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Lessons from The Snowball: Warren Buffett and the Business of Life

The Snowball: Warren Buffett and the Business of Life

Probably the best book about Warren Buffett is “The Snowball: Warren Buffett and the Business of Life, by Alice Schroeder.” In fact, The Snowball is the only biography of Warren Buffett authorized on this genius of finance and business, also known as “The Oracle of Omaha” from its constant successful investments.

We take this opportunity to extract some valuable lessons from Warren Buffett from this book, both for life and for business.

They both thought very similarly and were fascinated by business. For them, business was like a puzzle that was worth spending a lifetime to solve.

Both considered rationality and honesty as the best virtues that any man should possess.

Tell me where I’m going to die, so I do not go there.

Charlie Munger

About Charlie Munger and Warren Buffett.

They both thought very similarly and were fascinated by business. For them, business was like a puzzle that was worth spending a lifetime to solve.

Both considered rationality and honesty as the best virtues that any man should possess.

Humility and philosophy as an investor.

“I will be talking about stock prices, but I will not talk about predicting the price of the stock for next month or next year. Valuing is not the same as predicting. “

“Tell me where I’m going to die, so I do not go there” – Charlie Munger

Charlie Munger and Warren Buffett
UNITED STATES – MAY 02: Charlie Munger, left, vice chairman, Berkshire Hathaway Inc., looks on as Warren Buffett, billionaire investor and chairman & CEO, Berkshire Hathaway Inc., speaks at a news conference following the company’s weekend annual shareholder meeting activities in Omaha, Nebraska May 2, 2004. (Photo by Eric Francis/Bloomberg via Getty Images)

Warren Buffett circle of competencies.

Warren Buffett believed in something he called the circle of competencies, where he drew a line around himself and stayed within 3 topics in which he would be known as a great absolute expert.

These 3 topics, in the case of Buffett are:

  • Money
  • Business
  • His own life

And most precisely the third point seems that it is the one that more work costs to dominate to the majority of people, dominating your own life could be one of the most difficult things to do if you do not consciously prepare for it.

Warren Buffett says that people have two ID cards:

  • An internal scorecard
  • An external scorecard

“I always say: Do you prefer to be the best lover in the world, even if everyone thinks you are the worst lover in the world, or would you rather be the worst lover in the world but everyone think you are the best lover?”

And this question is quite interesting, because most people preferred to be the worst lovers if for the rest of the people they are the best lovers.

Lessons from Warren Buffett

“When teaching your children, I think the lesson you are learning at an early age is what your parents emphasize. If all the emphasis is on what others are going to think about you, forgetting how you are and how you really behave, you will end up giving more importance to the external scorecard.

My father taught me to be a guy with an internal scorecard. He taught me to live life with values and principles. He simply did not care what others might think. I have never met anyone like my father. And that’s why I learned to live my life away from the opinion of others.

While still in school, Buffett partnered with his sister to buy 3 shares of Cities Service Preferred. He invested 114 dollars in these actions. 38 dollars for each share.

“I did not understand those actions very well when I bought them. The value of these shares touched a minimum in June and fell from 38.25 to 27 dollars per share. Doris (her sister) reminded me every day on the way to school that her actions were going down. And I felt incredibly responsible for it.

When the stock finally recovered, we sold them for $40, earning a profit of $5 for both. And in the end the price of Cities quickly rose to $202 per share.”

Buffett says that the lessons he learned with this episode were the most important in his life.

  • You should not pay so much attention to what you have paid for an action.
  • You should not rush when it comes to making a quick profit without thinking.
  • On taking other people’s money: if you make a mistake, someone may get mad at you. So do not be responsible for anyone else’s money unless you are sure that you will succeed.

The 3 principles that Buffett learned from Benjamin Graham.

11 Mar 1955, Washington, DC, USA — Graham and Woods testify before the Senate Banking Committee in Washington, DC. They are discussing the stock market and investing. — Image by © Bettmann/CORBIS

As Benjamin Graham’s seminar, which Buffett was going to attend, approached, he began to study everything he could discover about Ben Graham’s method, his books, his investments, and everything he could about Graham himself.

In this way, Buffett would have a solid base of knowledge and understanding that would help him add the rest of his knowledge.

From Graham’s class, Buffett learned these principles.

  • An action is the right to own a small part of a business. An action is worth a certain fraction of what you would be willing to pay for the entire business.
  • Use margin of safety. The investment is based on estimates and uncertainties. A wide safety margin ensures that the effects of good decisions are not eliminated by mistakes. The best way to advance begins by not retiring.
  • The stock market is your servant, not your master. This motto of Ben Graham sowed chair. Mr. Market, which offers to buy and sell shares every day, often at prices that do not make sense. Mr. Market’s moods should not influence your view of the price. However, from time to time Mr. Market offers you the opportunity to buy cheap and sell expensive. And that’s where we should use it.

From that moment, Buffett began to devour everything he could about the market, the history of listed companies, the balance sheets of the listed companies, and above all, he began to absorb all he could from Graham’s knowledge.

Buffett and the secret of his success.

Buffett filled the tub with water and picked up his marbles. Each of his marbles had a name. he lined them up on the flat edge of the back of the tub and clicked on the stopwatch just as the marbles entered the water. The marbles ran through the tub, and chased each other in the direction of the drain plug. When the first marble arrived, Buffett pressed the stopwatch and declared the winner.

His sisters saw him do this kind of game over and over again. Buffett was trying to improve the times.

The marbles never got tired, the chronometer was never wrong and unlike his sisters, Buffett never seemed bored by the repetition.

I was just learning to calculate probabilities. In fact, he found variables and ways to calculate probabilities everywhere.

The only key was to gather information. As much information as you could collect. Buffett was a maniac of information gathering, measuring everything that could be measured, counting and memorizing numbers. He loved reading and spent many hours with the books he took from the library.

If we had to give an essential key to the success of Warren Buffett, undoubtedly, this would be the constant preparation and application of the information he gathered from everything he learned. For such a man, success is inevitable.

Warren was very clear that he wanted to be independent.

“If I became independent, then I could do what I wanted with my life. And the most important thing I wanted to do was work for myself. Not having a boss I did not want other people to direct me. the idea of doing what I wanted to do every day was very important to me.”

Warren Buffett in making ethical decisions.

“If you’re not sure if something you’re going to do is right or wrong, consider the possibility that what you’re going to do will be told in the newspaper tomorrow.”

Undoubtedly, an excellent way to act ethically. It is said of Buffett that he never lost his temper or said any rude word to anyone. He never rebuked or criticized his employees. He always let his employees do their job in the best way possible. No interference And is that if you hire smart people and then tell them what they have to do, that is not too smart on your part.

Buffett has a reputation for not getting into fights and arguments just for the sake of arguing.

On the subject of honesty it is white or black. There are no grays.

“I have no tolerance for lying and cheating people. If you lose money for the firm, I’ll be understanding. If you make the firm lose its reputation, I’ll be ruthless. “

What is success for Warren Buffett.

I know people who have a lot of money, but nobody in the world really loves them. If you reach my age and nobody loves you, it does not matter how big your bank account is. Your life is a disaster.

That is the definitive proof of how you have lived your life. The problem with love is that you can not buy it. You can buy sex. You can buy brochures that say how wonderful you are. But the only way to obtain true love is to be a good person, to be kind to people, to do something for people.

Love is probably the only thing in life that the more you give, the more you get.

And I think that all these extracts perfectly define who Warren Buffett is and why he has succeeded in business, in investments and in life. Even this would explain why he is one of the few billionaires and bankers who have the affection of virtually everyone.

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