Warren Buffett’s 10 Rules for Success. What do sub sandwiches have to do with success? Well, it turns out, you can find useful information everywhere….even at a Jimmy John’s. We may not always agree with the anecdotes but overall, these are great tips. Tastes like success to me!
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1. Reinvest Your Profits
When you first make money, you may be tempted to spend it. Don’t. Instead, reinvest the profits. Buffett learned this early on. In high school, he and a pal bought a pinball machine to put in a barbershop. With the money they earned, they bought more machines until they had eight in different shops. When the friends sold the venture, Buffett used the proceeds to buy stocks and to start another small business.
2. Be Willing to Be Different
Don’t base your decisions upon what everyone is saying or doing. When Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he was dubbed an oddball. He worked in Omaha, not on Wall Street, and he refused to tell his partners where he was putting their money. People predicted that he’d fail, but when he closed his partnership14 years later, it was worth more than $100 million.
3. Never Suck Your Thumb
Gather in advance any information you need to make a decision, and ask a friend or relative to make sure that you stick to a deadline. Buffett prides himself on swiftly making up his mind and acting on it. He calls any unnecessary sitting and thinking “thumb-sucking.”
4. Spell Out the Deal Before You Start
Your bargaining leverage is always greatest before you begin a job – that’s when you have something to offer that the other party wants. Buffett learned this lesson the hard way as a kid, when his grandfather Ernest hired him and a friend to dig out the family grocery store after a blizzard. The boys spent five hours shoveling until they could barely straighten their frozen hands. Afterward, his grandfather gave the pair less than 90 cents to split.
5. Watch Small Expenses
Buffett invests in businesses run by managers who obsess over the tiniest costs. He once acquired a company whose owner counted the sheets in rolls of 500-sheet toilet paper to see if he was being cheated (he was). He also admired a friend who painted only the side of his office building that faced the road.
6. Limit What You Borrow
Buffett has never borrowed a significant amount — not to invest, not for a mortgage. He has gotten many heart-rending letters from people who thought their borrowing was manageable but became overwhelmed by debt. His advice: Negotiate with creditors to pay what you can. Then, when you’re debt-free, work on saving some money that you can use to invest.
7. Be Persistent
With tenacity and ingenuity, you can win against a more established competitor. Buffett acquired the Nebraska Furniture Mart in 1983 because he liked the way its founder, Rose Blumkin, did business. A Russian immigrant, she built the mart from a pawnshop into the largest furniture store in North America. Her strategy was to undersell the big shots, and she was a merciless negotiator.
8. Know When to Quit
Once, when Buffett was a teen, he went to the racetrack. He bet on a race and lost. To recoup his funds, he bet on another race. He lost again, leaving him with close to nothing. He felt sick — he had squandered nearly a week’s earnings. Buffett never repeated that mistake.
9. Assess the Risks
In 1995, the employer of Buffett’s son, Howie, was accused by the FBI of price-fixing. Buffett advised Howie to imagine the worst- and best-case scenarios if he stayed with the company. His son quickly realized that the risks of staying far outweighed any potential gains, and he quit the next day.
10. Know What Success Really Means
Despite his wealth, Buffett does not measure success by dollars. In 2006, he pledged to give away almost his entire fortune to charities, primarily the Bill and Melinda Gates Foundation. He’s adamant about not funding monuments to himself-no Warren Buffett buildings or halls. “When you get to my age, you’ll measure your success in life by how many of the people you want to have love you actually do love you. That’s the ultimate test of how you’ve lived your life.”
As a seasoned expert in finance and investment strategies, I can confidently affirm that Warren Buffett's 10 Rules for Success are rooted in timeless principles that have contributed to his extraordinary success in the world of investing. Buffett's wisdom is not just applicable to financial matters; it extends to life and business in general.
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Reinvest Your Profits:
- This principle emphasizes the power of compounding. By reinvesting profits, you allow your money to generate more money over time. Buffett's early experience with pinball machines illustrates the concept of scaling and reinvesting earnings into new opportunities.
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Be Willing to Be Different:
- Buffett's success is closely tied to his contrarian approach. Going against the crowd and making decisions based on careful analysis rather than popular opinion has been a key factor in his success. The example of managing money in Omaha, away from Wall Street, showcases his willingness to be different.
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Never Suck Your Thumb:
- Time is a critical factor in investment success. Buffett's aversion to "thumb-sucking" highlights the importance of making timely decisions. Gathering information efficiently and acting promptly is crucial in a dynamic market.
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Spell Out the Deal Before You Start:
- Clearly defining terms and conditions before entering into any venture is essential. Buffett's childhood experience with his grandfather taught him the importance of establishing the deal upfront, ensuring clarity and fairness in agreements.
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Watch Small Expenses:
- The focus on managing small expenses reflects Buffett's appreciation for frugality and efficiency. Businesses that pay attention to even the smallest costs are more likely to be profitable in the long run. The anecdote about counting toilet paper sheets exemplifies this attention to detail.
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Limit What You Borrow:
- Buffett's aversion to significant borrowing aligns with the principle of financial prudence. Managing debt wisely and negotiating with creditors is a strategy he advocates. Being debt-free allows for financial flexibility and the ability to seize investment opportunities.
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Be Persistent:
- Buffett's acquisition of the Nebraska Furniture Mart underscores the value of persistence. The success story of Rose Blumkin, the founder of the mart, exemplifies how tenacity and a unique approach can lead to triumph against established competitors.
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Know When to Quit:
- Buffett's early experience at the racetrack taught him the importance of recognizing when to cut losses. Knowing when to quit is an essential skill in both investing and life. Learning from mistakes and avoiding repeated errors is a hallmark of successful individuals.
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Assess the Risks:
- Buffett's advice to assess risks is fundamental to sound decision-making. Evaluating potential scenarios, as demonstrated in the situation with his son's employer, helps in making informed choices and mitigating risks.
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Know What Success Really Means:
- Buffett's definition of success goes beyond financial wealth. His commitment to philanthropy and measuring success by the love and impact on people's lives reflects a profound understanding of the true meaning of success.
In conclusion, Warren Buffett's rules for success are a testament to the principles of prudence, patience, and a strategic mindset that can be applied not only in the world of finance but in various aspects of life and business. These principles serve as a valuable guide for anyone aspiring to achieve enduring success.
