Warren Buffett, the chairman and CEO of Berkshire Hathaway, also known as the “Oracle of Omaha”, is undoubtedly the most successful investor of the 20th century.
Despite all his worldly success, he is also one of the most humble and generous human beings alive. He recently donated a great portion of his wealth to Bill and Melinda Gates Foundation to be used for philanthropic purposes.
At 82 years old, Buffett also has a wealth of life experiences and wisdom to share with the young professionals of my generation. Here are three of his best pieces of advice for entrepreneurs and young professionals to achieve success in business and life:
1. Develop Excellent Character and Habits
Warren Buffett frequently says that there are many things in life that are outside a person’s control. These may include things like the circumstances in which a person is born, or genetic traits like IQ, looks, or exceptional talent in certain areas. He compares these things to winning a lottery; some people are more fortunate than others. However, a high IQ or exceptional talent alone is rarely a reliable predictor of a person’s success in life. Alternatively, there are things that a person can control. These are often choices related to a person’s character, habits, and temperament. These choices are often what determine how efficiently and effectively a person utilizes his/her IQ, talents, and abilities. According to Buffett, many people with exceptional IQ and talents get in their own way of success because they haven’t adequately developed their character and habits.
Warren Buffett provides a “motor” analogy to demonstrate this point. He compares IQ and talent to the Horsepower (HP) of a motor. On the one hand, a 200 HP motor could be inefficient and produce only 50 HP output and the rest goes to waste. On the other hand, another motor with only 100 HP could be very efficient and produce total 100 HP output. The second motor with less HP provides greater output than the first. The choices made with respect to character and habits are similar to the efficiency of a motor.
“The chains of habit are too weak to be felt until they are too strong to be broken”.
Action Step: According to Buffett, it is easiest to cultivate a good character and habits at
a young age and anyone can do it. An easy to way to do this is to find people whom you admire and write down all the character traits and habits you admire in them. Next, find examples of people whom you are not too fond of and write down all the qualities and habits that you dislike in them. Then simply emulate the list qualities that you like and avoid the qualities that you dislike, and, in some time, you will develop those likable qualities and eliminate the ones that you don’t like in others.
2. Stay Out of Debt
“All I want to know is where I am going to die, so I will never go there”
Warren Buffett’s best financial advice to young professionals is to avoid credit card debts. He says that it is way easier to prevent financial trouble, than to get out of financial trouble. Revolving credit card debts usually come with interest rates in the 18-20% range. According to Buffett, once a person gets into this debt cycle, it is very difficult, if not impossible, to get out of it.
By the time Warren Buffet had graduated from college, he had already saved $10,000. He was already ahead of the game and this put him in a position of advantage in comparison to the rest of his peers. He compares this to getting a head start in a race. If a participant in a race is given the opportunity to start the race even 1 meter ahead of everyone else, it makes a huge difference in the outcome of the race. Similarly, the young professionals who graduate from college without any debt or even with some savings have a huge advantage over everyone else.
Action Step: Warren Buffett’s simple financial rule to follow is: “If you can’t pay for it, don’t buy it, and first get yourself in the position to pay for anything”.
3. Be Humble
In a general sense, humility is the quality of being modest or respectful. If there is anyone who can claim to be humble, it is Warren Buffett. Despite being one of the richest peoples in the world, he always lived and continues to live a very humble life, living in the same home he had bought 50 years ago, driving his own car, and most recently, giving away most of his wealth to be used for philanthropic purposes.
However, Buffett has a second definition of humility as well that he thinks can immensely benefit the young professionals. According to Buffett, humility “is knowing the edges of your own competency”. In other words, humility “is knowing what you don’t know”. Buffett is often quoted saying that he would much rather deal with a person whose IQ is 130 but who thinks it is 125, than someone whose IQ is 180 but who thinks it is 200. The second person would do a lot more harm than good. Buffett’s successful career in investing is partly a result of this humility. He never invests in a business that he does not understand.
Action Step: How can someone go about developing a characteristic such as humility? I would prescribe the same solution that Benjamin Franklin used to develop the thirteen virtues within him. At the end of everyday, think about the instances where you may have transgressed humility and note down those instances on a piece of paper. Make an effort not to repeat the same mistakes again. Only with such rigor and self-reflection can a virtue like humility be developed and practiced over time.
Warren Buffett has walked the talk himself throughout his life and has been immensely successful as a result of it. Therefore, perhaps the reader may be interested in knowing what Buffett’s definition of success is. In a recent (2013) Forbes Q&A interview held at University of Nebraska (Omaha), Buffett said that not everyone is going to make a fortune and not everyone is going to be a world class athlete, but at the end, if the people around you, your family and children, and the people with whom you have worked, care about you after seeing you in action for many-many years, then you are a success. Conversely, if you have everything but not many people care about you, then you would not be considered a huge success in life.
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About the Author: Sushant Misra is a digital entrepreneur, founder of Yogamatstore.com, and founder and host at Trep Talks, a web based interview show where he interviews successful digital entrepreneurs. Follow Sushant on Twitter!