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Looking to build your business or invest like billionaire Warren Buffett?
Secure your financial future, follow the Warren Buffett investment strategy shared in these helpful tips.
Warren Buffett, the world’s second-richest person, shows no signs of slowing down.
Besides owning trains (BNSF Railway), planes (NetJets) and automobiles, Warren Buffett also wholly owns or controls huge stakes in food (Heinz), restaurant (Dairy Queen), beverage (Coca-Cola), banking (Wells Fargo), insurance (Geico), furniture (Nebraska Furniture Mart), real estate (Berkshire Hathaway HomeServices), building (Benjamin Moore) and clothing (Fruit of the Bloom) companies, to name just a few.
Warren Buffett also owns three Network Marketing companies. Warren Buffett Network Marketing Companies – Infinite MLM Blog (infinitemlmsoftware.com) These companies are not directly under the supervision of Warren Buffett. These three companies are run by owned by the Berkshire Hathaway which is owned by Warren Buffett. The three different direct selling companies are listed out below:
- Pampered Chef – it deals with the selling of kitchen and food products
- Kirby – It sells vacuum cleaners
- World Book – They sells encyclopedia
At the center of all these acquisitions is an enduring Warren Buffett investment strategy that is well worth knowing and applying to your own wealth-building goals.
Warren Buffett’s billions of dollars and stellar investing record have helped him transform into the business guru he is today. Often called the “Oracle of Omaha,” Buffett always seems to know which investment class is on its way up – or which business is undervalued and due for a rebound.
Because of his stunning success and reputation, Buffett is also well known for doling out some pretty amazing investing advice. His tip to “be fearful when others are greedy and greedy when others are fearful” is one of our favorites. And we love his advice to “put out the bucket, not the thimble” when it rains gold – as in, make sure you’re taking full advantage when something goes your way.
While his personal, business, wealth building and investment strategy comprises many values and principles that have been honed over the years, Reitenbach-Kissinger Success Institute has collected what it feels are the top tips that can help you become the next one-person, Buffett-like multinational conglomerate.
Warren Buffett – Advice for Entrepreneurs
Warren Buffett, Berkshire Hathaway CEO , talks about his personal experience in business and gave advice to small business owners. Warren Buffett – Advice for Entrepreneurs – YouTube
What Makes a Small Business Successful?
How do you measure whether a small business is successful or not? Success is arguably one of the most subjective words in the English language. In general, though, measuring small business success starts with how much profit a small business generates. The most profitable businesses are deemed to be the most successful.
Starting a small business has its rewards besides money. Starting a small business removes the glass ceiling on how much income an employee can make. A business can make an unlimited amount of income, so there’s no cap on how much money you can make with a small business.
Here are some other measures of success:
- Being the person in charge
- Flexibility with your work schedule
- Do something you’re passionate about
- Create a business legacy that can be transferred to others
- Creating value for society in a far bigger way than working for someone else
What Actions Makes a Small Business Successful?
1. Invest in yourself before you invest in anything else
Since 2011, the University of Nebraska Omaha has hosted the Genius of Warren Buffett seminar, where at one such gathering, one student asked what aspect of investing, in his leisure time, should he be studying.
The Oracle of Omaha replied: “For most people, the bulk of their income is going to come from earning power in their chosen profession. Therefore, from the standpoint of building wealth, free time is better spent sharpening one’s professional skills rather than studying investing.”
Following his own advice, Buffett returned to Omaha, Neb., as a stockbroker and enrolled in a Dale Carnegie public speaking course so he could better communicate with clients, who would prove to be the lifeblood of his early success.
Tip: Like Buffett, you can find a course or certificate program offered by your local community college to improve your professional stature and enhance your earning power. Or you can join the Reitenbach-Kissinger Success Institute to do the same. Always be learning. Early in your career, put mastery before money.
2. Determine Your Major Definite Major Purpose — Determine as early as you can what you want to do with your life – and do it
In his 1947 Woodrow Wilson High School yearbook, Buffett said he “likes math” and wants to be a “stockbroker.” Actually, Buffett’s quest had begun much earlier.
At age 11, he bought his first stock, six shares of Cities Service preferred stock (three for him and three for his sister Doris).
At age 13, he declared to a family friend that he would be a millionaire by the time he was 30 or “I’ll jump off the tallest building in Omaha.”
At 14, he took the earnings from his paper route and bought 40 acres of farmland, valued at $1,200, which he leased out.
