Have you ever wondered what it is about Warren Buffett that sets him apart? We know so much about the man and his work, yet the essence of his extraordinary success seems to have remained a mystery. What lies at the root of Warren Buffett’s remarkable achievements?
As a fairly young investor trying to understand and make sense of the countless investment styles and philosophies out there, something about Buffett and his charming and modest letters felt like home to me. Here was a man who seemed to provide the most obvious, simple and wise advice about some of the most complicated questions that plague any person thinking about investing. Coupled with that, he was enormously successful, humble and reachable. I was spellbound.
Inspired to find out what is so different or special about this man I set out to interrogate every word this man ever wrote, asking of every sentence: Is this revelatory of his genius as an investor? What I began to see was that Buffett was obviously a lot more than merely an intellectual giant with an unusual investment style. What I came to understand is that Warren Buffett has a magical combination of particular personality qualities that facilitate greatness.
In his book, The Dhandho Investor: The Low–Risk Value Method to High Returns, Mohnish Pabrai coined an investment approach known as "Heads I win; Tails I don't lose much." Q3 2021 hedge fund letters, conferences and more The principle behind this approach was relatively simple. Pabrai explained that he was only looking for securities with Read More
Here are some of the most surprising aspects to Warren Buffett’s character I uncovered whilst writing my book, Being Warren Buffett: Life Lessons from a Cheerful Billionaire, revealing how his happy (and lucky) mix of psychological characteristics combine to create the perfect mindset for making money. Importantly, there is a lesson here for us all; that, in the end, his ‘secret’ is available to everyone who is willing to pursue the perfect marriage of personality and profession.
Frugality is synonymous with restraint, but it’s complex. It’s about having a capacity to restrain your impulses from indulging in what might appear alluring or easy before you. In today’s world of increasing consumption and the desire to acquire more and more, frugality seems like a rare virtue indeed. Ultimately, Warren Buffett is a collector, not a stamp collector or a coin collector, but a collector of money. He seems to love it in much the same way other collectors treasure their objects and therefore having a frugal or restrained attitude toward spending it, allows him to accumulate more of it. Is it true that counting one’s pennies enable the pounds to look after themselves? In Buffett’s case, most certainly, yes.
The structure of our conscience is really about the way we judge ourselves in regard to our success and failures. Churchill once said that ‘success is about going from failure to failure without loss of enthusiasm’. In many ways this is the spirit of conscience that is Buffett’s way. Having this sort of sympathetic conscience enables us to take seriously the making of important decisions whilst also enabling a capacity to recover from mistakes without too vicious an attack for failing. It can often be a fine line but Warren Buffett’s friendly relationship with his conscience allows him to do the right thing by himself and live with the mistakes he makes.
This is perhaps the essence of what investing ultimately is. The ability to forego consumption now in order to be able to consume more in the future. Think of the three little pigs. The third one who puts off having fun in the moment in order to build his house of bricks and ensure his safety (and future fun) is the one who epitomises the maturity required for deferring gratification. Deferring gratification requires a certain strength of character in order to contain anxiety and impulsiveness, both of which would be kryptonite to any investor and especially Buffett.
Cutting your Coat
There is an old idiom that suggests it is wise to cut one’s coat according to one’s cloth. Beyond its obvious literal implications there is a deeper message pertaining to one’s inner resources. In this sense, cutting one’s coat is about embracing the parameters of our resources rather than striving to exceed their limits. This is not a defeatist instruction to diminish our own potential but rather an invitation to grapple with our own reality; or a call to rely on our resources to create the kind of life we desire; one that is defined by the limits of who we are. Warren Buffett often refers to a notion of a circle of competence and how important it is to operate within it and to know its boundaries. ‘We stick with what we understand’, he says. He is not a man who relies on a great imagination and innovative foresight to provide investment opportunities, but that’s who he is; that’s his cloth. And that is what it’s all about. Not a particular style – whether innovative or conservative – but applying your own resources in the most effective way.
What is greed? And how has it come to be thought of so pejoratively? Is it just about wanting more? If so, don’t we all want more? And aren’t surpluses, in every sense, a helpful thing? The danger with greed is that it can rob us of enjoying whatever it is we have, and we never feel as though we have enough. Warren Buffett might be greedy in the simple sense of wanting more, but unlike the miserably greedy, he revels in whatever he has. The ‘cheerfully greedy’ can appreciate and value what they get, they just want more of a good thing. As Mae West said, ’too much of a good thing can be wonderful’. So, is greed in the end just a value judgement about what makes a good life? It’s hard to see how Buffett’s greedy desire for acquiring more has been unhelpful to him. Perhaps we need to more deeply consider what greed is really about?
Buffett says that a public opinion poll is no substitute for thought. There is no question that a large part of Warren Buffett’s success can be ascribed to his ability to think independently and to be his own man. He is one of those rare individuals who is able to stem the tide of others’ opinion so that he can allow his own thoughts to emerge. And while a struggle for independent thought is a significant dimension of ordinary life in a shared world where there is a constant pull to adapt, it rockets into a different league entirely when one attempts to do this in an investment environment. Investing is an orientation toward a fantasized future and one often with enormous financial consequences, so no wonder one can feel vulnerable in this environment. But somehow Buffett remains his own man, unswayed by ‘important people, vocal people, or great numbers of people.’ It’s hard to overstate the significance of this capacity of his as one of the key ingredients of his success.
Modesty is about an awareness of our smallness in the scheme of things, and Warren Buffett is inherently modest. He constantly acknowledges the limited and connected role that he plays in something so much bigger than himself. This world view is far away from the omnipotence and self-importance that characterize a good part of the investment environment today. ‘We will not normally pay a lot in any purchase for what we are supposed to bring to the party – for we find that we don’t ordinarily bring a lot’, he says. He knows he is merely a good investor and that it’s his reliance on what he hasn’t got – the skills of good business operators – that makes him rich. His modesty and humility make it possible for him not merely to know this, but also to comfortably embrace it.
Being Warren Buffett: Life Lessons From a Cheerful Billionaire by Nic Liberman is published by Hardie Grant Books £12.99 hardback/ebook