Today, I want to share with you some of the secrets that have made Warren Buffett one of the richest men in the world. My background is in NLP and that was started by the practice of modelling – that is, finding out how someone very talented does something and then replicating their behaviour. What is it that makes a genius, for example? If it can be done, anyone can do it, so long as we follow their internal and external behaviour.
Although some of you may not want to become multi-billionaires, I think it is interesting how Buffett - ‘history’s greatest investor’ - achieved his phenomenal success. These extracts are from Of Permanent Value - The Story of Warren Buffett by Andrew Kilpatrick.
“Buffett lives in a “blighted” area
It’s hard to believe, but he lives in a “blighted” area of Omaha. That is because a 35,822-acre area of east Omaha was declared blighted in an effort to win tax incentives for the Aksarben (Nebraska spelled backwards) property development nearby. The area includes wealthy as well as deteriorating sections.
In the early days, he sometimes kept track of intricate financial matters literally on the backs of envelopes. His was a “one-room” operation.
Buffett always has lived beneath his means.
He insists on rock-bottom operating costs, plenty of cash on hand and “little or no debt.”
For example, it was not until he was in his late 20s and well on his way to being a millionaire that he splurged on a $295 IBM typewriter for the partnership.
“He was always saying he didn’t need it,” recalls William O’Connor, a vice president of Mutual of Omaha who had been an IBM Salesman for 30 years. In his early days, O’Connor made the strenuous sale to Buffett. “It was an IBM Standard Model electric typewriter. He bought the standard model rather than the more costly executive model.”
Always tight-fisted, Buffett occasionally has dipped into his fortune for such endeavours as adding rooms to his house, including a handball court.
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Buffett is a beacon of simplicity and sanity – and probably a genius. Rationality and common sense, actually uncommon sense, are his guiding lights. For example, there are many reasons he bought Coca-Cola stock, but a main one is that human beings, worldwide, get thirsty, and history shows that once exposed to Coke, people continue to drink it.
His three-word job description: “I allocate capital.” His verbose explanation: “My job is to figure out which businesses to invest in, with whom, and at what price.”
Operating from his spartan office, Buffett is the nerve center – along with business partner Charles Munger, who operates from Los Angeles – of a financial empire whose reach and influence sprawl all across the land and beyond.
Usually Buffett invests when there is some temporary stigma or fear or misunderstanding surrounding a superb business. Such was the case when GEICO, the auto insurance firm, came dangerously near bankruptcy in the mid-1970s. He bought big, made about 40 times on his money and now owns all of GEICO.
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A key tenet at Berkshire [his company] is to bet big and seldom.
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The secret to making money, in his view, is not to take risks, but to avoid risks.
Beyond his wealth, Buffett is the most influential investment mind and voice in the land.
He has two concrete rules for all who seek riches:
Rule No. 1. Never lose money.
Rule No. 2. Never forget Rule No. 1.
He lives an extraordinarily independent, stirringly original life. More than 99% of the monetary proceeds and 100% of the human proceeds of his life are to be “returned to society”.
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When Buffett, the avatar of modern investing, wings off to money heaven, he has promised to keep in touch with us. He once told author Adam Smith, “I see myself running Berkshire as long as I live and working on séances afterward.”
For all his splendid long record […] Buffett serves as the business muse of the world."
Wednesday 4 July 2007
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