At 21, he volunteered to work for one of his business mentors for free.
Tip: Determine your life and business Major Definite Major Purpose. Select a pursuit you’re most passionate about and make it the focus of all your energy and determination. Answer honestly and don’t feel as if you have to major in business (like Buffett) either.
According to a survey conducted by Gallup and Purdue University, business students were the least satisfied in their jobs, and, in a twist, not even the most economically secure.
“My advice to Americans, especially young people, is that if you make a decision about what to major in based on how much money you want to make, you might end up disappointed, not only with your first job but with your overall career,” said Brandon Busteed, executive director of Gallup Education.
3. Watch small expenses
You don’t become a legend or an oracle by not watching the little things.
Although he won’t flinch at spending billions to buy a ketchup company, he also believes in watching his spending down to the last penny. Buffett also won’t buy a company unless it imposes that same kind of financial discipline.
For example, he once bought a company whose owner counted the sheets in rolls of 500-sheet toilet paper to see if he was being shorted.
When his first child was born, Buffett turned a dresser drawer into a bassinet. For his second child, he borrowed a crib, although he had the means to buy a new one.
During one of his most famous investment deals at New York’s Plaza Hotel, he reportedly phoned a friend to bring over a six-pack of Pepsi so he wouldn’t have to pay for room service.
Back in Omaha, he motored around town in a Volkswagen until his wife finally persuaded him to upgrade to a Cadillac, a car better suited for caddying around clients.
Tip: To be able to invest, you have to spend less than you make. By finding ways to cut back on your spending, you’ll have money left over each month to increase your savings and add to your investments.
4. Keep cash in reserve
In Buffett’s latest deal, he used all cash.
He didn’t have to liquidate any investment. By having cash on the sidelines, he was able to pull the trigger with lightning speed. You may not be playing at Buffett’s same level, but you can still emulate his M.O. Keep enough cash in reserve so you can buy “opportunities” too good to pass up.
At the same time, your cash will provide you with a cushion against unexpected events, so you never have to be a panicked seller.
Tip: If your cash reserves aren’t where you feel they should be, maybe there’s hidden treasure you’ve overlooked that you can convert to cash. Perhaps, there’s an old car in your driveway on which you’re still paying insurance, although you never drive it. Maybe, it’s time to cut the cable bill. Do whatever you have to do to build your cash reserves. Keep some power dry!
5. Invest in what you know and understand
Buffett invests in cars, planes, trains, catsup, razors, underwear, jewelry, furniture and boring insurance companies.
There’s not a high-flyer among them, certainly not an Apple or a Google, but the staples he does invest in all make money over time.
He invests in companies’ services and products that people use.
Tip: Review your investments to see if they will continue to have a place in the homes and family budgets of consumers when the next economic downturn takes place.
6. Buy quality
Until Buffett added the classy See’s Candy to his portfolio in 1996, he had largely focused his investment efforts on finding undervalued assets that he could buy cheaply.
Buffett’s partner, Charlie Munger revealed that See’s was the first high-quality business that Berkshire Hathaway ever bought.
The success of the See’s acquisition forever influenced their commitment to buying businesses with a strong reputation and brand recognition.
Tip: Whatever investment you anticipate making, invoke the example of Buffett and Munger’s See’s purchase. Even it’s a little more expensive, buy one coat that’s going to last several seasons, not the one that is barely going to get you through this winter. Always put quality over quantity!
7. Be patient
At 84, Buffett still takes a long-term investment horizon as if he’s going to live another 50 years. “We don’t get paid for activity, just for being right,” Buffett said. “As long as we’ll wait, we’ll wait indefinitely,” he said.
Buffett’s partner, Munger, seconds that investment philosophy: “There are worse situations than drowning in cash and sitting, sitting, sitting,” he said. “I remember when I wasn’t awash in cash — and I don’t want to go back.” As an illustration of this philosophy, Buffett first invested in Coca-Cola in 1988. Since that investment, he has never sold a share.
Similarly, Buffett also has maintained his sizable stake in American Express through severe market downturns only to see the stock rebound with a vengeance.
If you’re looking for the quick score or flip, you’re the anti-Buffett.
“Even now,” Buffett said, “Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”
Tip: So, with your investments, take a long-term approach. Give them time to grow. Don’t be prepared to run at the first sign of trouble or a negative report magnified by the media. If you can’t stomach the ups and downs of investing, consider putting your money in less volatile investments. Slow and steady wins the race.
