Editor’s note: This article was first published in April 2018; the reference to Buffett ‘even at 85’ reflects his age around 2015, and he was 87 when the article appeared.
Today we are looking at Warren Buffett’s best advice for success in life. And that success covers everything.
Probably everyone admires Warren Buffett as one of the best investors in history. His investment advice is the gold standard, and there is no denying that he has a remarkable mind. But whether he is giving lessons on investing or business, or talking about success in life in general, if we pay attention we can see that he always starts from the same principles.
A Warren Buffett special
Some time ago we looked at the habits that had turned Warren Buffett into the best investor and one of the richest people in the world. And in fact, all his success comes down to three incredibly simple habits. So simple that most people don’t bother to apply them.
Warren Buffett’s three habits of success
- Keep learning, and never stop.
- Be patient.
- Give credit where credit is due.
These simple habits can turn out to be a whole world if we dig into them. Clearly, without acquiring the knowledge needed for something, we cannot succeed at anything. And once we have that knowledge, if we relax and stop learning, our growth stalls and we start to fall back, or get overtaken by people who are hungry for success.
Patience, too, is a very scarce mental asset. Everyone wants quick results, ideally with as little effort as possible. Whether we are talking about investing or business, everything takes time, especially in personal finance, where building wealth is a constant process of saving, investing and reinvesting.
In fact, Warren Buffett’s multi-billion-dollar fortune is purely the result of patience and compound interest. That also means being patient enough to wait until the right opportunity comes along.
As he himself puts it, a pregnancy takes nine months, and even if you put nine pregnant women together, it will still take nine months.
See also: How Warren Buffett multiplied his fortune tenfold in 1963
As for giving credit where it is due, besides being a matter of honour and loyalty, it is also a tool of persuasion: it makes people trust you and want to do business with you or work for you.
Beyond investing in the stock market
Both investors and business people need much more knowledge on other subjects than just the technical concepts of stock investing or business.
See also: A new study challenges the 10,000-hours-of-practice theory of success
Warren Buffett spent some of his time giving advice to new graduates, advice that is worth its weight in gold for these young people.
1. Break bad habits quickly
In Buffett’s own words, the chains of bad habits start out so thin that you don’t notice you are wearing them until they have become too thick and heavy. That is when you want to break them, but by then it is much harder.
Habits shape you. Habits can lead you to success or failure. Although it is never too late to break with bad habits, it is better to do it as soon as possible. You can break any bad habit at any time, and you can build good habits at any time. But if you are young, it will take far less effort now than once that bad habit has become part of you.
2. Always play the long game
And not just in investing. We all know that Buffett does not see shares as something to speculate with, buying and selling quickly to make a lot of money. In fact, most people who play that game lose money. More than 90% of traders lose money.
When it comes to investing, choose solid shares in companies you would like to be part of. And be part of them. They will pay you in dividends and through the appreciation of their value over the long term.
Play the long game in everything else, too. If Amazon had focused on making quick money, it would very probably not have achieved the success it has. Jeff Bezos instead focused on the shopping experience, sacrificing his own profits and those of short-term shareholders. In the end, over the long run, the company took off. It did so once it was ready to reap the profits.
If you join a company, play the long game there too. Work, learn, help and improve. Do things well, be patient and the results will come.
3. Always stay humble
It doesn’t matter how far you go, or how far you think you have gone. Never forget where you came from, or it is only a matter of time before you lose everything you have achieved. Stay humble. Always assume you still have a lot to learn.
Read every day and never stop learning. It is well known that Buffett, even at 85, spent more than 70% of his time reading.
See also: Richard Branson’s 10 best pieces of advice for success in business and life
Be humble in how you deal with others, too. Always treat everyone with respect and never stop being approachable.
See also: How Warren Buffett prioritises his time
4. Invest your own money
In his 2018 letter to Berkshire Hathaway shareholders, Buffett strongly recommended not investing with borrowed money. In other words, don’t use loans to buy shares. If a stock you bought with borrowed money falls in value, it can cause needless worry that leads you to make terrible decisions you would never make if the money were entirely yours.
On the other hand, Buffett says that investors with spare cash and no debt have incredible opportunities when the market falls, because they don’t have to worry about paying money back and can take on certain risks with more peace of mind.
5. Build relationships and treat people well
Success comes from the relationships you form along the way. As Buffett sees it, no amount of technical business knowledge can replace the relationships you build and the way you treat people. What’s more, success in business depends precisely on the relationships you build. And to build excellent relationships, treating others well is essential.
6. Look to the future, not the past
Apply this to everything in life. In investing, it doesn’t matter how well a company has done. There is little point in looking only at past results if we are not clear about where the company is heading in the future.
The same goes for life. It doesn’t matter where you come from, but where you are going. It doesn’t matter what you did yesterday, but what you are going to do today and tomorrow. Nor do all the problems you had yesterday or the hundreds of dead ends matter. All that matters is the path you will start building from now on. Living in the past is a bad deal. Our eyes should always be on the future.
See also: 8 books Warren Buffett recommends reading
7. Avoid the herd mentality
This is probably one of Warren Buffett’s most famous pieces of investing advice: “Be fearful when others are greedy, and greedy when others are fearful.” In other words, do the opposite of the herd. That way you will buy cheap and sell dear, which is precisely the opposite of what most investors in the markets do.
See also: 7 lessons about investing and money your parents taught you without knowing it
Buy in recessions and sell in boom times. That is the investment strategy that guarantees the best results.
8. Know when to walk away and cut your losses
Knowing when to quit is much better than being persistent. Buffett learned this lesson as a teenager, when he tried to win back his losses at a horse racing track. After losing a bet, he went back out and bet again to recover his money, but all he managed to do was double his losses.
The best way to get out of a hole starts with not digging any deeper. When an investment has not turned out as you expected, cut the loss immediately. Don’t fall into the psychological biases (loss aversion and commitment bias) that can get you into trouble.
9. Don’t focus on money
Buffett invites you not to focus on money. Being rich is nice, according to Buffett, but how you get there and the people who help and support you along the way are what really matter.
Some time ago, Buffett defined happiness and success in a very particular way: you know you have succeeded in life when the people you wanted to love you really do love you. That is success, because money is of little use if you cannot share it with the people you love.
That said, this advice from Buffett is also useful from another point of view. Sometimes the best way to reach a goal is indirectly. In other words, if you want to get rich, don’t focus on getting rich, but on improving your skills and enjoying the process of making other people’s lives better through your product or service.
If you focus solely on making money (with nothing else of value), you are unlikely to achieve that goal.
See also: Warren Buffett’s commandments of investing
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