How to Use the Rule of 72

How to Use the Rule of 72.

The Rule of 72 is a handy tool used in finance to estimate the number of years it would take to double a sum of money through interest payments, given a particular interest rate. The rule can also estimate the annual interest rate required to double a sum of money in a specified number of years. The rule states that the interest rate multiplied by the time period required to double an amount of money is approximately equal to 72.
The Rule of 72 is applicable in cases of exponential growth, (as in compound interest) or in exponential "decay," as in the loss of purchasing power caused by monetary inflation.

Method 1 Estimating "Doubling" Time.
1. Let R x T = 72. R is the rate of growth (the annual interest rate), and T is the time (in years) it takes for the amount of money to double.
2. Insert a value for R. For example, how long does it take to turn $100 into $200 at a yearly interest rate of 5%? Letting R = 5, we get 5 x T = 72.
3. Solve for the unknown variable. In this example, divide both sides of the above equation by R (that is, 5) to get T = 72 ÷ 5 = 14.4. So it takes 14.4 years for $100 to double at an interest rate of 5% per annum. (The initial amount of money doesn't matter. It will take the same amount of time to double no matter what the beginning amount is.)
4. Study these additional examples:
How long does it take to double an amount of money at a rate of 10% per annum? 10 x T = 72. Divide both sides of the equation by 10, so that T = 7.2 years.
How long does it take to turn $100 into $1600 at a rate of 7.2% per annum? Recognize that 100 must double four times to reach 1600 ($100 → $200, $200 → $400, $400 → $800, $800 → $1600). For each doubling, 7.2 x T = 72, so T = 10. So, as each doubling takes ten years, the total time required (to change $100 into $1,600) is 40 years.

Method 2 Estimating the Growth Rate.
1. Let R x T = 72. R is the rate of growth (the interest rate), and T is the time (in years) it takes to double any amount of money.
2. Enter the value of T. For example, let's say you want to double your money in ten years. What interest rate would you need in order to do that? Enter 10 for T in the equation. R x 10 = 72.
3. Solve for R. Divide both sides by 10 to get R = 72 ÷ 10 = 7.2. So you will need an annual interest rate of 7.2% in order to double your money in ten years.

Method 3 Estimating Exponential "Decay" (Loss).
1. Estimate the time it would take to lose half of your money (or its purchasing power in the wake of inflation). Let T = 72 ÷ R. This is the same equation as above, just slightly rearranged. Now enter a value for R. An example.
How long will it take for $100 to assume the purchasing power of $50, given an inflation rate of 5% per year?
Let 5 x T = 72, so that T = 72 ÷ 5 = 14.4. That's how many years it would take for money to lose half its buying power in a period of 5% inflation. (If the inflation rate were to change from year to year, you would have to use the average inflation rate that existed over the full time period.)
2. Estimate the rate of decay (R) over a given time span: R = 72 ÷ T. Enter a value for T, and solve for R. For example.
If the buying power of $100 becomes $50 in ten years, what is the inflation rate during that time?
R x 10 = 72, where T = 10. Then R = 72 ÷ 10 = 7.2%.
3. Ignore any unusual data. If you can detect a general trend, don't worry about temporary numbers that are wildly out of range. Drop them from consideration.

Method 4 Derivation.
1. Understand how the derivation works for periodic compounding.
For periodic compounding, FV = PV (1 + r)^T, where FV = future value, PV = present value, r = growth rate, T = time.
If money has doubled, FV = 2*PV, so 2PV = PV (1 + r)^T, or 2 = (1 + r)^T, assuming the present value is not zero.
Solve for T by taking the natural logs on both sides, and rearranging, to get T = ln(2) / ln(1 + r).
The Taylor series for ln(1 + r) around 0 is r - r2/2 + r3/3 - ... For low values of r, the contributions from the higher power terms are small, and the expression approximates r, so that t = ln(2) / r.
Note that ln(2) ~ 0.693, so that T ~ 0.693 / r (or T = 69.3 / R, expressing the interest rate as a percentage R from 0-100%), which is the rule of 69.3. Other numbers such as 69, 70, and 72 are used for easier calculations.
2. Understand how the derivation works for continuous compounding. For periodic compounding with multiple compounding per year, the future value is given by FV = PV (1 + r/n)^nT, where FV = future value, PV = present value, r = growth rate, T = time, and n = number of compounding periods per year. For continuous compounding, n approaches infinity. Using the definition of e = lim (1 + 1/n)^n as n approaches infinity, the expression becomes FV = PV e^(rT).
If money has doubled, FV = 2*PV, so 2PV = PV e^(rT), or 2 = e^(rT), assuming the present value is not zero.
Solve for T by taking natural logs on both sides, and rearranging, to get T = ln(2)/r = 69.3/R (where R = 100r to express the growth rate as a percentage). This is the rule of 69.3.
For continuous compounding, 69.3 (or approximately 69) gives more accurate results, since ln(2) is approximately 69.3%, and R * T = ln(2), where R = growth (or decay) rate, T = the doubling (or halving) time, and ln(2) is the natural log of 2. 70 may also be used as an approximation for continuous or daily (which is close to continuous) compounding, for ease of calculation. These variations are known as rule of 69.3, rule of 69, or rule of 70.
A similar accuracy adjustment for the rule of 69.3 is used for high rates with daily compounding: T = (69.3 + R/3) / R.
The Eckart-McHale second order rule, or E-M rule, gives a multiplicative correction to the Rule of 69.3 or 70 (but not 72), for better accuracy for higher interest rate ranges. To compute the E-M approximation, multiply the Rule of 69.3 (or 70) result by 200/(200-R), i.e., T = (69.3/R) * (200/(200-R)). For example, if the interest rate is 18%, the Rule of 69.3 says t = 3.85 years. The E-M Rule multiplies this by 200/(200-18), giving a doubling time of 4.23 years, which better approximates the actual doubling time 4.19 years at this rate.
The third-order Padé approximant gives even better approximation, using the correction factor (600 + 4R) / (600 + R), i.e., T = (69.3/R) * ((600 + 4R) / (600 + R)). If the interest rate is 18%, the third-order Padé approximant gives T = 4.19 years.
To estimate doubling time for higher rates, adjust 72 by adding 1 for every 3 percentages greater than 8%. That is, T = [72 + (R - 8%)/3] / R. For example, if the interest rate is 32%, the time it takes to double a given amount of money is T = [72 + (32 - 8)/3] / 32 = 2.5 years. Note that 80 is used here instead of 72, which would have given 2.25 years for the doubling time.


FAQ.
Question : When would I need to use the rule of 72?
Answer : It's a handy shortcut when considering compounded, monetary gains or losses. For example, you might want to know how long it would take for invested money to double in value, given a specific rate of interest.
Question : How do I calculate compound interest?
Answer : The formula for annual compound interest (A) is: P [1 + (r / n)]^(nt), where P=principal amount, r = the annual interest rate as a decimal, n = the number of times the interest is compounded per year, and t = the number of years of the loan or investment.
Question : What is APY for an APR of 3.5% compounded?
Answer : It depends on how often the interest compounds: annually, semi-annually, quarterly, monthly or daily.

Tips.

Let the Rule of 72 work for you by starting to save now. At a growth rate of 8% a year (the approximate rate of return in the stock market), you would double your money in nine years (72 ÷ 8 = 9), quadruple your money in 18 years, and have 16 times your money in 36 years.
The value of 72 was chosen as a convenient numerator in the above equation. 72 is easily divisible by several small numbers: 1,2,3,4,6,8,9, and 12. It provides a good approximation for annual compounding at typical rates (from 6% to 10%). The approximations are less exact at higher interest rates.
You can use Felix's Corollary to the Rule of 72 to calculate the "future value" of an annuity (that is, what the annuity's face value will be at a specified future time). You can read about the corollary on various financial and investing websites.

Warnings.
Let the rule of 72 convince you not to take on high-interest debt (as is typical with credit cards). At an average interest rate of 18%, semiretired credit card debt doubles in just four years (72 ÷ 18 = 4), quadruples in eight years, and becomes completely unmanageable after that.

April 10, 2020

Warren Buffett reveals his investment strategy and mastering the market (PART 5).

Warren Buffett reveals his investment strategy and mastering the market (PART 5).

ANDY SEWER: Have you talked to Elon ever?

WARREN BUFFETT: He joined the Giving Pledge, so once or twice, but that's a lot of years ago, seven or eight years ago. He hasn't come to our annual gathering, so I haven't seen him for seven or eight years.

ANDY SEWER: So let's talk about this trade war that's been going on a little bit with China. And, I guess, I'd like to ask you, do you think that Donald Trump was right in calling out the Chinese government and, basically, putting them on notice?

WARREN BUFFETT: I won't have any comment on that. In terms of political activity, I don't put my citizenship in a blind trust. So when the election comes around, I'll do something.

On the other hand, people will interpret things I say about any president as, to some extent, coming from Berkshire. And they and they don't come from Berkshire. I'm just an individual. I'd be glad to talk about China, but I can't talk to you about that part of it.

ANDY SEWER: Fair enough. I mean, do you think there was room for improvement, then, in terms of the trade relationship between China and the United States?