8. Give up something less valuable to gain something more valuable
The razor blade business that Gillette pioneered and still dominates is the original example of the business model of giving away a larger, infrequently purchased product (the razor) to sell a smaller, repeatedly purchased product (the disposable blades) to customers for the rest of their lives.
Knowing this simple investment truth, Buffett was a big buyer of Gillette stock over the years for which he was richly rewarded.
Tip: Everybody loves a deal. Think of what you can give away as a promotion, premium or loss leader to attract more business for your primary profit-maker. For every steak, you sell, make sure to add a little sizzle.
9. Put as little money into your house as possible or even rent
Sounds shocking, doesn’t it? At age 28, Buffett bought his first house, which he still lives in, for $31,500.
Adjusted for inflation, that sum equals about $260,000 today.
While Buffett admits a home is a great place to create “terrific memories with more to come,” he believes it falls flat as an investment vehicle. “I would have made far more money had I instead rented and used the purchase money to buy stocks,” Buffett said.
When you factor in that it also costs about $4,000 a year on average to maintain a home, ask yourself if buying a home, especially with so many upfront costs, including a down payment, is the best use of your money.
Tip: Don’t beat yourself up if you’re over 30 and still don’t own a house. Rather, beat yourself up if you’re not saving and investing in things that will make your money grow, such as taking full advantage of your company’s 401(k) program.
10. Dare to be different
During the financial crisis, instead of fleeing the markets in lockstep with millions of panicked investors, Buffett stepped up his acquisitions. In 2008, he threw a $3 billion lifeline to Dow Chemical.
That same year he also helped Mars finance its $23 billion purchase of Wrigley.
In 2010, he bought the remaining shares of Burlington Northern Santa Fe Railway Co. for $34 billion.
In 2011, he invested $5 billion in Bank of America. He summed up his go-against-the-grain investment philosophy, saying, “Be fearful when others are greedy, and be greedy when others are fearful.”
A half century after he moved back to Omaha, he was still going against the grain and defying conventional wisdom.
During the Great Recession, he was gobbling up companies — Bank of America, Goldman Sachs Bank USA, General Electric and Dow Chemical — that had been crushed.
Tip: Like Buffett, use an Inner Scorecard, where you judge yourself by your standards, not everyone else’s.
#11: Start a business.
Remember that Buffett started buying shares in Berkshire Hathaway early on, then moved into a leadership role by 1965. Ever since, Buffett has worked diligently to transform this firm into what it is today – a holding company that invests in hundreds of diverse businesses around the world. Berkshire Hathaway is not only at the core of Buffett’s success, but it is one of the main reasons he was able to build unthinkable wealth.
This shouldn’t really surprise you. If you really think about it, most of the truly wealthy people you know aren’t working for somebody else – they are business owners. They are individuals who have used their influence, business acumen, or investing prowess to take over or build companies they can utilize to grow their fortunes. Best Advice to Small Business Owners – YouTube
#12: Become an entrepreneur.
Step two to becoming insanely wealthy is becoming an entrepreneur. While many entrepreneurs are also business owners, most entrepreneurs got their start by inventing a product or launching a business that fills some sort of need. Thanks to the internet, many of today’s most successful entrepreneurs are also ones who figured out how to utilize technology to expand a business idea or make it better.
While plenty of entrepreneurs fail spectacularly, most of the world’s richest people are entrepreneurial in some way.
13. Never Lose Money
“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.“ – Warren Buffet
What makes it impossible to say that you are never going to lose money, is that it would mean that you would never take the calculated risks that are necessary to make money in the first place. But that’s the whole point – taking calculated risks.
Buffett doesn’t take wild chances. He has specific criteria in regard to any business that he will invest in, and this method keeps him from entering blind speculations.
If you use the never lose money mantra as a foundational strategy, it will have a positive effect on everything you will do, whether it has to do with a business or with investing. Many of the lessons that will follow will outline exactly how Buffett avoids losing money in the first place.
14. Buy Businesses – Not Stocks
“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.“ – Warren Buffet
Despite being perhaps the most successful investor in stock market history, Warren Buffett never actually bets on stocks, at least not the way that most investors and even fund managers do.
Buffett looks not at the performance of a given stock, but at the performance of the underlying business. This is critical, because a strong underlying business means that an investment will almost always payoff, at least sooner or later.
