didn’t get smart because they are both billionaires. No, in fact they becamebillionaires because they are smart. More importantly, they keep getting smarter. Read. A lot.Buffett says, “I just sit in my office and read all day.” He estimates that he spends 80% of hisworking day reading and thinking. “You could hardly find a partnership in which two peoplesettle on reading more hours of the day than in ours,” Munger commented.When asked how to get smarter, Buffett once held up stacks of paper and said “read 500 pageslike this every day. That’s how knowledge builds up, like compound interest.”One smart cookie who implemented Buffett’s advice, Todd Combs, now works for the legendaryinvestor.But how you read matters too. You need to be critical and always thinking. You need to do themental work required to hold an opinion.In Working Tougher: Why Great Partnerships Succeed Buffett comments to author MichaelEisner: "Look, my job is essentially just corralling more and more and more facts andinformation, and occasionally seeing whether that leads to some action. And Charlie—hischildren call him a book with legs." Learn. Continuously & Constantly.Eisner comments that the reason both men agreed that it’s better that they never lived in thesame city, or worked in the same office is because they would have wanted to talk all the time,leaving no time for the reading. Munger himself says: “If we had not been continuous learners,the record would not have been as good. And we were so extreme about it that we both spentthe better part of our days reading, so we could learn more, which is not a common pattern inbusiness.”Theres a catch here. They dont read the celebrity pages to find Kim Kardashians latest anticsor how many children Brad Pitt and Angelina Jolie currently have. Neither do they read otherpeoples opinions. “We don’t read other people’s opinions. We want to get the facts, and thenthink,” explains Buffett. “Charlie can’t encounter a problem without thinking of an answer. He
  2. 2. has the best 30-second mind I’ve ever seen. I’ll call him up, and within 30 seconds, he’ll grasp it.He just sees things immediately.”Munger offers: "We read a lot. I don’t know anyone who’s wise who doesn’t read a lot. But that’snot enough. You have to have a temperament to grab ideas and do sensible things. Most peopledon’t grab the right ideas or don’t know what to do with them."Commenting on what it means to have knowledge, in How To Read A Book: The Classic Guide toIntelligent Reading, Mortimer Adler writes: “The person who says he knows what he thinks butcannot express it usually does not know what he thinks.”I know a lot of people like that and frankly, sometimes I am guilty of the same.Can you explain what you know to someone else? Try it. Pick an idea you think you have a graspof and write it out on a sheet of paper as if you were explaining it to someone else. Or better still,get someone to sit down and listen to you and then ask him if you are making sense. Stop the blame game. Specially when its your genes.In an interview he gave for his authorized biography The Snowball: Warren Buffett and theBusiness of Life, Buffett narrated this story:Charlie, as a very young lawyer, was probably getting $20 an hour. He thought to himself, ‘Who’smy most valuable client?’ He decided it was himself. So he decided to sell himself an hour eachday. Everybody should do this, be the client, and then work for other people, too, and sellyourself an hour a day. It’s important to think about the opportunity cost of this hour. On onehand you can check twitter, read some online news, and reply to a few emails while pretendingto finish the memo that is supposed to be the focus of your attention. On the other hand, you candedicate the time to improving yourself. In the short term, you’re better off with the dopaminelaced rush of email and twitter while multitasking. In the long term, the investment in learningsomething new and improving yourself goes further.“I have always wanted to improve what I do,” Munger comments “even if it reduces my incomein any given year. And I always set aside time so I can play my own self-amusement andimprovement game.”Go to bed smarter than when you woke up- Charlie MungerHave you ever realised that most people go through life not really getting any smarter? Is thatnot shocking? That is simply because they won’t do the work required. It’s easy to come home,sit on the couch, watch TV and zone out until bed time rolls around. But that’s not really going tohelp you get smarter. Sure you know what happened on Survivor and Mad Men and who CarrieBradshaw in Sex and the City is currently dating. But that’s not knowledge accumulation, it’s amind-numbing sedative.So read and concentrate when you do that. Another way to get smarter, outside of reading, is tosurround yourself with people who are not afraid to challenge your ideas. It sharpens yourthought process, makes you question your convictions and forces you to think harder andsmarter. Howards Marks: What makes an investor smart Warren Buffett: Wisdom & advice at 2013 annual meet Worlds most famous contrarian investors
  3. 3. Heres why you should consider investing in mutual funds.To buy and sell mutual funds online, click here.Disclaimer: iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual fundsof any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or bematerially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or saleof any mutual fund. No investment decision should be taken without first viewing a mutual funds scheme information documentincluding statement of additional information. Any advice herein is made on a general basis and does not take into account thespecific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, andlegal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative ofthe future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise.Opinions expressed herein are subject to change without notice. Please read our disclaimer on the website. Please read ourdisclaimer in the website. Risk Factors: Mutual funds, like securities investments, are subject to market risks and there is noguarantee against loss in the Scheme or that the Scheme’s objectives will be achieved. As with any investment in securities, the NAVof the Units issued under the Scheme can go up or down depending on various factors and forces affecting capital markets. Pastperformance of the Sponsor/the AMC/the Mutual Fund does not indicate the future performance of the Scheme. The name of theScheme does not in any manner indicate the quality of the Scheme, its future prospects or returns. Please read the Statement ofAdditional Information and Scheme Information Document carefully before investing.