WARREN BUFFETT: Well, I think that China and the United States absolutely are destined to be the superpowers beyond my great-grandchildren lives and will always be competitors and will be competitors in business. We'll be competitors in ideas, all kinds of ways.

There's no other way it would be, and we just have to make sure that competition doesn't get us to a point where we don't realize that the best world is one in which both the United States and China prosper. We do not want to have an island of prosperity and the rest of the world envious of us in a nuclear age. And China doesn't. Russia doesn't.

I mean, we all recognize the dangers of letting competition get out of control. You can be competitors without being enemies. And that's what all powerful nations have to realize over time. It's different than 200 years ago when you could have some dominant country, and then they may have done some things that you didn't like. But it didn't threaten the existence of the world.

You really threatened the existence of the world as we know it if important countries do not constantly recognize that they can compete, they can fight over certain things, but they can't regard it as, essentially, the equivalent of war.

ANDY SEWER: Here's a question from Kevin Chen, who is a Berkshire shareholder and an NYU professor. And he says-- and this is sort of along the lines of what you were just saying, Warren-- but do you think the US and China will be able to resolve their differences or are conflicts unavoidable?

WARREN BUFFETT: Well, I don't think conflicts are unavoidable. But I think it has to be active thinking on the part of every hugely-powerful country. Russia is hugely-powerful. I mean, 90% of the nuclear arms in the world are between US and Russia.

They have to recognize that the best world for them is one where they don't try and grab all the apples, basically, and we have to recognize that. And we can't-- the United States-- we can't think that either our ideas run the world, or we start getting aggressive about things. And China can't think that. Russia can't think that.

That's obvious. You've got to be sure things don't escalate. We had World War I with an Archduke. You can get chance incidents. I asked one of the presidents one time in terms of what he would do if awakened in the middle of the night with somebody coming to him and saying, absolutely somebody else has launched. Would you launch on that? And you've got 10 minutes to decide. I wouldn't want to have that responsibility. But you want to make sure you don't get to that point.

ANDY SEWER: Right. Right. Would you ever make a big acquisition in China. And if not, aren't you missing a huge portion of--

WARREN BUFFETT: Yeah, the answer is, we would. We would.

ANDY SEWER: Have you looked?

WARREN BUFFETT: We've been made aware of some things, yeah.

ANDY SEWER: On the flip side of the coin, are you concerned that the rule of law is different, that the accounting might be opaque?

WARREN BUFFETT: Well, I'd want to be sure I understood the accounting, obviously. In some businesses, that'd be easier to do than others. But I know the laws, the customs, the accounting, the people better in the United States than any place else. So there's some small hurdle in many countries to get over, which I can get over, but it's just not as easy as looking at something where I already know the answer from previous transactions or something of the sort.

So it it's easier to make a big acquisition in the United States. I'd have to do more work if I'm looking beyond the borders. But I love the idea of doing it. When we made the acquisition in Israel a dozen years ago, I didn't know what the tax rates were there. I didn't know what corporate law. I suspected that it would all be answered satisfactorily, which it was. But I didn't just automatically know it.

ANDY SEWER: It seems like you're more open about doing a deal in China than in previous conversations.

WARREN BUFFETT: I don't think so.

ANDY SEWER: No?

WARREN BUFFETT: No.

ANDY SEWER: It's out there.

WARREN BUFFETT: I'm open. Yeah. We made two decent-sized stock acquisitions there, and that worked out fine.

ANDY SEWER: Those are?

WARREN BUFFETT: Well, PetroChina and DYD.

ANDY SEWER: DYD, yeah.

WARREN BUFFETT: DYD was Charlie's. But Charlie's very well-versed on China.

ANDY SEWER: Right. The US trade deficit has been widening and, of course, a lot of that has to do with our trade with China. Is that something that worries you?

WARREN BUFFETT: Well, I wrote an article about it for "Fortune" and the trade situation many years ago and when our deficit got to be large in relation to GDP. I don't think it's essential to have a trade balance. But I think that, if a trade deficit gets large, and it looks like you have no way out from it, that can be a real problem over time.

You're shipping little pieces of paper to the rest of the world, and they're shipping you goods. People are working making underwear or shoes someplace, and they get little pieces of paper from us. And it gets very tempting, if you've done that enough, to make sure that those little pieces of paper aren't worth very much over time when they want to cash them for something.

We don't have any problem running trade deficits. But if we ran really large ones, and we sort of worked ourselves into a box, where we didn't really have a solution to get those numbers down, it could be a problem. And I wrote about it one time. It's kind of a nice thing, actually. Wouldn't you like to have something where you just send out little pieces of paper, and somebody could supply you with their food?

ANDY SEWER: I'm living it.

WARREN BUFFETT: Right.

ANDY SEWER: Exactly.

WARREN BUFFETT: We call them credit cards.

ANDY SEWER: Exactly. Yes. OK, and last question. China is facing its slowest growth in nearly three decades. The leadership there lowered the targets, I think, to around 6.5%, 6%. Are you concerned about this slowing growth and the impact on global markets?

WARREN BUFFETT: Well, I don't worry about it in terms of global markets. China is going to grow a lot over time. When you think of what's happened-- was it in 1949-- but there's been nothing really like it. You had 20% of the world's population at that time perhaps, and it really hadn't remotely achieved their potential.

They had intellectual capacity. They had decent soil, all kinds of things. And what's happened there is almost beyond belief. And that game's not over, but we've had incredible developments in the United States. Real GDP per capita is six times what it was the day I was born in the United States-- six times. And we thought we were a pretty evolved country then and everything.

My parents wouldn't have believe it. They would have thought, this kid has really got it made being born in the United States. And it was true. We had this tailwind, and China's had a hurricane behind it in recent decades.

ANDY SEWER: In a good way.

WARREN BUFFETT: Absolutely.

ANDY SEWER: Because you were comparing it to the tailwind of the hurricane at their back.

WARREN BUFFETT: Yeah, at their back. And they have found a way of life that is dramatically different than existed for the billion. There was a billion then, maybe a billion, two, or three, whatever it is now. They have changed a country, really, of size that, I don't think, there's ever been anything like it.

We've done it, too, but it took somewhat longer. It was more stretched out. It was a remarkable period, but when you go to-- I first went there in 1995. And then, they regarded it as a miracle. Then I went back 10 years later, and it was a whole different country beyond that.

ANDY SEWER: Warren Buffett, thanks so much for joining us. I'm Andy Serwer. You've been watching "Influencers." We'll see you next time.

July 31, 2020

Warren Buffett reveals his investment strategy and mastering the market (PART 4).

Warren Buffett reveals his investment strategy and mastering the market (PART 4).

ANDY SEWER: You talked a lot about the tax cuts and the benefits to Berkshire. You didn't really get into the costs of the tax cut, which surprised me a little bit. Are there costs? I mean, is it just free money?

WARREN BUFFETT: Well, it makes a difference. The tax cut we get, for example, our utilities, as I mentioned in the report, that goes to the customers. That's just the nature of utility regulation. But net, we were a significant beneficiary from the tax cut.

Basically, let's just say we had one class of stock. We got two. You and I own a business together, and we think we own all the stock. But the truth is, before the tax cut, the government had a 35% share of the stock on income.

Now they didn't have a share of the assets, but they had a share of the income. And if it wanted to change it to 40, it could've changed it. But fortunately, it changed it to 21. And if we had a private business, if we had a McDonald's franchise together or an auto dealership together-- the third shareholder-- that invisible shareholder, the government-- just handed us back a bunch of the shares of stock. And our shareholders benefited, and a lot of other shareholder benefited.

ANDY SEWER: You talked about Ajit Jain and Greg Abel saying that Berkshire blood flows through their veins. Have they made a difference since they become vice chairs? And then are they like Warren and Charlie?

WARREN BUFFETT: No, they don't have the interaction. They each run a separate business. Ajit does not think about the other businesses. He thinks about the insurance business. And Greg does not think about the insurance business at all. And I think about the money and the capital and so on.

They're running two very big businesses. I mean, Ajit's business has, all told, a couple of hundred billion of assets. And Greg's business has $150 billion of revenues. They both would fit up there toward the top 10 or so in the country in terms of value, maybe the top 15. But they're very big businesses.

ANDY SEWER: But they're not exactly like you two guys?

WARREN BUFFETT: No, Charlie and I have a partnership thinking about the whole place, and we've done it forever now, and we still do.

ANDY SEWER: And Todd and Ted? I didn't see them mentioned.

WARREN BUFFETT: Well, they have $13 billion each, including pension funds, our pension funds, that they run. So the $173 billion we had at year end in equities-- well, we had 173, but we had another $8 billion in pension funds. So of the 180 or so, they had 26 between them that they're managing.

They got total discretion on that. They don't ask me. At the month end, I look and see what they did. They don't do much. They don't do a lot of trading or anything. But I look to see what changes they made.

Todd, for example, he made a couple of small investments in private-placement-type operations. And I know what the businesses do, but I can't tell you their names.

ANDY SEWER: Was one of those-- you made this investment in Oracle, and you sold it. Was that something they did?

WARREN BUFFETT: No, that was not something they did. That was something I did.

ANDY SEWER: Yeah, and you said, you didn't understand it. That's why you sold. But than why'd you get it in the first place?