The reason why most investors fail to follow Buffett’s advice in this regard is because it requires a lot more work. You actually have to research the individual companies and have a keen understanding of their business and how well they are faring against the competition. Market sentiment of the company’s stock has little to do with it.
Warren Buffet on Network Marketing
” If I had to do it all over again, rather than building an old style business, I would have started building a network marketing business” – Robert Kiyosaki author of New York Times Bestseller Rich Dad , Poor Dad
Fortune magazine called direct selling (of which network marketing is the largest segment) “the best kept secret in the business world.” It has experienced 91-percent growth in the last 10 years with annual sales in excess of $30 billion in the United States, and $100 billion worldwide. Financial experts say it’s a “recession proof” industry.
Billionaire Warren Buffet, after purchasing a network marketing company, called it the best investment he’d ever made.
Tom Peters, author of In Search of Excellence, calls it the first truly revolutionary shift in marketing in the last 50 years.
16. Be in the Game For the Long Haul
“Someone is sitting in the shade today because someone planted a tree a long time ago.“ – Warren Buffet
When you look at the companies that Buffett either owns individually, or through Berkshire Hathaway, they’re all long-term investments. Buffett will buy stocks and hold onto them – not for years – but for decades. As long as the business is strong, the investment will pay off. Buffett’s track record, and the size of his portfolios, are testaments to the success of this strategy.
17. You Are Ultimately Responsible For Your Success or Failure
There are a lot more people in the financial markets then there is understanding of those markets. For this reason, people hold their investments through mutual funds, or pay for the services of investment advisers. Buffett holds that there is no substitute for getting involved in your investments.
Whether your investments succeed, or fail will be completely on your shoulders, and not on those of your investment advisor. He maintains a policy of learning all about an investment and taking complete charge of how you go about managing it. In addition to being a solid strategy, this is also the only way that a novice investor learns to be an expert.
18. Keep Tight Control Over Your Living Expenses
If you look at the most successful people in almost any endeavor, you will typically see that they are people who live the life. That is, they live a lifestyle that is consistent with their level of success. This often leads to more than a little bit of lifestyle inflation, which helps explain how so many super successful people end up in a bankruptcy, and eventually, even the poor house.
Warren Buffett has done an outstanding job of keeping his ego in check when it comes to his lifestyle. It can even be said that he uses the same value principles for investments that he does in managing his own personal finances. For example, Buffett still lives in the same five-bedroom stucco house be purchased in Omaha Nebraska in 1957 for $31,500.
It’s certainly a nice enough house, but it doesn’t come close to the palaces that people who are nowhere near as wealthy as Buffett tend to live in. There is a strong message in that arrangement.
19. Invest in Quality
One of Buffett’s hallmark investment strategies is investing in quality. This means that he invests in companies that have well-known, well-regarded products that add value to the consumer and the economy. The companies he inverts money in are usually household names, which is to say that they have both strong market penetration and brand recognition.
Many less successful investors are drawn to companies and industries that they know little or nothing about. They assume that the less they know, the more likely it is that the investment will be a success, as though it will succeed based on some unexplained mystery factor. Quality – not mystery – makes a company a long-term winning investment.
20. Buy Value
We can think of buying value as buying quality – when it goes on sale. This is part and parcel of Buffet’s never-lose-money strategy. Simply put, Buffett never pays full price for anything, including the investments that populate his portfolios.
He does this by buying companies that are selling at a discount to their real value. This strategy is more commonly referred to as value investing, which is the practice of buying stock in companies that are undervalued compared to other companies in their industry, as well as to the general market.
Buffet has this down to a science. He looks at the fundamentals of a company – it’s earnings, revenue, price-earnings ratio, return on equity and dividend yield, among other metrics – then he compares them to the same metrics in competing companies. If the company is generally strong compared to the competition, but the stock price is well below them, it becomes an investment candidate.
21. Avoid Fads
One thing that is immediately obvious about Buffett is that you’ll never see him running with the herd. That means no “Nifty Fifty” stocks, no hot stock of the year investments – and nothing that even hints at being trendy.
As an example, Buffett has publicly stated that he avoids buying stock in new social media, like Facebook and Google, citing the difficulty in determining their value and how they will fare in the future.
We can also bet that participating in fads would get in the way of investing in quality and value on a long-term basis. If it’s one thing Buffett is, it’s consistent.
