The fastest way to change yourself is to hang out with people who are already the way you want to be.

Hoffman & Casnocha. Warren Buffett agrees:

Hang around people who are better than you all the time. You do pick up the behavior of people who are around you. It will make you a better person. Marry upward. That is the person who is going to have the biggest effect on you. A relationship like that over the decades will do nothing but good.

If I can stretch this a bit, they don’t even have to be alive! See Austin Kleon:

The great thing about dead or remote masters is that they can’t refuse you as an apprentice. You can learn whatever you want from them. They left their lesson plans in their work.

What economic laws have worked best for Berkshire?

It is all a matter of trying to find businesses with wide moats protecting a large castle occupied by an honest lord. Moats might be a natural franchise, brand loyalty, or being a low-cost producer. In a capitalistic society, all moats are subject to attack: if you have a good castle, others will want it. What we want to figure out is what keeps the castle standing and how smart is the lord. [Charlie Munger: We also like to look for low agency costs on that lord, economies of scale and “economies of intelligence.”]

Buffett elaborated on the “economies of intelligence”: the idea is to find businesses where you have to be smart only once instead of being smart forever. Retailing is a business where you have to be smart forever: your competitors will always copy your innovations. Buying a network TV station in the early days of television required you to be smart only once. In that kind of business, a terrible manager can still make a fortune. Given the choice between the two (a business where you have to be smart forever or one where you have to be smart once), Buffett advised, pick the great business–be smart once.

Be smart once!

What economic laws have worked best for Berkshire?

They get one letter from me every couple of years. And basically it says, run this business like it’s the only business that your family can own for the next 100 years. You can’t sell it. But every year don’t measure it by the earnings in the quarter that year. Measure it by whether the moat around that business, what gives it competitive advantage over time has widened or narrowed. If you keep doing that for 100 years, it’s going to work out very well. Then I tell them basically if the reason for doing something is everybody else is doing it, it’s not good enough. If you have to use that as a reason, forget it.

Warren Buffett’s thoughts on building a business work well on a personal scale, too. Build your moat, make it bigger. See also Douglas Adams’ career advice (via):

If you want something extraordinary, you have two paths: 1. Become the best at one specific thing. 2. Become very good (top 25%) at two or more things. […] Capitalism rewards things that are both rare and valuable. You make yourself rare by combining two or more “pretty goods” until no one else has your mix.

The difference between potential and output comes from human qualities. You can make a list of the qualities you admire and those you despise. To turn the tables, think if this is the way I react to the qualities on the list, which is the way the world will react to me. You can learn to turn on those qualities you want and turn off those qualities you wish to avoid. The chains of habit are too light to be felt until they are too heavy to be broken. You can’t change at 60; the time to look at that list is now.

Warren Buffett on habits and being a better person. Ties in with some of my thoughts on a well-balanced life earlier this year. Write it down, check in every so often, re-calibrate as needed.

I have to look them in the eye and decide whether they love the business or they love the money. It’s fine if they love the money, but they have to love the business more. Why do I come in at 7 every morning, can’t wait to get to work? It’s because I get to paint my own painting and I like applause.

Warren Buffett on choosing good managers.

[If I could have lunch with one person I’ve never met] I would have to say Isaac Newton or Benjamin Franklin. I’ve met a lot of interesting people and some uninteresting ones, too. The two men had a bigger grasp of the world they lived in. But I don’t think I would pass up an opportunity with Sophia Loren.

Warren Buffett.


Sophia Loren
. Rome, June 1961. Photo by Alfred Eisenstaedt.

I bet we all in this room live about the same. We eat about the same and sleep about the same. We pretty much drive a car for 10 years. All this stuff doesn’t make it any different. I will watch the Super Bowl on a big screen television just like you. We are living the same life. I have two luxuries: I get to do what I want to do every day and I get to travel a lot faster than you.

The market knows nothing about my feelings. That is one of the first things you have to learn about a stock. You buy 100 shares of General Motors (GM). Now all of a sudden you have this feeling about GM. It goes down, you may be mad at it. You may say, “Well, if it just goes up for what I paid for it, my life will be wonderful again.” Or if it goes up, you may say how smart you were and how you and GM have this love affair. You have got all these feelings. The stock doesn’t know you own it.

The stock just sits there; it doesn’t care what you paid or the fact that you own it. Any feeling I have about the market is not reciprocated. I mean it is the ultimate cold shoulder we are talking about here.

Warrren Buffett on the emotional void of the stock market.

Hang around people who are better than you all the time. You do pick up the behavior of people who are around you. It will make you a better person. Marry upward. That is the person who is going to have the biggest effect on you. A relationship like that over the decades will do nothing but good.

Warren Buffett. And if you can’t find/identify people who are better than you, you’re probably an asshole.

When Charlie and I disagree, Charlie says, “In the end you’ll see it my way, because you’re smart and I’m right!”

We do not bring in compensation consultants and we don’t have a human resources department, legal department, etc. That makes life way too complicated, and people get vested in going to conferences.

If you are dependent on borrowed money, you have to wake up every day worried about what the world thinks of you.

Warren Buffett. The context for this was the Bear Stearns meltdown, but it applies to so much more.

We also look for three things: intelligence, energy and integrity. If [they] don’t have the latter, then you should hope they don’t have the first two either. If someone doesn’t have integrity, then you want them to be dumb and lazy.

Buffett FAQ

A treasure trove for Warren Buffett (and Charlie Munger) fans. (via)

Goal – To compile and order the teachings of Mr. Buffett to maximise their benefit and usefulness to others. All material below is from question and answer (Q&A) sessions with Mr. Buffett.

Buffett FAQ