WARREN BUFFETT: Well, that's a good question to which I do not have a good answer. I know enough about the cloud to know I don't know enough about the cloud.

ANDY SEWER: Right. OK. So Barclays put out a note. They said they were lowering the estimates for Berkshire for EPS. Do you read that stuff?

WARREN BUFFETT: No. Well, I mean, I may read it accidentally, but I don't seek it out to read. I'll put it that way. It just doesn't make any difference. If I spent time reading that, I wouldn't have the time to read 10Ks. And we're not going to do anything different.

I don't know what we're going to earn. As I put in the annual report-- and I really think this is unique-- we do not prepare financial statements monthly for Berkshire. There's just no other company that would do it. But there's no sense doing it.

I know where the money is. I know how the companies are doing, generally, but what difference does it make? Because I'm not going to try and hit any number for the quarter by having a sale on insurance or doing something even worse. And Charlie, he knows where we stand. And we know what businesses are doing well and which aren't. We certainly know where the money is.

ANDY SEWER: Another one-- UBS survey of Berkshire investors says, the five most important things to them are succession, investment performance, M&A opportunities, share repurchase, insurance margins. Do you read that? Does that surprise you?

WARREN BUFFETT: No, but I don't disagree with that. Somebody understands this.

ANDY SEWER: Your own investors.

WARREN BUFFETT: Yeah. Well, that's important. To go back to when I started my partnership in 1956 that Berkshire came out of, there were seven people sitting there at a table having dinner, relatives primarily. And I said, here's the partnership agreement.

It's done under Nebraska law. It's four or five pages. You don't need to read it. But I said, here's a little half page, what I call the ground rules. And I want you to read these, and if you feel OK about that-- about the interaction, what the expectations are, and all of that sort of thing-- then we'll join forces.

And if you don't, it's fine. We shouldn't be partners. If I'm going to have a partnership with somebody, I want to be compatible. And when you have a public company, you can't control who comes in. I can't control some guy comes in and thinks we were going to pay big dividends or split the stock or something like that.

So by my actions and my communications and everything, I want to attract the people from the public market that I want, and I want to keep the others away. Costco was built-- Sal Price, who started the Price Club, I think, he sat down and figured out the customer he didn't want. And he set up a system that would keep away the customer he didn't want.

Who did he not want? He didn't want somebody buying a quart of milk with somebody behind him with a basket of $200 worth of goods waiting for that. So he put in a membership fee. And by putting in a membership fee, he killed all the drop-in business, the business that belonged to the 7-Eleven.

We want Berkshire to keep out people who have expectations about us that are different than ours. Good for them, and I hope they find somebody they fit. But if you're going to run a church, you want your seats to be filled by people that generally want to listen to your form of religion.

And you don't want it to change every week and say, gee, I need a new group. And I'll go out and talk to a bunch of investors and get them to come to my church next Sunday. Because there's only so many seats in the church. There's a 1,645,000 or so A-equivalent shares. And those are the seats, and I want them occupied by people that are on the same page I am.

ANDY SEWER: The Church of Berkshire. Seems like you've got a big weighting in financials. And of course, you finally invested in Jamie Dimon's company. Why banks right now?

WARREN BUFFETT: They're businesses I understand, and I like the price at which they're selling relative to their future prospects. I think, 10 years from now, that they'll be worth more money. And I feel there's a very high probability I'm right. And I don't think they will turn out to be the best investments at all of the whole panoply of things you could do. But I'm pretty sure that they won't disappoint me.

ANDY SEWER: Is climate change changing your insurance businesses?

WARREN BUFFETT: No, it doesn't change the insurance business.

ANDY SEWER: Does it change modeling or something in the business?

WARREN BUFFETT: It would change our insurance business if we were writing 20-year policies. If there was something that changed life mortality adversely to the interests of a life insurance company, you're stuck with a policy for 20 years if you write the life insurance policy. You'll keep paying your premiums if it's adverse to me. That's what's happened in long-term care insurance, for example.

But when you write a policy for one year at a time, see what the developments are. Cars, for example, are much safer to drive than they used to be. There used to be 15 deaths per 100 million miles driven. Now, there's a little over one. On the other hand, they've become much more expensive to fix. That little side view mirror, which used to cost 10 bucks, is now 1,000 bucks or something like that.

So you have things that are changing in terms of, if you're writing collision insurance, you've got to allow for the fact that the windshield, the bumper, all kinds of things, the side view mirror and all that are way more expensive. But if you're writing liability, people aren't going to die as often.

Climate has been changing. But the truth is that you now can buy really big catastrophe limits cheaper than you could buy them in 2005 or thereabouts, allowing for changes in the dollar and concentration of population. So far, rates have come down. That's the reason we've gotten out of the cab business to a great degree.

We were a very big writer of cab business 10 or 12 years ago. We aren't out of the cab business because of climate change. We're because the prices aren't right. And the world will change, and that's got very serious consequences. But it won't change that much from year to year. We've done very well during a period of some climate change.

ANDY SEWER: You've talked about technology advancing faster than our ability to understand it. And I'm wondering if social media, and Facebook, and Google, and Russian trolls coming in, is that maybe an example of that? Are you still worried about that problem?

WARREN BUFFETT: Well, I think cyber poses real risks to humanity. Forgetting about the problem even of misinformation. I'm just thinking of we have railroads running over 22,000 miles of track. And some of them are carrying ammonia. And some of them are carrying chlorine and things. We have to carry them. We have no choice about that. We're required by law to carry them.

I would rather do that in a non-cyber world than a cyber world. There are all kinds of things-- the problem by something like cyber is that it's moving, and it's just unpredictable whether you'll get some crazy guy, like stuck the anthrax in the-- you know, what they can do becomes magnified. You saw what 19 guys did on 9/11.

Tools in the hands or potentially in the hands of either crazy individuals, crazy groups, or even a few crazy governments are really something. And we don't necessarily know what all the tools they have are, and that is moving all the time. Again, Einstein said, I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones. It's a dangerous world.

ANDY SEWER: I don't know if you've following this, Warren, but what do you think of Elon Musk's behavior as a CEO?

WARREN BUFFETT: Well, I think it has room for improvement. [CHUCKLING] And he would say the same thing. It's just, some people have a talent for interesting quotes, and others have a little bit more of a blocker up there that says, this could get me in a problem. But he's a remarkable guy.

I just don't see the necessity to communicate. I think I've got seven tweets, because a friend of mine signed me up for it. And she's called me about 100 times saying, can I tweet this or that? I said yes to her seven times, I guess, or something like that. I've never actually written one myself. I don't even know how to do it.


TO BE CONTINUED

July 31, 2020

Warren Buffett reveals his investment strategy and mastering the market (PART 1).

Warren Buffett reveals his investment strategy and mastering the market (PART 1).

ANDY SERWER: Warren Buffett needs little introduction. He's the godfather of modern-day investing. For nearly 50 years, Buffett has run Berkshire Hathaway, which owns over 60 companies, like Geico and Dairy Queen, plus minority stakes in Apple, Coca-Cola, and many others. His $82.5 billion fortune makes him the third richest person in the world. And he's vowed to give nearly all of it away. The Oracle of Omaha is here to talk about what shaped his investment strategy and how to master today's market.

I'm Andy Serwer. Welcome to a special edition of "Influencers" from Omaha, Nebraska. It's my pleasure to welcome Berkshire Hathaway CEO Warren Buffett. Warren, welcome.

WARREN BUFFETT: Thanks for coming.

ANDY SERWER: So let's start off and talk about the economy a little bit. And obviously, we've been on a good long run here.

WARREN BUFFETT: A very long run.

ANDY SERWER: And does that surprise you? And what would be the signs that you would look for to see that things were winding down?

WARREN BUFFETT: Well, I look at a lot of figures just in connection with our businesses. I like to get numbers. So I'm getting reports in weekly in some businesses, but that doesn't tell me what the economy's going to six months from now or three months from now. It tells me what's going on now with our businesses. And it really doesn't make any difference in what I do today in terms of buying stocks or buying businesses what those numbers tell me. They're interesting, but they're not guides to me.

If we buy a business, we're going to hold it forever. So we're going to have good years, bad years, in between years, maybe a disastrous year some year. And we care a lot about the price. We do not care about the next 12 months.

ANDY SERWER: But are you surprised at how long this economy has been expanding?

WARREN BUFFETT: I've been surprised by all kinds of things in the last 10 years about the economy. I don't think there was any economist I've ever read that talked about negative interest rates for long periods of time. If you go back and read Keynes, or you read Samuelson, you read any of them, they do not get into a negative rate environment. I think now there's still $11 trillion that's-- of government debt around the world that's at a negative rate.

So we've never seen it before. And we've never seen, at least the conventional wisdom on it, a sustained period of long and growing deficits while the economy's getting better, extremely low interest rates, and really very little inflation. So something different's happening, but something different happens all the time. And that's one reason economic predictions just don't enter into our decisions.

Charlie Munger, my partner, and I, in 54 years now, we've never made a decision based on an economic prediction. We make business predictions about what individual businesses will do over time, and we compare that to what we have to pay for them, but we have never said yes to something because we thought the economy was going to do well in the next year or two years. And we've never said no to anything, because we were right in the middle of a panic even, if the price was right.

