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Mar 23
2010

“Life is like a snowball, all you need is wet snow and a really long hill”, this quote epitomizes Warren Buffett and how he lived his life. Now can we learn a thing or two from Warren Buffett? I definitely hope so! This post is a bit different than what I typically write on this blog. It won’t be a post on analytics and marketing optimization, but rather comments and excerpts from Warren Buffett’s biography. I just recently finished reading his biography – “The Snowball – Warren Buffet and the Business of Life” by Alice Schroeder. I am actually very proud of this accomplishment :) , 834 pages! (I don’t remember ever carrying around a book that heavy!). I took some notes and marked a number of quotes that struck a cord with me that I thought to share with our blog readers.

The following excerpts and comments are in no particular order and in a way are fragmented. I just grouped them in terms of what I gathered as Buffett’s perspectives on business, his work ethics, some personal traits and views on philanthropy as well as interesting factoids.

If you want all the details and really want to enjoy the ride, buy the book and read it in its entirety. But meanwhile, check out these excerpts from The Oracle of Omaha, the professional investor that became one the richest men alive who spent his entire life accumulating wealth and then gave most of it to charity as he was convinced that “the one who dies rich, dies disgraced”.

Personal Traits

  • Buffett regarded rationality and honesty as the highest virtues
  • He is very focused and always stays within his circle of competence
  • There was nothing he hated more than selling people investments that lost them money, he couldn’t stand disappointing people.
  • One of his friends, Peter Kiewit, another Buffett prototype, said: reputation is like fine china, expensive to acquire, and easily broken”. If you are not sure if something is right or wrong, consider whether you’d want it reported in the morning paper.
  • He was bloodhound for anything free or cheap. He was known for his frugality and tightfistedness (once made a deal with a local newsstand to buy week-old magazines at a discount!). When he got a car, he only washed it when it was raining, so the rain could do the manual labor of rinsing
  • He was an “Inner Scoreboard” type of person: he said “would you rather be the world’s greatest lover, but have everyone think you are the world’s worst lover? Or would you rather be the world’s worst liver but have everyone think you’re the world’s greatest lover? Warren’s father was 100% Inner Scoreboard person and “taught him how life should be lived”

Buffett’s Perspective on Business

  • Buffett had a fascination with business as a puzzle worth spending a lifetime to solve
  • He pondered the reasons for failure as a way of deducing the rules of success
  • “It is always a mistake to pay too much for something you wanted. Impatience is the enemy
  • On investing in high tech: he had a long standing bias against technology companies (he felt they had no margin of safety)
  • Ideal business? The one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.. there are very very very few businesses like that … we can move that money around from those businesses to buy more businesses
  • He mastered the art of handicapping which is based on information. The key is to have more information that then other guy, then analyzing it right, then using it rationally
  • He warned investors that trees don’t grow to the sky, but he never stopped from climbing as fast as he could
  • Three roles interested him the most: the relentless collector, expanding his empire of money, people, and the influence. The second was the preacher, sprinkling idealism from the lectern. The third was the cop, foiling the bad guys
  • “Cash combined with courage in a crisis is priceless”

Work Ethics

  • Hard working: it was common in the book to read “I got up at 4:30 in the morning to do such and such”
  • Responsible from a young age: as a kid, he delivered newspapers (two routes, in early morning and in the afternoon). He said “I paid my own bills monthly, always on time, I always showed up to deliver the papers”
  • Ambition: at 14, he fulfilled his dream of saving $1,000, which was inspired by the book “One Thousand Ways to Make $1,000″ (this is a lot of money in the early 1940′s)
  • Learning/Reading: when they moved to Washington DC (his father was elected as a congressman), the first thing Warren asked for was access to the library of congress and specifically hundreds of books on horse handicapping, then he would read them all (so he learned how to make money in the horse racetrack). He learned two rules that apply to investment as well “no one goes home after the first race, and you don’t have to make money back the way you lost it”
  • More reading: to do his detective work he used the Moody’s manuals, and would sit down to read/research/take notes from files that dated forty or fifty years
  • Intensity: looked for partners employees who shared a mutual obsession “Intensity is the price of excellence
  • His favorite concept: stewardship – the lens through which he viewed duty, moral obligation and the responsibility that went along with a position of trust
  • People: Dale Carnegie said to “give people a fine reputation to live up to” Buffett learned how to Carnegize heroic accomplishments out of his people. He would sound like “you’re so good at what you do, this won’t take you any time at all, and it won’t cost anything to do.”
  • He couldn’t bear conflicts and broken relationships
  • He said “we should have people to match our principles, rather than the reverse, but I found out that wasn’t so easy”

Philanthropy

  • Buffett held strong views on specialization: when asked to donate, his first choice, always, was to donate ideas that would get other people to give money (never labored in volunteering directly for causes no matter how urgent and important). He could use his time more efficiently thinking of ideas and making more money to write bigger checks. He felt no inner conflict about how he spent his time.
  • June 26, 2006: Buffett announced that he would give away 85% of his Berkshire Hathaway stocks, worth $37 Billions, to a group of foundations over a number of years 5 out of 6 shares would go to the Bill and Melinda Gates Foundation (to reduce inequities and improve lives around the world in the areas of global health and education
Quotes & Advice

