1. Fortune favors the bold.
In 1951, when he was not even 21 years old, Buffett took a train to Washington, DC on a Saturday, and “pounded on the door” of the headquarters at the insurance company, Geico, where his mentor and investing hero, Benjamin Graham, was chairman.
His brash arrival led to a four-hour lecture on the insurance industry from a top executive who would later become CEO, and that tutorial led to Buffett’s lifelong connection to Geico. Today, Berkshire owns all of Geico itself, and Berkshire’s insurance interests are what Buffett calls one of the company’s “crown jewels.”
Had Buffett not been bold enough to show up at Geico on that day 70 years ago, it’s likely none of this would have happened. Audacity pays off; early audacity can pay off most.
2. Measure things, so you can improve them.
Buffett very likely holds the record for an unusual statistic: It’s that he claims to have held onto a copy of every federal tax return he’s ever filed, going all the way back to 1944, when he was just 13 years old.
There probably aren’t that many people still alive who first filed in 1944, never mind actually kept all of their returns all this time. As a result, he can tell you things like — well, like the dates in 1951 on which he originally bought and sold shares of Geico.
This is an unusual example, but the lesson Buffett shares here is clear: Things that get measured can be recorded, and the successes and failures you record are the ones that you can learn from and improve.
3. Believe what you see with your own eyes.
I love this one, because when Buffett explained it in one of his Berkshire shareholder letters, he did so with a quote from Henry David Thoreau: “It’s not what you look at that matters. It’s what you see.”
What Buffett spent decades looking at, he explained, was the success of the Coca-Cola Company. Buffett’s very first side hustle involved buying six-packs, dividing them up, and selling them one at a time. And while it pains me to write this, he says he’s such a devoted fan of the company that he drinks five cans of their sodas each day.
Not until 1988, which was 52 years after he first started drinking and selling the stuff, did he decide to invest in the company. “If I had been thinking straight,” he later wrote, “I would have persuaded my grandfather to sell the grocery store back in 1936 and put all of the proceeds into Coca-Cola stock.”
4. Admit your mistakes–to yourself, and others.
Earlier this year, in the latest Berkshire shareholder letter, Buffett embraced an important mistake. It has to do with what he called an “ugly $11 billion write-down” as a result of overpaying for a company.
It’s not so much that he admitted the mistake; that was obvious. It’s how he worded his mea culpa: “almost entirely the quantification of a mistake I made in 2016 … No one misled me in any way – I was simply too optimistic.”
In fact, Buffett admits mistakes all the time. Perhaps my favorites are the somewhat unexpected, like when he calls buying Berkshire itself a costly mistake, or when he talks about holding on, far too long, to its original core business: textiles.
Of course, we only know the mistakes he actually admits; we don’t know if the others he thinks are even bigger, but that he keeps to himself. Still, the lesson is pretty clear. It’s hard to learn from your mistakes if you can’t admit you’ve made them.
5. Don’t make things harder than they have to be.
What I love about this final piece of advice is that it confirms the benefit of the one listed above. In other words, it’s an important lesson Buffett says he’s learned as a result of making a big mistake, over and over, for many years.
The mistake? Resisting the calls for nearly 20 years that he should close Berkshire’s textile mills until he finally gave up in the 1980s.
The lesson? I think he summed it up memorably:
“It’s not like the Olympics. You don’t get any extra points for the fact that something’s very hard to do.”
I think this is the advice I see ignored most often. People focus so much on how much work and energy it takes to create something — a house, a business, a work of art — that they can’t focus on how much value other people put on the outputs.
In art, or when the creation is the reward you seek in and of itself, that’s fine. But in business? All other things being equal, easier is probably better.