ANDY SERWER: All right, so you don't pay much attention to the dismal scientists then, I guess.

WARREN BUFFETT: Well, I pay none in the sense of as a guideline to doing anything. It's entertainment. It's like going to a variety show or something like that. But I just don't know of any economist that actually has bought businesses successfully or done well in stocks. Paul Samuelson did. And as you may know, he was a big shareholder at Berkshire.

But it's-- they make guesses. And there's so many variables. In the hard sciences, you know that if an apple falls from a tree that it isn't going to change over the centuries because of anything or political developments or 400 other variables that go in. But when you get into economics, there's so many variables. And the truth is you've got to expect good times and bad times in business. And if you were to buy an auto dealership wherever you live locally or a McDonald's franchise or anything like that, you wouldn't try and time the purchase. You'd try and make the right purchase at the right price, and you'd want to be sure you got a good business, but you wouldn't say, I'm going to buy it because growth this year is going to be 3% instead of 2.8% or something of the sort.

ANDY SERWER: Fair enough. You have over $100 billion of cash at Berkshire.

WARREN BUFFETT: Berkshire does.

ANDY SERWER: Berkshire. Not you. Well, I'm gonna see how much you got.

WARREN BUFFETT: Yeah! [LAUGHS]

ANDY SERWER: Maybe you do! Berkshire has over $100 billion in cash. And you say that you always want this company to be a fortress. So how much cash should an ordinary investor have on a percentage basis, do you think?

WARREN BUFFETT: It depends on their personal situation. If you're working in something where you're living off your paycheck from week to week, you want to have a little cash around, and you certainly don't want have a credit card that's maxed out or anything like that. But if your house is paid off, if you don't have big living expenses, you got a portfolio of decent diversified businesses, you don't really need any cash.

ANDY SERWER: So you can be more cash-free than Berkshire is.

WARREN BUFFETT: Yeah. Yeah, I've got responsibil-- we've got insurance claims. We could have hurricanes that would happen, all kinds of things, where you might have to pay out billions of dollars. And I've got over a million people that own shares that are counting on me to run the place, so we get through periods like that.

But if I were retired, I had a-- say, a million dollar portfolio of stocks that was paying me $30,000 a year in dividends or something of the sort, and my children were grown, the house was paid off and everything, I wouldn't worry too much about having a lot of cash around.

ANDY SERWER: Let's talk a little bit about Apple. Everyone always wants to talk about Apple, right? It's kind of the it stock, it company. You have a $45 billion stake, more or less. How closely do you follow the company? People are concerned they haven't really introduced any new products.

WARREN BUFFETT: Well, if you have to closely follow a company, you shouldn't own it.

ANDY SERWER: Really?

WARREN BUFFETT: No. If you buy a business-- if you buy a farm, do you go up and look every couple of weeks to see how far the corn is up? And do you worry too much about whether somebody says this is going to be a year of low prices because exports are being affected or anything like that? You buy a farm, and you hold it for-- I've got one farm that I bought in the 1980s. And my son runs it. But I've been there once. It doesn't grow faster if I go and stare at it. I can't cheer for it, more effort, more effort, or something like that. And I know there's going to be some years when prices are going to be good and some when the prices aren't going to be good. I know there's years when yields will be better than others. But I bought the farm.

And it just doesn't-- I don't care about economic predictions or anything of the sort. I do care that over the years it's well tended to in terms of rotating crops. And I hope yields get better, which they generally have. In fact, that farm 100 years ago would have probably produced 30 bushels, maybe 35 bushels of corn per acre. Now on a good year, it'd be 200. We've really made progress in this country. That's one reason commodity prices, go back a couple hundred years, they've moved so little is because we've just gotten better and better at whether it's cotton or whether it's corn or soybeans or all kinds of things. And you and I have benefited from that.

ANDY SERWER: And so Apple's kind of like a farm.

WARREN BUFFETT: Well, it's a long-term investment. If you owned the best auto dealership in town, the best brand, and had somebody good running it, you wouldn't drop by every day and say, you know, how many people have come in today? Or, I think, interest rates are going up a little. Maybe we ought to slow down our sales.

No, you buy it knowing there's 365 days a year. You're going to own it for 20 years. So that's 7,300 days. Things are going to be different from day to day and year to year. You shouldn't buy it if the day-to-day stuff is important.

ANDY SERWER: Let's switch over to talk about buybacks, which is another hot topic these days. And you did a fair amount. If you look in the annual report, you can see that between December 13 and 24, it looks like you guys bought back about $233 million worth of Berkshire, which was right near that particular stock market bottom. How did you know that? What was going through your mind?

WARREN BUFFETT: If I knew, I'd had bought a lot more than 200. That's not a big purchase for us, actually. We will buy Berkshire when we have lots of excess cash, all the needs of the business are taken care of. We spent $14 billion on property, plant, and equipment last year, way more than depreciation.

So we take care of the needs of the business, then we have excess cash. We'd love to do is find other businesses to buy, but if I think the stock and my partner, Charlie Munger, think the stock is selling below intrinsic business value, we will buy in stock.

ANDY SEWER: So it obviously was at that point?

WARREN BUFFETT: Well, we thought so, yeah. But what's really intriguing is when it goes down a lot. I mean, when you're buying dollar bills for $0.60 or $0.70, which, periodically, you get a chance to do it in stocks, then yeah, assuming you've the cash, whenever it gets so that some surprise could really take you out in some way. But if we've got excess cash, we'll buy it as fast as we can.

ANDY SEWER: At that point, it'll be more like a 2009 rather than just December of this pay season?

WARREN BUFFETT: Yeah, exactly. If you and I own a McDonald's franchise together, and it's worth a million dollars, and you own 50% of it, and you come to me and you say, I'll sell out for $400,000, I'll buy you out.

ANDY SEWER: In my mind, I'd be wary of that for just that reason.

WARREN BUFFETT: You should be, yeah. If you want $600,000, you'll say come back tomorrow.

ANDY SEWER: So just continuing about buybacks, Senator Schumers and Sanders want the government to weigh in to sort of legislate when companies can do buybacks. And then also, there was a report recently about executives doing insider trading, it appears, around the times of buyback. So are buybacks kind of a problem?

WARREN BUFFETT: Well, you'll have some people that misbehave irrespective of any activity. That really wouldn't have much to do with buybacks. I think, buybacks, the degree to which they've been part of nefarious activity that I've observed and put a lot of years in are very close to zero. But that just may be that there aren't enough opportunities.

But that article did not-- I didn't follow the conclusion on it. You're distributing money to shareholders, essentially. You can do it by dividends and presumably, American business should distribute money to its owners occasionally. We do it through buybacks. We've done some, and we don't do it through dividends.

But most companies do it through having a dividend policy. And then if they have money beyond the needs of the business, then, I think, if their stock is underpriced, then it makes nothing but sense.


TO BE CONTINUED

July 31, 2020

Business Lessons From Mega-Entrepreneur Richard Branson (part 1).

Business Lessons From Mega-Entrepreneur Richard Branson (part 1).

By : Zach Bulygo.

Like many entrepreneurs, Richard Branson loves creating things. He sees problems in the world and provides solutions. But unlike others, he has established many different businesses. In fact, in his 40+ years as an entrepreneur, he has developed over 100 brands.

Branson has given a lot of advice along the way. He has spoken on topics of starting a business, running a business, managing people, and hiring people. Let’s get into what he advises entrepreneurs.

On Starting a Business, Challenge The Status Quo.
Challenge the accepted wisdom and encourage your staff to do the same. Look at things from the point of view of the customer. Here are two examples where Virgin took a totally unique perspective on things:

Virgin Money is a bank in Britain where the branches look more like living rooms than banks. There are tables for Wi-Fi, newspapers, and comfortable seating. This eliminates lines and teller windows.

Virgin America Terminal 2 was a terminal with a yoga room, a wide variety of food choices, etc.

It’s important to create something different, something that will stand out.

Create Value In The World.

Branson says that he starts a business only if it will improve people’s lives. He was unhappy with the customer service he was getting from British Airways, so he started a new airline, Virgin Atlantic, which is focused around the customer.

Building something you’re passionate about is important as well. If Branson hadn’t been passionate about building an airline, he wouldn’t have put so much time into getting the staff, buying the aircraft, and working hard to turn it into a viable business.

When Pitching, Keep Things Simple
Keep your pitches simple, clear, and memorable. Avoid wishy-washy language like “we hope that…” or “with some luck, we’ll…” Be concrete and confident.

“It is vitally important to present a clear, concise plan that investors can easily understand and repeat to their own people. In the first meeting, avoid overly complicated, numbers-laden presentations.”

Branson also advises entrepreneurs to give a clear explanation of why their business will be sustainable and pull through technological changes and shifts.

“Nothing stays the same for long, so explain how you plan to tackle the inevitable technological changes and market shifts that are heading your way.”

Be A Self-Motivator.
According to Branson, entrepreneurs need to be good self-motivators. Branson advises that entrepreneurs use it to their advantage:

“It’s important to understand what your main motivation is so that you can focus your efforts on reaching those goals. Then structure your job – perhaps by delegating some work – so that you can spend as much time as possible turning this energy to your company’s advantage.”

