Insights

I’ve just finished reading a book about Warren Buffett called “The Snowball: Warren Buffett and the Business of Life“. For those who haven’t heard of Warren Buffett, he’s the second richest person in the world (or thereabouts). His fortune is now around US $47 billion and predominantly gained through thoroughly researched investments in the share market (later by acquiring whole companies through majority shareholdings).

There are a number of good tips sprinkled throughout the book that I’ve discovered from reading between the lines about Buffett and his life.

1. Spend less than you make - if you don’t know how to save, you will never be rich.
2. Don’t go into debt – if you can avoid it. Cash is king. Stay away from credit cards.
3. Use market fluctuations to your advantage.
4. “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that you’ll do many things differently.”
5. Invest in yourself, never stop learning. Buffett took a course on “How to Win Friends and Influence People” because he was a shy kid. He recognised that this is an essential skill to have in order to be successful. It took him two tries to summon up the courage to attend the course but he achieved it.
6. Reinvest your earnings, so they compound (“snowball”) with time.
7. Brutal honesty is the best path to success.
8. Never gamble with your money – Buffett’s investments were well researched, plus he also had a margin of safety.
9. Don’t follow the crowd – often there are mass delusions (like the dotcom bubble at the turn of the century). Buffett did his investing away from New York, which was the place to be if you were to be a successful investor in the stockmarket.
10. Do what you love doing. Buffett loved it. That’s why he poured over thousands of stocks and statistics, doing meticulous research to uncover some great bargains to invest in.

In 2006, Warren Buffett announced that he will give 85% of his fortune away to charity. The Bill & Melinda Gates Foundation will get most of it since they are the only foundation capable of dealing with such large sums of money. The foundation aims to improve the health, wellbeing and general opportunities of as many individuals and communities throughout the world as possible. There is no point having all that money and not doing something worthwhile with it all.

Buffett still writes annual letters to the shareholders of Berkshire Hathaway, which have now become the stuff of legends. They contain much knowledge about business and investing. You can read them here.