15 excerpts from Warren Buffett's Biography: Snowball & the Business of LIfe (Part 1 of 3)

It was a 800+ page biography, and it took me around 2 months to complete, where I powered through the weekends. At the end, it felt great. It also felt like an achievement in life.

Buffett seems one of the most unconventional billionaires around, as he lives an ordinary enough life. He is also a teacher, who jumps at every chance to share his thoughts and knowledge. It was a pleasure reading about him.

Reading is fun - It's like traveling, as you enter a different realm

I also learned many new words (mostly American English).

I will most likely revisit these quotes every month, as it not only taught me about investing, but also the business of life.

1. The Genie

"Let's say that I turned 16, a genie had appeared to me. And the genie said, 'Warren, I'm going to give you your wish (the car of your choice). Brand new. And it's all yours.'

I would ask, 'what's the catch?' And the genie would answer, 'There is only one catch. This is the last car you're ever going to get in your life. So it's got to last a lifetime.'

“I would read the manual about 5 times, and always keep it garaged. If there was the least little dent or scratch, I'd have it fixed right away because I wouldn't want it rusting. I would baby the car, because it would have to last a lifetime.”

"That's exactly the position you are in concerning your mind and body. You only get one mind and one body. And it's got to last a lifetime. Now, it's very easy to let them ride for many years. But if you don't take care of that mind and body, they'll be a wreck forty years later, just like the car would be."

"It's what you do right now, today, that determines how your mind and body will operate ten, twenty, and thirty years from now." 

To students in private, Buffett explained his "Twenty Punches" approach to investing. "You'd get very rich. If you thought of yourself as having a card with only twenty punches in a lifetime, and every financial decision used up one punch. You'd resist the temptation to dabble. You'd make big and better decisions."

Buffett bet and paid his kids $2000 for not smoking during / after graduation. He also made bets with them to control their weight. As for himself, he doesn’t take alcohol, and was happy with hamburgers and Coca-cola (which doesn't sound too healthy either).

2. Heroes

“Choose your heroes carefully, because heroes matter in your life. You should work for people you admire.” Buffett’s hero was Ben Graham, who gave his first break in investing.

“When you get to my age, you’ll really measure your success in life by how many of the people you want to have love you actually do love you. I know people who have a lot of money, and they get testimonial dinners and hospital wings named after them. But the truth is that nobody thinks well of them. That’s a disaster. Basically, the more you give love away, the more you get.”

Since childhood, Buffett read every biography he could find of people he admired, looking for lessons, he could learn. He attached himself to everyone who could help him and coattailed anyone he could find who was smart. He never stopped thinking about good business, bad business, how they competed, what made customers loyal.

3. Rules of the racetrack

“The racetrack counts on people to keep betting until they lose. Couldn’t a good handicapper turn these rules around and win?”

 

Once, when he was in his teens, Warren went to Charleston (Horseracing track) by himself. And he lost the first race. But he didn’t go home. He kept on betting and he kept on losing, until he had lost more than $175 and his pockets were stripped nearly bare. 

“I came back. I went to the Hot Shoppe, and I treated myself to the biggest thing they offered – a giant fudge sundae or something – and there went all the rest of my money. While I ate, I figured out how many newspapers I had to deliver to make up what I had lost (Note: Warren used to deliver Washington Post in the morning). I was going to have to work more than a week to make back the money. And I’d done it for dumb reasons.”

“You are not supposed to bet every race. I’d committed the worst sin, which is that you get behind and you think you’ve got to break even that day. (That is when I really learned) The first rule is that nobody goes home after the first race, and the second rule is that you don’t have to make it back the same way you lost it. That is so fundamental, you know. It was the last time I ever did anything like that.”

Borrowing doubles your risk. Rule number one, don't lose money. Rule number two, don't forget rule number one. Rule number three, don't go into debt. 

4. Focus

Both Buffet and Bill Gates believe the factor that got them where they are in life is to be focus. 

Buffett deemed computers outside his "circle of competence". Being offered to buy Microsoft and Intel, he did not take them. He would never give up his margin of safety. Even had he been of temperament to do so, he didn't make risky bets. Past decisions made years ago were still compounding for him.

“Be long term greedy, not short term greedy.” Buffett became an elder statesman of corporate America after the correcting the mess at Salomon, Coca-cola, General Re and etc. People turned to him because they trusted his direct way of getting to the heart of things and his sense of right and wrong. He had passed up a lot of opportunities to make money or make it faster. This had brought him power and respect of a different sort. He was not feared like so many businessmen. He was admired.

Buffett would never call himself courageous; he would cite his energy, focus and rational temperament. Above all, he described himself as a teacher. His dad taught him the “how” mattered than the “how much”.

Buffett is very sure of his Inner Scorecard rather than being defined by an Outer Scorecard.  "If the world couldn't see your results, would you rather be thought of as the world's greatest investor but in reality have the worst record? Or be thought of as the worst investor when you were actually the best?"

"In teaching your kids, I think the lesson they're learning at a very early age is what their parents put the emphasis on. If all the emphases is on what the world's going to think about you, forgetting about how you really behave, you'll wind up with an Outer Scorecard. Now my dad: He was 100% Inner Scorecard guy. He was really a maverick. But he wasn't a maverick for the sake of being a maverick. He just didn't care what other people thought."

5. Being Debt-free

Debt is something to be used only with a care for the worst-case scenario. Credit card debts are the worst.

Charlie Munger says "liquor, drug and debt are the main things that cause smart fellows to go astray."

By July 2008, oil traded at $144/barrel. Buffett recounted “it was a weird time. We’ve gone into a different world, and nobody knows what will happen to the world, but Charlie and I looked at the downside, and nobody else did, very much.” Deleveraging could be a painful process in which banks, hedge funds, financial-services companies, construction, travel industries, and indeed the whole economy withdrew – fast and painfully or slow and painfully – from the intoxicant of cheap debt. Assets return could well stay subpar for a long time – a “4% return world.” Beware of scams and charlatans. The easiest way to turn 4% into 16% is thievery. 

The Buffett family motto: Spend less than you make.

PS: We are in May 2020, and look at the KLSE. 2 months after the historical sell-out, we are indeed in a weird time. Oh the number of charlatans have skyrocketed, especially during movement control.  

To be continued in Part 2:

https://weesertan.blogspot.com/2020/05/15-excerpts-from-warren-buffetts_23.html