He says that making money shouldn’t be a main motivator.

“Above all, you should work on building a business you’re proud of. This has always been a motivator for me, from my Student magazine days, through to our latest startups today. I have never gone into any business purely to make money. If money is your only motive, then I believe you shouldn’t launch the business at all.

“Once you know what your own motivations and aspirations are, talk to your employees and colleagues about theirs, if you haven’t already. Then structure their jobs in a way that allows them to tap into this energy, too. With you and your employees approaching your work with renewed energy and commitment, you’ll find that there’s little that you can’t accomplish together.”

Dream Big.

Branson’s first book, Losing my Virginity, was almost titled Talking Ahead of Yourself. Branson goes on to say:

“Because I sometimes think in life you’ve got to dream big by setting yourself seemingly impossible challenges. You then have to catch up with them. You can make what people believe is impossible possible if you set big enough targets. Flying from New York to Australia in, say, two hours. Can we do it in our lifetimes? I’m determined to try. If you don’t dream, nothing happens. And we like to dream big.”

Your First Year Is All About Surviving.
In your first year of running a business, your only goal should be surviving.

“In a company’s first year, your goal should be simply to survive, and this will likely take everything you’ve got. No matter how tired or afraid you are, you have to figure out how to keep going.”

Investors Bring More Than Just Money.
When examining investors, Branson suggests that you ask yourself, “Will this person or group give us the space and time we need to build a great business?” A “dictatorial financial partner” can ruin the spirit and enthusiasm of entrepreneurs, so ensure that your investor is someone who will let you run your company without getting in the way or questioning every decision you make. Remember that it’s not all about the money and that the person you are bringing on is also important. They carry more than just a checkbook.

The most important partnership you have is the one with your staff. Branson says that if you get that right, your chances of success are much higher.

Five Tips For Success.
In a LinkedIn post, Branson gives entrepreneurs five tips for starting a successful business:

Listen more than you talk.
Keep it simple.
Take pride in your work.
Have fun, success will follow.
Rip it up and start again (don’t let failure be the end all, be all).

Five Guidelines Branson Follows When Launching Businesses.
Branson and his friends in business followed these five guidelines when they launched their first magazine, Student, and, later, Virgin Music.

If you don’t enjoy it, don’t do it. You must love what you do.
Be innovative: Create something different that will stand out.
Your employees are your best asset. Happy employees make for happy customers.
Lead by listening: Get feedback from your staff and customers on a regular basis.
Be visible: Market the company and its offers by putting yourself or a senior person in front of the cameras.

Four Tips for Avoiding Startup Mistakes.

When speaking on avoiding common startup mistakes, Branson gives these tips.

Stay on target – You need to be clear and concise in explaining your idea. Branson says that the shorter the pitch is, the clearer it will be. Don’t plan too many years in advance, and stay on target.
Be realistic about costs – Don’t underestimate the cost that it will take to launch your company. Branson says that JetBlue needed $160 million to launch. Conventional wisdom said that cost was too high and they wouldn’t be able to raise that much capital. But they did and had one of the most successful launches in airline history and turned a profit after only six months.
Hire people you need, not people you like – It’s been said that people would rather work with people they like than people who are competent. Branson says entrepreneurs may want to stay away from working with friends because, if they don’t work out, it will be difficult letting them go.
Know when to say goodbye – Entrepreneurs need to know when to step away from the CEO role. This doesn’t mean turning your back on the business, but realizing you’ll have a new role in the company which will allow you to focus more. It also doesn’t mean that you cannot return to running the company, as Larry Page did at Google.

On Running a Business.
It’s All About The Details.
“I often compare creating a business to creating a painting. You’ve got a blank canvas, you’re filling in that canvas and you’re trying to get every single little detail right.”

Branson says entrepreneurs should have a notebook with them at all times and write down what they notice about their business. When Branson flies on Virgin, he takes notes on everything from the food to the carpets. He advises others to do the same, and focus on getting everything right, all the time.

Skip The PowerPoint And Have A Conversation.
Branson doesn’t care for PowerPoint. He said, “I believe in conversation and eye contact.” This isn’t surprising considering how well Branson connects with people. Avoiding PowerPoint is similar to the practice at Amazon, where, in place of PowerPoint, they write six page reports.

Ultimately, PowerPoint presentations are aimed to provoke conversation and only touch on the highlights, not to be a crutch for the speaker who only reads the slides.

Get Away From The Job.
It’s important to spend time away from work to be with family and friends. Branson says, “Spending time away from work is important to helping you maintain perspective on the challenges you face, and thus to the future of your company.”

Not only that, but time off can also improve performance. So take some time off, you’ll be better because of it.

Keep A Notepad With You.

“Anyone who aspires to lead a company must develop a habit of taking notes. I carry a notebook everywhere I go.”

As mentioned, Branson is an avid note taker and list maker. He recommends doing this to keep you focused and productive. It can be done for day-to-day or monthly goals. Making these lists can keep you productive and focused on what you need to get done.

Once you write in your notepad, then you need to act. Simply writing in a notepad doesn’t create change.

Don’t Take Yourself Too Seriously.
“Humor, I think is a very important part of building a business, not taking yourself too seriously and being willing to have a sense of humor.”

Along with not taking yourself too seriously, Branson says you should smile and not take failure too seriously, either.

Promote From Within.
Whenever possible, promote from within. This doesn’t mean just bumping people to higher positions, but also letting people have more freedom in their current job.

A Question Entrepreneurs Should Ask Themselves
Continually ask yourself,

“Is this how I would want to be treated if I were the customer?”

Don’t Forget What A Company Is.
Branson says that the most important thing to remember when running a company is remembering what a company is.

“A company is simply a group of people. And as a leader of people, you have to be a great listener, you have to be a great motivator, you have to be very good at praising and looking for the best in people. People are no different from flowers. If you water flowers, they flourish. If you praise people, they flourish. That’s a critical attribute of a leader.”

to be continued.

July 28, 2020

Warren Buffett reveals his investment strategy and mastering the market (PART 2).

Warren Buffett reveals his investment strategy and mastering the market (PART 2).

ANDY SEWER: Should the government tell companies when to do it or, at least, mandate conditions where they can?

WARREN BUFFETT: Well, they do restrict you a little in terms of some general rule of the SEC, if you're having some kind of-- this isn't quite the right word, but-- manipulative activity or anything like that in the stock. But no, I don't think the government should decide your dividend policy. I don't even think they should direct your capital investments.

They can make it enticing to make certain kinds of capital investments, which they do with renewable energy, for example. I mean, the government has interest in fostering certain developments in this country over time. There used to be a special oil depletion allowance 50 years ago and so on.

That was more politics than it was governmental policy. But certainly, renewables are a prime example of that. But the idea of directing whether you are entitled to return cash to shareholders and the manner in which you do it, I don't think, really makes a lot of sense.

ANDY SEWER: The 2020 election is going to be upon us before we know it. And I know that you had some nice things to say about Mike Bloomberg, but it appears he is not going to be running now.

WARREN BUFFETT: Yeah, it's hard to win with just the billionaire vote.

[LAUGHTER]

ANDY SEWER: He'll have your vote and a few others. That's funny.

WARREN BUFFETT: But I admire him enormously. I wish he had run. I want to be very clear on that.

ANDY SEWER: President Trump was a business executive. So two questions. Is a business executive the right kind of person to be president? And what characteristics do you look for for a president that you would support?

WARREN BUFFETT: Well, I think a business executive can be the right person. But I don't think that because they're a business executive that you give them extra points. Number one, I want a president that wakes up every morning and realizes that the greatest threat to a country which has got all kinds of things going for it are weapons of mass destruction, and that we live in a world where people, organizations, and, occasionally, countries could have people that would like to wipe out a large percentage of the American people or maybe other countries as well.

And that you now have capabilities, which I always thought, until recently, I'd classify as nuclear, chemical, and biological. But I think, you have to add cyber now. If you have some evil genius someplace that, for crazy reasons, just like what happened with anthrax back-- who knows what motivates somebody that starts sending anthrax in letters-- if you have somebody that thinks it'd be great to send a false alarm to the Russians and to the US that the other side was launching or something of the sort-- it's a very, very dangerous world.

It's a wonderful world, but it has dangers now that started in August of 1945 when Einstein said, you know, this changes everything in the world, except how men think. So I want a president that has that same fella that all of these other things are important. But protecting the country and reducing the chance of successful use of weapons of mass destruction against us is the number one job. And I think most of the presidents-- I've talked to a couple of them about it over the years, and I really think that they do realize it. They may get lost in the events of every day as they go along.

And then beyond that, I want a president that has two objectives with the economy. One is to make sure that this marvelous goose we have keeps laying more golden eggs. And then I want a president that also feels that if GDP is $60,000 per capita in the United States, that nobody should get left behind. We've got a market system that works marvelously in turning out more goods and services, better ones year after year, done it all through my life.

ANDY SEWER: Would you ever talk to a candidate and say, hey, what do you think about these three things?

