Hang around with people better than you
This website is named after a street located in Omaha, Nebraska. An amazing place, Omaha is famous for being the home of Warren Buffett, one of the world’s richest men. The headquarters of Berkshire Hathaway — and his house — just happen to be on “Farnam Street.” The name of this website is a homage to both Buffett and his business partner Charlie Munger.
While Buffett is famous for his investing acumen, he’s also full of sage wisdom on life and living.
In October 2009, while the housing crisis was still in full effect, his authorized biography The Snowball: Warren Buffett and the Business of Life hit the shelves.
Here are some of his lessons on life and investing.
Three Early Lessons in Investing
Having bought three shares of Cities Service Preferred at the age of 11, Buffett learned a valuable lesson. After the stock plunged from $38.25 to $27 a share. His sister Doris reminded him daily on the way to school that her stock was going down. Buffett felt “terribly” responsible. When the stock recovered he sold with a slight $5 profit. Almost immediately after, Cities Service quickly soared to $202 a share.
Warren learned three lessons and would call this episode one of the most important of his life. One lesson was not to overly fixate on what he had paid for a stock. The second was not to rush unthinkingly to grab a small profit. He learned these two lessons by brooding over the $ 492 he would have made had he been more patient. It had taken five years of work, since he was six years old, to save the $ 120 to buy this stock. Based on how much he currently made from selling golf balls or peddling popcorn and peanuts at the ballpark, he realized that it could take years to earn back the profit he had “lost.” He would never, never, never forget this mistake. And there was a third lesson, which was about investing other people’s money. If he made a mistake, it might get somebody upset at him. So he didn’t want to have responsibility for anyone else’s money unless he was sure he could succeed.
This is an important one to keep in mind. If we place too much emphasis on what the world thinks, we end up with an outer scorecard.
I feel like I’m on my back, and there’s the Sistine Chapel, and I’m painting away. I like it when people say, ‘Gee, that’s a pretty good-looking painting.’ But it’s my painting, and when somebody says, ‘Why don’t you use more red instead of blue?’ Good-bye. It’s my painting. And I don’t care what they sell it for. The painting itself will never be finished. That’s one of the great things about it.
“The big question about how people behave is whether they’ve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard. I always pose it this way. I say: ‘Lookit. Would you rather be the world’s greatest lover, but have everyone think you’re the world’s worst lover? Or would you rather be the world’s worst lover but have everyone think you’re the world’s greatest lover?’ Now, that’s an interesting question.
This has implications if you’re a parent: What you put emphasis on matters.
If all the emphasis 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.
Hang Around People Better Than You
After graduating from Columbia University, Buffett returned to Omaha to live with his parents. He spent part of that first summer fulfilling his obligation to the National Guard. While he wasn’t a natural, it sure beat going off to fight in Korea. Part of his duties in the guard required him to attend training camp in La Crosse, Wisconsin, for a few weeks. That experience taught him an incredible lesson that he’d carry forward for the rest of his life.
“It’s a very democratic organization. I mean, what you do outside doesn’t mean much. To fit in, all you had to do was be willing to read comic books. About an hour after I got there, I was reading comic books. Everybody else was reading comic books, why shouldn’t I? My vocabulary shrank to about four words, and you can guess what they were.
“I learned that it pays to hang around with people better than you are, because you will float upward a little bit. And if you hang around with people that behave worse than you , pretty soon you’ll start sliding down the pole. It just works that way.”
The Buffett Family Motto
As simple as it is powerful.
“Spend less than you make” could, in fact, have been the Buffett family motto, if accompanied by its corollary, “Don’t go into debt.”
On Why he Wanted Money
Even when he was little he was always fixated on money. He wanted money. Why?
“It could make me independent. Then I could do what I wanted to do with my life . And the biggest thing I wanted to do was work for myself . I didn’t want other people directing me. The idea of doing what I wanted to do every day was important to me.”
In July of 1952, Susie Buffett, having been married only a few months to Warren, went to Chicago with her parents and new in-laws for the Republican convention. The convention was covered on television for the first time in history. Warren, who stayed in Omaha, watched eagerly — “struck by the power of this medium to magnify and influence events.”
The front-runner was Senator Robert Taft, known as “Mr. Integrity.” He wanted three things: (1) small government; (2) pro-business; and (3) eradicate Communism. Taft’s friend and Warren’s father, Howard Buffett, was the head of his presidential campaign. Taft’s main opponent was the moderate and popular war hero General Dwight D. Eisenhower.
While it might have been the first convention covered by television it still lives in the history books as one of the most controversial Republican conventions. Eisenhower backers pushed through a controversial amendment to the rules that handed him the nomination on the first ballot. Taft and his supporters were, of course, outraged.
But Eisenhower soon made peace with them by promising to combat “creeping socialism.” Taft insisted that his followers swallow their outrage and vote for Eisenhower for the sake of regaining the White House. The Republicans united behind him and his running mate, Richard Nixon; “I Like Ike” buttons sprouted everywhere. Everywhere, that is, except on Howard Buffett’s chest. He broke with the party by refusing to endorse Eisenhower.
This was an act of political suicide. His support within the party evaporated overnight. He was left standing on principle— alone. Warren recognized that his father had “painted himself into a corner.” From his earliest childhood, Warren had always tried to avoid broken promises, burned bridges, and confrontation. Now Howard’s struggles branded three principles even deeper into his son: that allies are essential; that commitments are so sacred that by nature they should be rare; and that grandstanding rarely gets anything done.
While reading about Buffett won’t make you as smart as he is, you might learn something in the process. Pick up a copy of The Snowball: Warren Buffett and the Business of Life and give it a shot.
This piece originally appeared on Farnam Street.
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