The Five Lessons I Learned from Warren Buffett
One of the funnier things about the renowned philosopher Aristotle is that, so far as we know, he never wrote anything down. His books, which have been the subject of intense daily study for the past two millennia are, in fact, lecture notes that have been pieced together by scholars.
In many ways, Aristotle is an apt comparison to legendary investor Warren Buffett, Chairman of Berkshire Hathaway. Like his philosophical predecessor, #Buffett has also declined to author any books and instead teaches through lectures. These lectures are almost exclusively offered, at no charge, during the annual #BerkshireHathaway shareholders conference in Nebraska.
Also, like Aristotle, it is safe to assume that #WarrenBuffett's teachings will be studied for many subsequent generations. I can think of no single individual who has taught me more about #business, #finance, and #human behavior – at no cost – than the “Oracle of Omaha.”
Like an ancient scholar stitching together the tapestry of Aristotle’s genius, I thought it would be useful to summarize five of Buffett’s most critically important teachings that were imparted to me over many years of learning:
1) Building an ark is more important than predicting rain
When asked why the company had been so successful at navigating economic cycles, Buffett, and Berkshire Hathaway Vice Chair Charlie Munger, observed that they were more successful in their predictions because “they’ve made fewer of them.” Their mindset stems from the incontrovertible fact that in business, and in life, there will be periods of heavy rain. Moreover, it is a fool’s errand to try and predict when that rain will come. What matters, then, is the ability of a business, or person, to weather storms because of the ark they have built.
2) Investments in oneself have much higher rates of return
Though he received a master’s degree from Columbia University, the only academic achievement that hangs on Buffett’s office wall is a certificate he received for completing a $100 public speaking course. Profoundly nervous at the idea of standing in front of a crowd, Buffett knew he’d have to feel comfortable talking to an audience if he was to be successful in business. Investing in oneself picks up on the concept of building an ark. One of the easiest ways to survive recessionary periods, according to Buffett, is to be the best at what you do. The best lawyer will never be out of work. Neither will the best doctor, the best chef, and so on. Investments in yourself - to improve or become better at something - will therefore pay dividends far beyond any stock purchase.
3) Simple behaviors can often outperform complex behaviors
Taking a page out of engineering principles, Warren Buffett believes that, sometimes, the simplest design is the best one. Buffett has repeatedly chided complex investment schemes and is a perennial advocate for the S&P 500 Index Fund. In his estimation, over 90% of people should do nothing more with their portfolio than put everything in a good, low-fee S&P 500 Index Fund through firms like Vanguard or Fidelity Investments. Not only is it the "gadget" with the fewest moving parts, but it’s also likely to yield greater results in the long run. Buffett has contended time and again that a professional investor is about as accurate in their stock selections as a coin toss. Couple that volatile performance with high fees and you’ll quickly see why simple behaviors are likely the best choice.
4) Mind share is more important than market share
A core tenet of capitalism is the idea that any business ought to prioritize increasing its market share. In other words, a business should focus on drawing existing customers away from competitors while also attracting any new customers to the business as well. More important than owning a large market share, per Buffett, is the emphasis on owning a large mind share instead. Take The Coca-Cola Company, for example. Whenever a patron orders soda at a restaurant they will almost always order a “Coke” or “Sprite,” both products of the Coca-Cola brand. Though I’m sure it’s a fine beverage, I have yet to hear any customer order “RC Cola” while out to dinner. Coke is synonymous with the act of drinking soda. Google is synonymous with the act of searching for information online. Owning Apple’s iPhone is synonymous with owning a cell phone. These businesses have all prioritized mind share – occupying real estate rent free in the minds of customers – because with mind share comes market share. Companies with large market shares but small mind shares should keep watch over their shoulder because it will only be a matter of time before that market share is consumed.
5) Delight should be the primary focus of any business
We’ve all heard the adage “the customer is always right.” But that’s not what Buffett is referring to when he implores businesses to focus on delighting their customers. In fact, Buffett encourages entrepreneurs to write the phrase “delight the customer” on their bathroom mirrors at home so they see it first thing in the morning and last thing before bed. A delighted customer is one that will not only return to your business, but they are the ones most likely to champion your business as well. Free marketing is never a bad thing, and rave reviews of a new product or service from friends or family can be the difference between a business that thrives and one that flops. If a business prioritizes delight, they will hedge their bets and find success with greater frequency.
These are five lessons Warren Buffett taught me, but they are most certainly not the only five lessons he has imparted to a rapt audience of eager students. If there is another lesson Warren Buffett taught you, be sure to add it in the comments below. It may even help scholars construct a Buffett book, just as they did with Aristotle.
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Co-authored by David Brendel and Ryan Stelzer, Think Talk Create: Building Workplaces Fit for Humans was published by the Hachette Book Group under the PublicAffairs imprint on September 21, 2021. Now available to order!