WARREN BUFFETT: Well, they'll tell me what I want to hear in most cases. So I want to hear what they tell people who disagree with them on the subject. I always like to ask a candidate-- they usually finesse me somewhere-- but I say, what are you for that the majority of your followers are against? I know you really believe in that, and that's really the test. But I'm not sure that, except under some kind of sodium pentothal or something you're gonna get a great answer to that question.

ANDY SEWER: That's great that that's the question you ask the presidential candidates or presidents that you would speak to.

WARREN BUFFETT: If I really want to get-- and that's why Bernie Sanders was so successful. 90% of the people who voted for Bernie Sanders had probably not heard of him two years earlier. They felt they knew exactly what he would do. They felt he was authentic. And if you asked him what he was for that most people might be against, he would tell you.

ANDY SEWER: A few questions about Kraft Heinz. Was that a mistake?

WARREN BUFFETT: We'll find out over time. But we did pay too much, in my view, for Kraft. We didn't pay too much for Heinz.

So when we started out, it was originally a non-public partnership between us. And we did pay too much, in my view, for Kraft. There's not much you can do about things if you pay too much.

And secondly, there's always been a struggle between the retailer and brands. If I've got a terribly weak brand, and I want to get into Walmart, I'm not to be able to do it. I'd have to offer all kinds of crazy concessions, you know? And I want to be in Walmart if I have some sort of consumer-packaged goods.

The negotiation is way different if you have something essential versus nonessential. 10 years ago, Costco tried to get rid of Coca-Cola. Costco's got terrific loyalty among customers, and their own Kirkland brand is a $39 billion brand now. And it moves from category to category, and they only started in 1992.

So they know brands. But in the end, they put Coca-Cola back in. If had been Royal Crown Cola, they wouldn't have had to put it back in. So there's always that struggle between the brands, and there always will be. But the retailers net has been moving in their direction, particularly, I think, because of the Amazon revolution.

ANDY SEWER: First Walmart, and then--

WARREN BUFFETT: Yeah, Walmart. But it's been accentuated, I think. We have a new retailing environment now. It isn't like it goes from night to day, but it moves somewhat. And brands that people spent billions of dollars developing and sponsoring TV shows or sponsoring radio shows in the old days-- Campbell's soup was always on there with Jack Benny or something when I was a kid, and it was big.

And adult brands, and people obviously like the product, too. But people are more willing to change, and it's a somewhat different world than what-- it is night and day. You're very unlikely to keep changing brands everyday. But it really surprised me that Gillette lost position. Men don't like to experiment much. Women are better at experimenting.

When you were a kid, Gillette cavalcade of sports was your pal, and brought you the Rose Bowl and the World Series, and all that sort of thing. You just shaved with Gillette the rest of your life. And you still do to a great degree. But it's not exactly the same as it was, even five years ago or so, when we bought Kraft.

ANDY SEWER: You mentioned Amazon as a game-changer. And I have to ask you, you haven't bought the stock. You're an admirer of Jeff Bezos. A listing of the richest people in America came out. He's number one. I think, your friend, Bill Gates, is number two. You're number three.

So you can see what he's done in myriad ways. And, of course, the question is, how come you haven't bought Amazon? Is there still time to buy? Would you still buy?

WARREN BUFFETT: I always admired Jeff. I met him 20 years ago or so, and I thought he was something special. But I didn't realize you could go from books to what's happened there. He had a vision and executed it in an incredible way-- something that would not have--

But there's a lot of games I've missed. I would've missed Microsoft, even if I'd gotten to know Bill earlier or something. Those just aren't my games. I don't worry about the things that I miss that are outside my circle of competence of evaluating.

I have missed things that were within my circle, and that's a terrible mistake. Those are my biggest mistakes. You haven't seen them. It's not a mistake because I missed Netscape or something like that at all. I would say that maybe 5% of the companies or 10% of the companies, at most, are within an area of my circle of competence, there's something I should be able to understand.

ANDY SEWER: All right, well let me switch gears then and ask you about leverage a little bit. Corporate debt people are concerned about, people are concerned about federal debt at $22 trillion dollars. Should we reduce, let's just say, the federal debt and how would we do that?

WARREN BUFFETT: Well, if you're running a deficit getting close to 5% when things are really good, that's a new world. Neither the Republicans or Democrats are particularly concerned about it, and we're not having a lot of inflation.

That wasn't supposed to happen, but it's happening. That's why I say, you don't want to get hung up on trying to make economic analysis, because nobody is any good at-- you don't get rich doing that. If you look at-- you mentioned that Forbes list, if you get out the list, the number of people that have done that by economic analysis, I think, are just about zilch on there.

ANDY SEWER: OK, fair enough. Income inequality, wealth inequality-- you've talked about the Earned Income Tax Credit. Is there more to it than that? Should we adjust tax policy? It seems to be going the other way right now.

WARREN BUFFETT: Well, it was going the other way. But I think, the Earned Income Tax Credit is the best way to put money in the pockets of people that don't fit well into the market system, but that are perfectly decent citizens and that have made a good bit of the success, something like I've had with Berkshire or something possible. It wouldn't have happened without the America we have.

And if you go back 200 years, and 80% of us are working on farms, the person that's the best at that-- working on that farm, whoever it may be-- is worth maybe twice the ones that's the worst. I mean, that's the difference between super-talent and no talent in the farm economy-- picking cotton or whatever it may be.

Now, if you're the best middleweight fighter in the world, you may get $20 or $30 million. And if you are just a good citizen, raised nice kids, helping the neighborhood and everything else, but you don't have market-related skills, you'd be good on that farm still. And you would be earning something comparable to most of the people around you.

But you don't have something out as it gets more and more specialized. And it's going to continue to get more specialized. You want two things for that person. You want them to have a decent life. They live in a country with $60,000 of GDP per person. You want them to have a decent life, and they can.

I also think you want them to have a feeling of accomplishment. So you want them to have a job, assuming that they're not handicapped in some way. You want them to have a job. But the minimum wage would be one way to say, well, we'll make sure that they have enough in their pocket. But that's got a lot of effects in disturbing the market system.

They just need more cash. They don't need a higher wage. They need more cash in their pocket. And the government, at relatively low cost, can provide a decent living for any that's living, that's working 40 hours a week and has a couple of children.

And we've gone in that direction, and it's sort of bipartisan. And I find both Republicans and Democrats for it. I think it would be better not to have one annual payment, that they get it monthly.

I think there are various things you could do. But you want them to feel part of the system, and as more and more of these golden eggs are laid, you want them to get a little bit more of their share.

ANDY SEWER: I mean, if we don't do that, and the Democrats win, it's possible we get big taxes on wealthy people, free college for all. And those are bigger plans.

WARREN BUFFETT: You want more money in the pockets of everybody that's willing to work or is unable to work. And we can do it. A rich family would do that. If I had six or seven kids, and I had some business I wanted to pass on, you'd pick the most able person to run it, because that's the market system to do that. But you'd make sure that all seven of the family participated.

You might give more to the one that kept producing the golden egg. You would. But you wouldn't just say to the one at the lowest end, who might be the best kid of all in most respects-- he's the one that shares with everybody and does all kinds of that-- you wouldn't say to him or her, too bad. That's just the way the market system works. Have your spouse get a job and look for housing someplace.


TO BE CONTINUED

July 31, 2020

Warren Buffett reveals his investment strategy and mastering the market (PART 3).

Warren Buffett reveals his investment strategy and mastering the market (PART 3).

ANDY SEWER: Right. Why don't we do an update about the Health Care Initiative, which now, the company has a name-- Haven. Was that your idea?

WARREN BUFFETT: No. I didn't worry about a name. We could've gone on as a no-name operation for 10 years, as far as I'm concerned. We've got a wonderful partnership in the sense that it's large and has reasonable market muscle, with more than a million employees among the three of us.

We've got three CEOs that can make things get done and organizations that so are so big that normally, they wouldn't get very bureaucratic. If you tried to do this with many big companies, you'd have legal weighing in and public relations weighing in. We don't have any of that stuff.

They may have them in certain areas, but Jamie hasn't got to worry about doing that sort of thing and neither does Jeff. So we've got a unity of commitment and an ability to execute on the commitment. The only problem is, you've got a $3.4 trillion dollar industry, which is as much as the federal government raises every year, that, basically, feels pretty good about the system.

As we went around talking to people to find a leader for the group, for example, everybody says, the system, it turns out very good medicine. But you can't go from 5% of GDP to 18% without really making you less competitive, among other things, in the world. So everybody thought the system needed some adjustment, just not their part of the system. And that's very human. I'd do the same thing, I'm sure, if I was in the same place.

So there's enormous resistance to change, while a similar acknowledgment the change will be needed. And, of course, if the private sector doesn't supply that over a period of time, people will say, then, we give up. We've got to turn this over to government, which will probably be even worse.

ANDY SEWER: How often do you talk to Jamie and Jeff about it? I know Todd Combs, I think, is your point person.

WARREN BUFFETT: Todd really does all the work. If this works, give Todd 100% of the credit from the Berkshire standpoint.

ANDY SEWER: Does Haven have to buy companies to gain expertise? What do you--

WARREN BUFFETT: No.

ANDY SEWER: What is the plan?

