• bsi-innovation
  • bsi-learning
  • bsi-people
  • bsi-wealth
  • bsi-capital

Buffets 10 Rules

Unfortunately, I wasn’t able to take a glare-free or hi-res photo, so let me list out these Rules below (with my comments in bold Italics):

(Inspired by Tien Wong)

No. 1: REINVEST YOUR PROFITS – When you first make money, you may be tempted to spend it. Don’t. Instead, reinvest the profits. Buffett learned this early on. In high school, he and a pal bought a pinball machine to put in a barbershop. With the money they earned, they bought more machines until they had eight in different shops. When the friends sold the venture, Buffett used the proceeds to buy stocks and to start another business. Why sell a business to invest in someone else’s dream – I do think it’s important to take chips off the table – however, ensure there is enough working capital and buffer for growth . If you are a public company – I do believe that paying dividends is a sign of the company aligning their goals with the shareholders .

No. 2: BE WILLING TO BE DIFFERENT – Don’t base your decisions upon what everyone is saying or doing. When Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he was dubbed an oddball. He worked in Omaha, not on Wall Street, and he refused to tell his partners where he was putting their money. People predicted that he’d fall, but when he closed his partnership 14 years later, it was worth more than $100 million. Don’t be afraid to be different and swim against the tide.  Be contrarian
 – John D. Rockefeller who said the best time to buy is when there’s “blood in the streets”? 
– My granny Zelda taught me “Ivan, buy low and sell high” 
– Henry Ford said that if he would have asked customers what they wanted – they would have said “a faster horse” – the point is – focus more on your dreams and intuition – and less on research and public opinion.

A manager would say  – “the trend is your friend” or “no one ever went wrong from buying from IBM” 
 – as my mentor Allen Parhmarajah says – managers do things right , leaders do things right 

I think there is merit in both being contrarian and going with the trend …. what do you think? 

No. 3: NEVER SUCK YOUR THUMB – Gather in advance any information you need to make a decision, and ask a friend or relative to make sure that you stick to a deadline. Buffett prides himself on swiftly making up his mind and acting on it. He calls any unnecessary sitting and thinking “thumb-sucking.” Buffett invested $5 Billion in Goldman Sachs during the worst moments of the 2008 financial crisis when Wall Street appeared to be melting down. He committed this money in a 15 minute (no thumb sucking here) phone call with Goldman CEO Lloyd Blankfein. Result? A $10 Billion profit in 30 months. 

Once you have the research – take action !!! 
If you fail – it’s a learning and you will make anothe decision – more informed 

No. 4: SPELL OUT THE DEAL BEFORE YOU START – Your bargaining leverage is always greatest before you begin a job – that’s when you have something to offer that the other party wants. Buffett learned this lesson the hard way as a kid, when his grandfather Earnest hired him and a friend to dig out the family grocery store after a blizzard. The boys spent five hours shoveling until they could barely straighten their frozen hands. Afterward, his grandfather gave the pair less that 90 cents to split. This advice holds not only for jobs, but also for any kind of negotiation, investments, partnerships, JVs, etc. 

No. 5: WATCH SMALL EXPENSES – Buffett invests in business run by managers who obsess over the tiniest costs. He once acquired a company whose owner counted the sheets in rolls of 500-sheet toilet paper to see if he was being cheated (he was). He also admired a friend who painted only the side of his office building that faced the road. The little things matter 

No. 6: LIMIT WHAT YOU BORROW – Buffett has never borrowed a significant amount – not to invest, not for a mortgage. He has gotten many heartrending letters from people who thought their borrowing was manageable but became overwhelmed by debt. His advice: Negotiate with creditors to pay what you can. Then, when you’re debt-free, work on saving some money that you can invest. Not sure whether I agree with this – as long as you borrow to acquire solid growth assets 

No. 7: BE PERSISTENT – With tenacity and ingenuity, you can win against a more established competitor. Buffett acquired the Nebraska Furniture Mart in 1983 because he liked the way its founder, Rose Blumkin, did business. A Russian immigrant, she built the mart from a pawnshop into the largest furniture store in North America. Her strategy was to undersell the big shots, and she was a merciless negotiator. If you believe in something – go the extra mile – push through the blockages – and follow up every Nagle until you achieve what you want to achieve 

No. 8: KNOW WHEN TO QUIT – Once, when Buffett was a teen, he went to the racetrack. He bet on a race and lost. To recoup his funds, he bet on another race. He lost again, leaving him with close to nothing. He felt sick – he had squandered nearly a week’s earnings. Buffett never repeated that mistake. There is a reason why Casino operators are so successful – if something doesn’t work – be sure to pivot quickly – this goes against rule 7, I know – it’s pretty confusing! 

No. 9: ASSESS THE RISKS – In 1995, the employer of Buffett’s son, Howie, was accused by the FBI of price-fixing. Buffett advised Howie to imagine the worst- and best-case scenarios if he stayed with the company. His son quickly realized the risks of staying far outweighed any potential gains, and he quit the next day.
Identify risks and look to mitigate them before starting a project 

No. 10: KNOW WHAT SUCCESS REALLY MEANS – Despite his wealth, Buffett does not measure success by dollars. In 2006, he pledged to give away almost his entire fortune to charities, primarily the Bill and Melinda Gates Foundation. He’s adamant about not funding monuments to himself – no Warren Buffett buildings or halls. “When you get to my age, you’ll measure your success in life by how many of the people you want to have love you actually do love you. That’s the ultimate test of how you lived your life.”  The Talmud defines success as he who is happy with his lot .
Posted on September 5, 2017

Leave a Reply

Your email address will not be published. Required fields are marked *

referron-logo
BBG-logo
spark-logo
© Copyright 2017 BSI