22. Buy When “The Blood Is Running in the Streets”
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.“ – Warren Buffet
I just said that you will never see Warren Buffett running with the herd, and this one of the best examples. His investment philosophy is simple – buy when everyone else is selling (be greedy) and sell when everyone else is buying (be fearful). This is consistent with the Wall Street saying (that few investors ever follow), the crowd is usually wrong.
This strategy is very consistent with Buffets strategy of buying value. If you buy when everyone else is selling, you will be able to get positions in strong companies for a lot less than you would pay when the market is running strong, and everyone is buying.
23. Sell Your Losing Positions in Strong Markets
By the same token, if you wait to sell your losing positions until the market is particularly strong, you will minimize your losses. In some cases, you might even recover a profit.
Most investors have great difficulty mastering this concept. Once the stock starts rising, they tend to hold on to it under the assumption that will continue to do so. But in Buffets world, a losing position is a losing position, regardless of where the stock price is at.
24. Risk is Part of the Game – Get Used to It
“Risk comes from not knowing what you’re doing “ – Warren Buffet
Buffets way to wealth is actually a very risky one by conventional standards. He doesn’t invest heavily in safe assets like bonds and treasury bills. He invests primarily in stocks. But stocks are not nearly as risky as people tend think – as long as you know what you’re doing. And Buffet clearly does.
Buffet is able to eliminate most of the risk associated with stocks, by buying them cheaply enough that the speculation – and high prices – are completely squeezed out. Most of the positions that Buffet takes have nowhere to go but up. That is the result of buying after everyone else has sold out their positions.
In Buffets world, you would be buying heavily after a market crash, and keeping your powder dry when a bull market has been around for a few years.
25. Pay Close Attention to Management
“When a management with a reputation of brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.“ – Warren Buffet
While many investment analysts tend to focus on a company’s numbers, market position, specific assets, and even public sentiment, Buffett looks more closely at management. Every one of those tangible metrics can change in the future, substantially weakening a company. But the caliber of management represents the future of the business. With the right people at the helm, the business will grow and prosper no matter what challenges it may face.
26. Stick With What You Know
Just as Buffett avoids fads, he also tends to stick with what he knows when it comes to making investment decisions. In Buffett’s world, you have no business putting money into companies and industries that you know nothing about. Buffett’s billions came from the fact that he invested in businesses that he knew well.
The businesses that he does buy into also tend to be more basic in concept. As we saw in an earlier specific example, Buffett avoids buying into social media companies, since they are virtually new business concepts and not readily measurable. He favors easy to understand concepts like Coca-Cola and insurance.
27. Keep It Simple
“Derivatives are financial weapons of mass destruction. “ – Warren Buffet
There are a small number of investors on Wall Street who are making a lot of money in exotic investments, such as derivatives. Buffett avoids all such investment schemes, preferring to keep his investments basic. It once again gets back to the concept of investing in what it is that you know and understand.
28. Keep a Low Profile
Just as Warren Buffett lifestyle is incredibly simple considering his stature in the world, he also does his best to avoid the spotlight.
Sure, he’s a regular in giving an opinion on economic and public policy, but he avoids the outrageous behavior that has become symptomatic of the ultra-successful. But the success that he has is determined by the success of his business, rather than on his participation in out-of-the-box activities, or inflammatory public comments, designed mostly to draw attention.
We can probably guess that this low-profile existence makes it easier to focus on Buffett’s business at hand. After all, if you’re running around acting wild and making divisive comments, you won’t need to be spending a lot of time on rear-guard strategies to cover your tracks.
Even if you are not into investing, you can take all of these lessons from Warren Buffett’s life and apply them to your life and business, and with positive results.
29: Invest boldly.
When you think back to Buffett’s fairly humble beginnings, you must admit that Warren was “all-in” with his company. He wasn’t diversified at all, which could have been a recipe for disaster.
But you know what? Buffett had the courage to invest boldly, and his belief in himself paid off in a big way. Imagine if he hadn’t invested in Berkshire Hathaway or a small windmill farm, but in index funds instead. Buffett would be rich thanks to the passage of time, but he wouldn’t be who he is today.
30: Think of your business as a partnership
Warren Buffett and Charlie Munger see their shareholders as “owner-partners.” “We view the company as a conduit through which our shareholders own assets
This approach guarantees that everyone is more personally invested in the company. If it’s more personal, employees feel like there’s more at stake. This keeps them loyal and committed, while simultaneously preventing shareholders from dumping shares or speculating.