  • He didn’t want his children to live on Easy street because of Berkshire Hathaway
  • Quoting Andrew Carnegie, “one who dies rich, dies disgraced“. Agreed with Bill Gates that the measurement of accomplishment should be “how many lives you can save with a given amount of money”
  • Luck: Buffett always said that he won the “Ovarian Lottery” (as he always credited his success to luck): for example, born in the 1930 (didn’t go to war), he had intelligent parents, he was wired in a way that paid off in this particular society (where capital allocation wiring is important) went to a decent school,etc.. (note: Malcolm Gladwell mentioned a similar thing about Bill Gates and others in his book Outliers”
  • Asked about his greatest success: “measure your success by how many of the people that you want to have love you actually do love you .. the trouble with love is that you can’t buy it”
  • Advice to students: “start a little bit ahead of the game, it’s so much better than starting out behind the game, and credit cards really get you behind the game”
  • He read every biography he could find of people he admired looking for lessons to be learned. Ruled out paying attention to almost anything but business so that he can focus on his passion
  • “People ask me where they should go to work, and I say work for the whom you admire the most. Do what you love, and work for whom you admire the most, and you’ve given yourself the best chance in life you can”
  • One of his favorite quotes, from Martin Luther King’s speeches: “the laws are not to change the heart, but to restrain the heartless

Inheritance

  • “A football player shouldn’t inherit the starting quarterback position from his father, a former start quarterback. Unearned position and inherited wealth drove Buffett crazy, offended his sense of justice, and disturbed his sense of the universe’s symmetry
  • “Around country clubs, you hear people talking about the debilitating aspects of a welfare cycle (food stamps, etc.) and how we are perpetuating the cycle of dependency. These same people are leaving their kids with a lifetime supply of food stamps and beyond. Instead of welfare officer, they have a trust fund officer. You shouldnt’ consume more than you produce”
  • “All along I felt money was just claim checks that should be back to society. I am not an enthusiast for dynastic wealth, particularly when th alternative is 6 Billion people we’ve got much poorer hands in life that we have , getting a chance to benefit from the money

Interesting Facts

  • As his father’s health declined, Warren asked his father to remove him from his will to increase the share left to others (amount of $180,000)
  • Once asked by Bill Gates Sr. “what factor did people feel the most important in getting to where they’d gotten in life? And he said “focus“, and Bill Gates said the same thing (and they both shared the same intensity)
  • “I follow very simple rule when it comes to food, if a 3-year old doesn’t eat it, I don’t eat it”
  • When asked about the business of life: “if a genie appeared and gave you the car of choice (and you love cars), but there is a catch, the is the last care you get in your life. What will you do with it? You’ll read the manual five times, keep it in the grange, fix the least little dent, fixed right away, etc.. ” this is exactly the position you in concerning your mind and body. You only get one mind and one body, and it’s got to last a life time… it’s what you do right now that determines how your mind and body will operate ten, twenty, thirty years from you”
  • On Taxes: “I’d have a higher tax at the higher levels of wealth. Passing wealth form generation to generation flies in the face of a meritocratic society”

So here you have it, go out and find some wet snow, a very long hill, and create your own snowball!!!

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13 Responses to “Excerpts and Quotes from Warren Buffett’s Biography: The Business of Life”

  1. Husam Jandal says:

    Thank you so much Feras for this fantastic blog. I still remember when posted a tweet couple of months ago that you started reading the book, and I was so interested to buy it at that time. I am now even more interested to read it and I can’t wait to get my shipment from Amazon. Please keep sharing the learnings.

  2. Feras Alhlou says:

    I am glad you liked the post. Some of the quotes are very powerful and it’s my intent to put them to use at the personal level and the professional level. Thanks again and hope things are going well for you!

  3. Amany Raafat says:

    This will be my Next book to read, I can’t wait to explore Buffett’s life and you even made it more interesting as i liked one of his rules which was “Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1.”
    Thank you Feras

  4. Bill DeWeese says:

    Feras…been a long, long while. Great post. Its a book that sadly is too far down on my reading list at the moment. I appreciate your willingness to share your gleanings and I will share this out as well. Take care!

  5. Feras Alhlou says:

    Hi Bill, yes, it has been a very loooong while! :) Great to hear from you. I am glad you enjoyed the post. I need to put some of it into action now :) . If you are ever in the san francisco bay area, please let me know, would love to meet and catch up on things.

  6. Feras Alhlou says:

    Thanks for the comment Amany. Yeah, I liked rule #1, and when you do lose money, he says, you don’t have to earn it the same way you lost it :) .

  7. Yomna says:

    Very impressive, quotes no.4 and no.7 are most favorable as they match what I believe in. :)

    Those interesting facts also are surprising, and showing that you shouldn’t have to sacrify any of your principles or virtues in order to be more successful in business…and you should think of others as a core pillar of a successful business…

    Thanks Feras for your great effort to share that with us!

    Definitely, very helpful post :)

  8. Feras Alhlou says:

    Thanks for the comment Yomna. In one of the chapters of the book he said, that he would feel totally miserable if he lost an investment with other people’s money. I think this sense of responsibility was lacking from many investors in the last few years which led to the economic mess we are now in.

  9. Deric Loh says:

    Something for us to pause and reflect back, thanks for sharing this moment with us to make us really ponder Feras !

    Similarly would apply your point earlier onto how we utilize web data:
    “Buffett regarded rationality and honesty as the highest virtues”

    Honesty – As a web analyst, our role is pretty much being really honest through the data thats coming through in our web analytics tool.

    Rationality – And basing our real data sitting on our web analytics tool, we analysis and apply the what, the whys and the how.

    Thanks Feras

    Cheers,
    Deric Loh

  10. Great quotes.. thanks Feras

  11. I like this word,”Impatience is The Enemy” .. Warren Buffet..!
    Life is not easy, but must continue to strive to realize each of our desires, although the results are not the same as we want.
    Have a great day :)

  12. pein says:

    nice blog with full of inspiration..

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