WARREN BUFFETT: The plan is to support a very, very, very good thinker on this subject, who is a practicing physician and who commands the respect of the medical community, to, in effect, figure out some way, so that we can deliver even better care and have people feel better about their care, too. They have to perceive that they're receiving better care over time and stop the march upward of costs relative to the country's output.

We've got this incredible economic machine, but we shouldn't be spending 18% when other countries are doing something pretty comparable in terms of doctors per capita, hospital beds per capita, and all that. The very top stuff in medicine, I think, is very much concentrated in this country, and that's great.

I want us to be the leader, but I think we're paying a price. If we're paying seven extra points of GDP, that's $1.4 trillion a year.

ANDY SEWER: Is the administration focusing-- by focusing on drug prices, is that sort of a rabbit hole? Is that missing the bigger picture?

WARREN BUFFETT: They're trying. And Congress, generally-- I mean, you talk to the average congressmen-- they regard it as a problem. And they see specific instances of drug prices or something like that.

It's a big problem to change. The problem is, it intersects in so many ways. And that's why we've got Gawande heading it, and We've got three bigger-sized organizations backing him. We're not trying to do it to make money. That is not a goal that we end up with some business that we make money off of.

ANDY SEWER: Will he be talking to health insurers, for instance?

WARREN BUFFETT: He'll be talking to everybody. His game plan is not something we're going to try and lay out, because it's in his head, to some degree. I mean, obviously, we selected him by hearing, and reading, and so on what he's done.

But he'll learn as we go. We will conduct certain experiments, or he will, and try out a community, where one of us has a lot of employees maybe. There are various ways to experiment.

ANDY SEWER: Shifting gears, where do you find things like that Abe Lincoln tail-and-leg quotes? Do you read Bartlett's book of quotations--

WARREN BUFFETT: No, I don't read, but probably 50 years ago, I looked at a few Bartlett's quotations. But I read a lot and--

ANDY SEWER: Do you just remember these things and apply them?

WARREN BUFFETT: Well, if you're 88 years old, I mean, you ought to remember something. You don't remember what happened yesterday, but you remember the old stuff. You've got a lot of interesting quotations in your head.

ANDY SEWER: Yeah, but not like you do, I think. That's great. OK, so one company you invested in was GE, and you did well with that investment.

WARREN BUFFETT: Yeah, I was too early, actually. If you look back, I was very active in the last half of September and early October. And then I wrote that article in later October. And I knew it was going to get bad. I wrote in the article, it was going to get bad.

But I didn't think the stock market would react as much as it did between then and March. So I had, more or less, used up our powder well before the bottom was hit.

ANDY SEWER: That's interesting. How have you avoided not getting back into GE more recently? I mean, I'm sure that they've reached out to. Everyone says, why doesn't Warren Buffett invest in GE, and save it, and take it to the promised land? It's this great American company.

WARREN BUFFETT: Well, actually, I think Larry is actually doing a good job.

ANDY SEWER: Larry Culp?

WARREN BUFFETT: The Danaher. Yeah, Larry Culp at the Danaher is a good sell, and, I think, his priorities are straight. And, I think, he's a very able guy, and he's on the right track. And I'm a I'm a fan of GE's in the sense that we're a big buyer from them. We're a big seller to them. I know them, the managers.

Jack Welch is a very good friend of mine. We don't agree on politics 100%, but we have a lot of fun together, and I love the guy. So I've got a great desire for GE to do well. It just hasn't looked that attractive to me.

ANDY SEWER: You talked about the groves of trees in the letters shareholder. One was the third grove, which was sort of the in-between stakes.

WARREN BUFFETT: Yeah, the equity interests.

ANDY SEWER: Yeah. Is it is it the case that those are sort of not the healthiest grove of trees? And why would that be?

WARREN BUFFETT: No, Pilot Flying J is very-- there are companies that, under GAAP accounting, we have the record under equity method. We own more than 20%, but we don't control them. So it's treated under GAAP accounting as a special category. It didn't fit well in the other grove, so I had to make it a separate grove by itself. It's not that significant a grove.

ANDY SEWER: You say that the sum of Berkshire has a greater valuation than the parts.

WARREN BUFFETT: That is true.

ANDY SEWER: Did you ever try to calculate that? How much is that?

WARREN BUFFETT: Well, that depends on circumstances. There's some times when the float from insurers can be very valuable. There are some times when the ability to use production tax credits will stay in the utility business, but have been on as part of our consolidated return, helps. But that varies a lot. But it is a plus, and we can move capital.

Take a business like See's Candy, which we bought 40-odd years ago. It's a wonderful little business. It's put us out of capital. We've tried 50 different ways to expand geographically, do all kinds of things. Doesn't work. And we'll try it again, and it won't work. But we can move that capital to help buy BNSF Railroad or do all kinds of other things.

So we've got a seamless and tax-efficient way of moving capital where it's needed. And we've got some companies that really chew up capital, and we've got others that kick it off. And we can move it from one spot-- If you try to do that with your investments, you'll incur some taxes as you go along doing it. It's less efficient than what we've gotten.

TO BE CONTINUED

July 31, 2020

how to detox your finances

How to Detox Your Finances.

One thing you need to do when you resolve to get your financial ducks in a row is to know how to detox your finances. It is important to get rid of old habits, any residual money pits, or anything else that is hurting you financially so that you can move on in a financially sound manner. These steps provide a financial detox plan to get you on your way.

Steps.

1. Sort out your credit and debts immediately.

Check your credit report. Do this, at the very least, annually. You are entitled to a free credit report once a year from each of the three major agencies.

Manage your credit. Don't let it manage you. Don't max out your cards just because you have a certain limit. It's more important to stay conscious of what you can afford to pay rather than relying on any illusory limit as a source of your finances. The banks want you to spend that much; it doesn't mean you have the income flow capacity to meet it regularly!

Manage your debt. If you are struggling, talk to your creditors. Don't ignore the problem, it will not go away on its own, it will only get worse. The sooner that you seek financial advice and support, the faster you can turn around debt problems.

Avoid store credit cards. Their APR (annual percentage rate) is considerably higher than a 'regular' credit card and having several cards can tempt you into thinking you have more spare cash than you actually do. Store cards also tie you down to spending at one place, regardless of whether it has the best deals or not.

2. Sort out your savings and insurance.

Get a decent interest level in your savings account. Work out how much you can spare from your income to place into this account and try to stick with that minimum on a regular basis. Keep checking for better savings deals and switch your money around to follow increased interest returns - internet banking makes it easier to track interest changes and change your savings approach regularly.

Realize that saving in a low interest savings account might not actually be the best use of your money. If you can use 100 dollars towards knocking down a high rate card or a very low rate savings account, think hard about where to use it.

Invest in yourself. Get some life insurance. Educate yourself about the different types of insurance and what suits you at the time. If you can't afford to make such a payment now, what makes you think your family will be able to if something happens to you? It's a priority worth sorting out in the present.

3. Become actively involved in your finances.

Think about where the money is going, what it is doing. Don't just 'let it happen', or hope that money will come to you. Active planning, saving, and debt paying requires the investment of your time and engaged interest.

Undertake weekly money management tasks. It is better to spend 20 minutes a week sorting finances than to leave it all to tax time - incremental financial attention each week will save you a lot of effort and time in the long run.

4. Watch out for fraud. There are some key things that you can do to protect yourself:

Destroy any unneeded receipts and statements;

Retain the receipts you do need (in a safe place) and compare them against credit card and other financial statements;

Never disclose your personal information to someone on the phone, such as a cold sales call or through your email. It is crucial to remember that most of the time, your email is not secure.

Redirect your mail immediately when you move. If someone moves into a house behind you, they are unlikely to have the same stake that you will in safeguarding your information and will simply throw things in the trash where they can be found by others, or worse still, might be tempted to make fraudulent use of it.

Check your credit report periodically.

Remember that if a deal seems too good to be true, it probably is. Do your research and ask trusted people for advice before leaping in and spending your money.

5. Track your expenditures.

Do this to identify where your money is going and whether or not each expenditure is necessary or frivolous. This will allow you to build a bigger spending pattern and review what you are spending your money on. You can do this by:

Saving receipts (for at least as long as it will take you to note down the cost and what was covered).

Keeping a notebook handy that you can write down prices and purchases as they occur.

6. Think before you buy.

Save, then buy. Start reminding yourself often that don't have to have that item or service right now. That new computer will wait until you can save up to get a new one. Putting a $500 computer on credit now can easily cost you over a thousand dollars over the period it takes to pay it off. Write "New Computer" on an envelope and put money into it every chance you get. Hide the envelope and don't ever take money out except for the new computer.

Avoid impulse buying. Nothing is that important. Stores prey on consumers trying to get you to buy. That is why they are laid out the way they are and why the candy and magazines are right by the cash register.

Carry it around the store for a while. Quite often, you will realize that maybe you don't need it just now. Research it on the Internet to see if you can find it more cheaply, or to see if it really does do what you want it to. Maybe you can borrow someone else's rather than owning it? Think through all the options.

Don't buy into a brand just because you always have. With today's technology, there are alternatives to just about anything, and quite often they are less expensive. Look around and be a choosy buyer. Use buyer comparison sites before you go shopping so that you are aware of the best deals and can use this knowledge to bargain with.

