Editor’s note: This article was first published in December 2012. The figure of $52 billion it gives for Warren Buffett’s fortune is from that year; his wealth is much larger today.
Few people know that Warren Buffett‘s success (or what accelerated it) probably comes from an old book called One Thousand Ways to Make $1000. The book was first published in 1936, and it answers the question “How do you make a million dollars?”
In Buffett’s authorised biography, The Snowball, written by Alice Schroeder, Buffett himself admits that when he was 11 he dusted off that old book in the attic and started reading it. More than reading it, he devoured it, analysed it and studied it.
At 11, using the message the book conveyed, he set himself short-term goals and a final target: to become a millionaire by the age of 35.
If that book fell into our hands, many of us would think it was utter nonsense, because it’s basically about making money through the excellent art of selling, hard work and ingenuity, along with knowing how to influence people and win them over.
The book discusses many business ideas that might seem absurd to us, and not because times have changed. I suspect they would have seemed absurd even when Warren Buffett was young, since its examples of profitable businesses include making the most of a dairy cow, manufacturing motorised chairs and renting pool tables to bars.
Be that as it may, sometimes a book isn’t good or bad in itself. What’s good or bad is the reader’s interpretation of it, or the reader’s ability to adapt the messages the author wants to get across.
What did Warren Buffett learn from One Thousand Ways to Make $1000?
The first thing the book teaches you is how to “eat an elephant”. How would you do it? One bite at a time, obviously. Never all at once.
The same goes for getting rich or making a million dollars. It’s better to look for different ways of making money.
See also: 41 ways to make extra money from home with no investment
Most of us tend to set very big, long-term goals, when goals should really be small and short-term, completely achievable within the set time. That helps keep us motivated.
If you think about it, the book isn’t about making a million dollars (or euros), but about making $1,000 many times over. The more times you make $1,000, the closer you get to a million. In other words, Buffett hasn’t made 52,000 million dollars; he has made a million dollars 52,000 times. Ironically, for most of us it’s incredibly hard to make even €1,000 just 300 times.
The book talks about investing and the power of compound interest. If we invest those $1,000, which then earn interest, and add another $1,000 to that interest, the money multiplies faster and faster and in ever larger amounts. See the section on the magic of compound interest in our earlier article on how to make your first million.
The next thing Buffett learned was to be frugal by choice, not by necessity, which led him not to look wealthy but to actually be wealthy.
We all know that, with time and inflation, 10 euros today could be worth just 5 euros in five years. For Warren Buffett it didn’t work that way: to him, 1 euro today, well invested (in businesses, stocks, bonds…), is 10 euros in five years.
Above all, he learned to spot business opportunities that are there for everyone but that few people see. Maybe plenty of people do see them, but if it takes effort or risk to seize them, many leave them for someone braver.
Going back to The Snowball, Warren Buffett says that anyone can make a million dollars, but few people are willing to learn what it takes, or to give up immediate rewards today in exchange for a reward in the future.
Whether you’re starting a business or investing, you need a plan, prior research, and hard, steady work to learn everything about what you’re starting. And it would be unfair for someone who makes no effort to achieve the same as someone who has been working hard for a long time.
For him, the problem isn’t that people can’t become financially free, but that they don’t really want to once they learn the price they have to pay. See Warren Buffett’s 10 keys to financial success.
For another article on how to get rich, written by a self-made millionaire, see:
- How to get rich: Felix Dennis’s secrets
- The 10 best books on financial education and personal finance
Featured image: John Vachon, Public domain, via Wikimedia Commons.