31: Employees have their own net worth invested with the company
The majority of Berkshire Hathaway’s directors have a substantial portion of their own net worth invested with the company. With stakes that high, you know they’re paying close attention to the quality of their investments. What benefits the company benefits directors, and vice-versa?
32: Make pay proportional to company performance
Instead of bonuses, options, golden handcuffs or parachutes or Fed handouts, Buffett and Munger, who have the vast majority of their fortunes invested with Berkshire Hathaway, are rewarded in sync with their company, not on the crust above it. “When I do something dumb,” Buffett writes, “I want you to be able to derive some solace from the fact that my financial suffering is proportional to yours.” Why can’t all companies be run this way?
33: Measure success by Progress
Buffett and Munger focus on the rate by which Berkshire Hathaway’s shares increase, based on per-share value. That value matters more than size, political clout, or visibility. This is their main priority, and they have a solid way of measuring it.
34: Have a simple strategy for Success
Berkshire has a Plan A and a Plan B for reaching success, which is defined by increasing value per share. Although these strategies may be complex in implementation, they can each be summed up in a single sentence.
Plan A involves generating cash and steady above-average capital returns by owning a diverse set of businesses. Plan B is to own parts of those kinds of businesses in the form of stock bought by Berkshire’s insurance subsidiaries.
Those two sentences cover the basic strategy of one of the world’s most successful and longest-lived conglomerates.
35: Know Bad Times Will Benefit You
If your company is as intimate with the stock market as Berkshire, how do you benefit when said market goes into hibernation mode? By picking shares of companies and entire companies up on the cheap, according to Buffett and Munger. Because companies also tend to buy back their own shares at discounted rates, Berkshire, a major shareholder in a variety of companies, benefits that way, too.
36: Facilitate the Way You Think
Buffett and Munger are upfront about the kind of financial information they provide about their business and why they provide it. They think that conventional accounting doesn’t provide all the necessary numbers to evaluate their businesses’ performances, so they add earnings and additional information because they think that will help readers better judge their performance. If they use additional concepts to assess businesses, they explain them to shareholders and why they think they’re important. This form of transparency has gained Buffett many admirers.
37: Don’t Use Debt
Now here’s an unusual concept. Berkshire funds itself through deferred taxes and the premiums its insurance companies collect. It doesn’t support itself off debt or government bailouts. Buffett and Munger claim to feel an obligation towards shareholders, many of whom have a huge portion of their net worth with Berkshire Hathaway; using debt to field that obligation isn’t comfortable for them. This is exceptional behavior for a business of any size.
38: Only take Out Conservative Loans
In the rare instances Berkshire does take out loans, they’re generally fixed rate and long term. No fancy loans, no abbreviations, no loan sharks cloaked as Wall Street banks. Buffett and co. know that these loans don’t potentially lose you as much money as the other kinds. Having substantial cash, they also pay back those loans as early as possible.
39: Don’t Supersize Management Perks
Buffett and Munger do not increase their office size or private island purchases as Berkshire’s balance sheet grows. The annual rent at Berkshire HQ is a little more than $270,000, piddling by conglomerate standards. For what it’s worth, Buffett’s own annual CEO salary is $100,000, and he has more than 98% of his wealth invested with Berkshire Hathaway.
40: Admit Your Weaknesses
Buffett and Munger don’t like selling their businesses, even the ones that are struggling. Instead, they try to rehabilitate them by addressing the problems that are slowing them down. They don’t “discard (their) least promising businesses at every turn.” They also admit that this attitude negatively affects their financial performance. Yet they keep doing it, because they would rather carry that weakness than pick up and discard their businesses all the time.
41: Communicate as if the table was a round table
When Buffett and Munger communicate, they say they owe it to their shareholders to tell them the “business facts that (Buffett and Munger) would want to know if the tables were turned.” They try to hold their business reporting up to journalistic standards. They also shirk priority updates to analysts or high-grade shareholders. Instead, they update everyone at the same time. This non-elitist model of communication has helped solidify their folk-hero reputation and earn them their “Woodstock of Capitalism” annual meeting in Omaha.
