Warren Buffett

Warren Buffett, majority shareholder, Chairman and CEO of Berkshire Hathaway – a holding company which owns and invests in various other companies – is currently the 3rd richest man in the world. What is it that separates him from all others? What does he believe that has allowed him to be so successful? How does he differ from the masses? How can the everyday man adopt his belief systems to prosper similar to him?

In this blog we will look at the aforementioned.

In general Buffett is a down-to-earth, no-nonsense investor who takes a contrarian stance by “going against the trend”, this has proved very successful over his extended career.

What are his key distinctive belief systems?

Focus

  • Bill Gates father asked both Gates and Buffett at a lunch what the one thing they could agree was the main contributor to their success, at the time they were the two richest men in the world, the answer they both agreed unanimously was focus. Focus on where you are headed and what you want and not letting anyone deter you from what you want.
  • Buffett’s children have been quoted as saying he was so focused when he read that they struggled to get more than a murmur or grumble out of him.
  • He has always lived in Omaha, Nebraska and steered well clear of Wall Street. He said this has allowed him to think independently and not follow others. Going with the masses he has found to be detrimental.
  • Lives, eats and breathes investing 24/7.
Independent Thinker
  • He is an avid contrarian and is quoted famously as saying “be fearful when others are greedy and greedy when others are fearful”.
  • His results over the years have shown that he performs better in bear markets than bull markets.
  • The main example was during the Dot Com bubble when he shied away from all tech stocks saying that he couldn’t understand how they made money or their longevity. Many would accuse him of being “out of touch” or “not understanding the internet”. He wasn’t dissuaded by their remarks. He stuck to what he knew and understood and bought the companies and stocks that most were selling to buy the high tech stocks. As we now know, he had the last laugh.
  • He drove a VW beetle even after he became a millionaire. Reasoning that he could compound money at 20% p.a. so over 20 years he could compound say $35,000 to over $1.3million and “that’s just too much to spend on a car” he would say!
Positive Beliefs
  • He loves what he does. He often says he “tap dances to work each day”.
  • He is grateful for the world he was born into saying he “won the Ovarian Lottery” by being born male, white, with a high IQ, into a middle class family and early in the 20th Century.
  • He is a billionaire and so could do whatever he wants in life, he says there is nothing he would rather be doing. He has his dream job.
Common Sense
  • He has vowed to give his fortune to charity with the majority (83%) going to the Bill and Melinda Gates Foundation. He chose to give it to them purely from a common sense stand point – they are already dealing with such large sums and so would not squander and waste it due to them already being set up to such a degree. It would cost him a significant amount of his capital to set up a foundation of the magnitude to handle his fortune that would be wasteful and so society wouldn’t get the full benefit.
  • In valuing a company he moves away from financial jargon and more to the general performance and capabilities of management and the company’s brand value.
  • He considers shares a part ownership in a company not just a ticker symbol on a screen.
Dale Carnegie
  • He attended a Dale Carnegie public speaking course when he was younger and such teachings found in Carnegie’s book ‘How To Win Friends and Influence People’ can be discovered when studying Buffett.
  • He praises the managers of his various company’s in his annual letters to shareholders
  • He instills confidence in his managers so they will do their best to never let him down
  • Gives managers freedom
  • Rewards his employees with good working conditions and the freedom of running their own show as opposed to cash bonuses and stock options.
Berkshire Hathaway Key Subsidiaries:
  • Geico Insurance
  • See’s Candy
  • Borshiem’s Fine Jewelry
  • Burlington Northern Santa Fe Railway
  • Nebraska Furniture Mart
  • Net Jets
  • and many more
Berkshire Hathaway Significant Shareholdings:
  • The Coca Cola Company
  • American Express
  • Wells Fargo
  • Gillette
  • H & R Block
  • Moody’s Corporation
  • The Washington Post
  • and many more
Any questions or comments feel free to post.
Advertisements