42: Be fearful when others are greedy and greedy when others are fearful
This is perhaps Buffett’s most famous quote. Its application to the stock market is pretty obvious–when most people sell, prices go down, and it’s an ideal time for you to start collecting bargains. The quote applies to other areas of business, too. If everyone’s running towards the latest business opportunity, think before you follow the herd. It could be a bubble. Likewise, if everyone is writing off a market or service model as dead, is it true, or are there still opportunities in the space? The idea is to hone your critical thinking skills so that you see through mass movement and make better investing decisions, inside financial markets and in other areas.
43: Don’t overvalue or undervalue your stock
Berkshire tries to keep a fair value on its stock at all times, though some analysts would beg to differ. Their reasoning behind this is that they want to attract their target market of long-term investors with a loyalty to their company and avoid speculators. Even in privately held companies, the same could be said for any other soft currency, like your reputation, your PR, etc.
44: Have a Success Plan
The Berkshire barge isn’t sinking after Buffett or Munger’s death. They’ve made sure of that through careful succession planning. They’ve reassured investors time and again that the business will continue to run as it has even after its two head men pass on. This keeps investors confident in the company
45: Report Bad News Immediately
Buffett told his managers to always do this in his 2010 letter, based on the hard lesson he learned with Salomon Bros. It’s a good general business concept to follow, whether you’re managing someone, or you work for them. A fresh problem is often easier to address than one that’s been concealed for a while, and often complicated in the process. Case in point: Toyota.
46: Hire people who are not in it for the money
Most of Buffett’s managers are independently wealthy. They work for Berkshire Hathaway because they want to, not because they have to. That means they like their work, and won’t be drawn away by the promise of higher pay
47: Trust Your Employees
Buffett doesn’t micromanage. He acknowledges the fact that his managers run the gamut of styles. Buffett and Munger give the managers as much autonomy as they want, leaving them in charge of operations. Managers send any excess cash their business generate to Buffett and Munger, who invest it accordingly
48: Treat Your Employees Like You Want to be Treated
Buffett says Berkshire does this in order to retain its passionate, independently wealthy managers, but it’s a good general rule of thumb for any business that doesn’t thrive off high turnaround (and really, who does?).
49: Focus on Company Culture
Berkshire’s directors are heavily invested in the company and feel the responsibility of owners. So, they tend to Berkshire as though it were an English garden, cultivating the right investments at the right time so the financial bloom continues, letting managers do what they need to do in order to contribute cash supplements to the cause. Buffett doesn’t believe in layers of bureaucracy or what he dubs “imperious behavior,” common to too many upper-management types
50: With Every Decision Weigh the Alternatives
Berkshire’s business model is to buy businesses, but sometimes even the most drool-worthy acquisition options don’t offer financial returns as good as stocks or bonds. In such cases, no matter how much they want the business, Buffett and Munger buy securities instead, and wait for a better business buy opportunity to come along. They also compare potential buy candidates across industries against each other, making the best financial, not emotional or trend-based, decision
51: Embrace the Unexpected
When Berkshire is swimming in capital, Buffett looks for opportunities across industries. He and Munger don’t limit themselves to one industry or type of investment. As long as they can understand its “likely future,” they can see if it’s a worthy investment. That’s why Berkshire is invested in everything from insurance to candy
Don’t try to copy Buffett’s winning get-rich formula step by step.
He would be the first to tell you that you have to find your own investment strategy and style with which you’re comfortable.
But he also would tell you to be consistent, focused, vigilant, and patiently looking to invest in yourself as well as other opportunities that will stand the test of time and stick to your investment philosophy through thick and thin.
If you’re angling to become rich à la Mark Zuckerberg or Warren Buffett, it’s going to take a lot more than index funds to get there. While you should definitely make sure you’re diversified and investing for the long haul, you’ll need to make some savvy business moves if you want outsized reward for your efforts.
Buffett can take big bets now because he has a ton of cash and years of investing experience most of us don’t. Still, we can learn from his willingness to take calculated risks. These risks are the driver behind his success and his riches.
Do you agree with Buffett’s approach to building businesses, investing and life? Even if you don’t it’s hard to ignore the results he’s produced over his lifetime.
At the end of the day, Buffett preaches taking the necessary time to invest himself in his investments, living below his means (no matter how high they may be), and establishing real relationships through effective communication.
It’s yet to be seen if these are the everlasting keys to success, but it’s definitely worth implementing into your own life and business.
Knowing how to communicate and build relationships with your customers is even more effective when you have the right tools to help you do so. Reitenbach-Kissinger success Institute offers a comprehensive platform for personal development coaching, business coaching, investment coaching and life coaching.
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