Learn how to haggle and don't be uncomfortable about it. Bargaining is a good way of getting a fair deal.

7. Take charge of your home space.

Sell things that you aren't using or don't want. They are just taking up space and not giving you joy. If you can't sell it, consider donating it. Your personal environment will be a lot cleaner for it and other people can benefit from your donation.

Declutter your home and your life. Clean out your garage, have a yard sale, etc. Doing this will surprisingly lighten your load. It is also a good way of reminding yourself that it's easier not to bring things into the house in the first place as you'll only end up having to clean them out!

Look at your energy usage. Change to light bulbs that use less energy, water heating that is less energy-intensive and turn off your appliances when not in use. Simple things that can save you a lot of money in the long run.

8. Take charge of your earnings.

Earn what you deserve. Look at your wages. Find out what the going rate is for what you are doing in your area. See what you can do to get your salary increased.

Increase your brand value. Yes, your brand value. See what you can do to increase your value to yourself and to your employers.

9. Balance your life and your work. Balance is very important to help you deal with day to day problems. When you are off balance with one thing, other problems will quickly follow and it can be all too easy to resort to spending as the answer to not coping with juggling many things in your life. Slow down and do a stocktake on what you need to change about the way you're living.

10. Teach your children about finances. Don't just assume that because they are kids, they shouldn't have to think about how to budget and how to delay desires for instant gratification. The bad habits they start now will stay with them; equally, teaching them good habits will be life-lasting too.

Tips.

If you have a lot of debt from credit cards, personal loans, payday or car title loans or medical bills, you may want to consult an attorney about bankruptcy.

Visit a free credit counselor in your area for financial and budgetary advice and counseling. These can be especially helpful if you feel you are in over your head.

Avoid blurring wants and needs. It is important to focus on the things you need first and be very conscious about fulfilling your wants.

AnnualCreditReport.com provides consumers with the secure means to request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies in accordance with the Fair and Accurate Credit Transactions Act (FACT Act). AnnualCreditReport.com offers consumers a fast and convenient way to request, view and print their credit reports in a secure Internet environment. They also provide options to request reports by telephone and by mail.

Warnings.

Stay away from companies that offer to repair your credit report or score. Many times these agencies will contest all the debts shown on your report. This process works temporarily, as creditors are required to verify debt within 30 days or it is removed from your report. At this point you will appear to have a "clean" record and the agency may collect a hefty fee from you. When the creditors do get around to verifying your debt, it will simply be added to your report again.

None of the advertised credit offers have accurate reporting from the credit bureaus.

There are many companies out there who will offer "free" credit services like reports and score monitoring to first-time customers. Be advised that while you may receive an initial report for free, you may be required to sign up for some kind of paid membership after your trial period is over. These reports are not directly from the credit bureaus, and they are not always accurate.

Credit bureaus do not maintain reporting agencies. There is only one agency maintained, an which deals directly with the bureaus. This site deals with both the FTC and the credit bureaus.

January 20, 2020

How to Detox Your Finances

How to Detox Your Finances.

One thing you need to do when you resolve to get your financial ducks in a row is to know how to detox your finances. It is important to get rid of old habits, any residual money pits, or anything else that is hurting you financially so that you can move on in a financially sound manner. These steps provide a financial detox plan to get you on your way.

Steps.

1. Sort out your credit and debts immediately.

Check your credit report. Do this, at the very least, annually. You are entitled to a free credit report once a year from each of the three major agencies.

Manage your credit. Don't let it manage you. Don't max out your cards just because you have a certain limit. It's more important to stay conscious of what you can afford to pay rather than relying on any illusory limit as a source of your finances. The banks want you to spend that much; it doesn't mean you have the income flow capacity to meet it regularly!

Manage your debt. If you are struggling, talk to your creditors. Don't ignore the problem, it will not go away on its own, it will only get worse. The sooner that you seek financial advice and support, the faster you can turn around debt problems.

Avoid store credit cards. Their APR (annual percentage rate) is considerably higher than a 'regular' credit card and having several cards can tempt you into thinking you have more spare cash than you actually do. Store cards also tie you down to spending at one place, regardless of whether it has the best deals or not.

2. Sort out your savings and insurance.

Get a decent interest level in your savings account. Work out how much you can spare from your income to place into this account and try to stick with that minimum on a regular basis. Keep checking for better savings deals and switch your money around to follow increased interest returns - internet banking makes it easier to track interest changes and change your savings approach regularly.

Realize that saving in a low interest savings account might not actually be the best use of your money. If you can use 100 dollars towards knocking down a high rate card or a very low rate savings account, think hard about where to use it.

Invest in yourself. Get some life insurance. Educate yourself about the different types of insurance and what suits you at the time. If you can't afford to make such a payment now, what makes you think your family will be able to if something happens to you? It's a priority worth sorting out in the present.

3. Become actively involved in your finances.

Think about where the money is going, what it is doing. Don't just 'let it happen', or hope that money will come to you. Active planning, saving, and debt paying requires the investment of your time and engaged interest.

Undertake weekly money management tasks. It is better to spend 20 minutes a week sorting finances than to leave it all to tax time - incremental financial attention each week will save you a lot of effort and time in the long run.

4. Watch out for fraud. There are some key things that you can do to protect yourself:

Destroy any unneeded receipts and statements;

Retain the receipts you do need (in a safe place) and compare them against credit card and other financial statements;

Never disclose your personal information to someone on the phone, such as a cold sales call or through your email. It is crucial to remember that most of the time, your email is not secure.

Redirect your mail immediately when you move. If someone moves into a house behind you, they are unlikely to have the same stake that you will in safeguarding your information and will simply throw things in the trash where they can be found by others, or worse still, might be tempted to make fraudulent use of it.

Check your credit report periodically.

Remember that if a deal seems too good to be true, it probably is. Do your research and ask trusted people for advice before leaping in and spending your money.

5. Track your expenditures.

Do this to identify where your money is going and whether or not each expenditure is necessary or frivolous. This will allow you to build a bigger spending pattern and review what you are spending your money on. You can do this by:

Saving receipts (for at least as long as it will take you to note down the cost and what was covered).

Keeping a notebook handy that you can write down prices and purchases as they occur.

6. Think before you buy.

Save, then buy. Start reminding yourself often that don't have to have that item or service right now. That new computer will wait until you can save up to get a new one. Putting a $500 computer on credit now can easily cost you over a thousand dollars over the period it takes to pay it off. Write "New Computer" on an envelope and put money into it every chance you get. Hide the envelope and don't ever take money out except for the new computer.

Avoid impulse buying. Nothing is that important. Stores prey on consumers trying to get you to buy. That is why they are laid out the way they are and why the candy and magazines are right by the cash register.

Carry it around the store for a while. Quite often, you will realize that maybe you don't need it just now. Research it on the Internet to see if you can find it more cheaply, or to see if it really does do what you want it to. Maybe you can borrow someone else's rather than owning it? Think through all the options.

Don't buy into a brand just because you always have. With today's technology, there are alternatives to just about anything, and quite often they are less expensive. Look around and be a choosy buyer. Use buyer comparison sites before you go shopping so that you are aware of the best deals and can use this knowledge to bargain with.

Learn how to haggle and don't be uncomfortable about it. Bargaining is a good way of getting a fair deal.

7. Take charge of your home space.

Sell things that you aren't using or don't want. They are just taking up space and not giving you joy. If you can't sell it, consider donating it. Your personal environment will be a lot cleaner for it and other people can benefit from your donation.

Declutter your home and your life. Clean out your garage, have a yard sale, etc. Doing this will surprisingly lighten your load. It is also a good way of reminding yourself that it's easier not to bring things into the house in the first place as you'll only end up having to clean them out!

Look at your energy usage. Change to light bulbs that use less energy, water heating that is less energy-intensive and turn off your appliances when not in use. Simple things that can save you a lot of money in the long run.

8. Take charge of your earnings.

Earn what you deserve. Look at your wages. Find out what the going rate is for what you are doing in your area. See what you can do to get your salary increased.

Increase your brand value. Yes, your brand value. See what you can do to increase your value to yourself and to your employers.

9. Balance your life and your work. Balance is very important to help you deal with day to day problems. When you are off balance with one thing, other problems will quickly follow and it can be all too easy to resort to spending as the answer to not coping with juggling many things in your life. Slow down and do a stocktake on what you need to change about the way you're living.

10. Teach your children about finances. Don't just assume that because they are kids, they shouldn't have to think about how to budget and how to delay desires for instant gratification. The bad habits they start now will stay with them; equally, teaching them good habits will be life-lasting too.

Tips.

If you have a lot of debt from credit cards, personal loans, payday or car title loans or medical bills, you may want to consult an attorney about bankruptcy.

Visit a free credit counselor in your area for financial and budgetary advice and counseling. These can be especially helpful if you feel you are in over your head.

Avoid blurring wants and needs. It is important to focus on the things you need first and be very conscious about fulfilling your wants.

AnnualCreditReport.com provides consumers with the secure means to request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies in accordance with the Fair and Accurate Credit Transactions Act (FACT Act). AnnualCreditReport.com offers consumers a fast and convenient way to request, view and print their credit reports in a secure Internet environment. They also provide options to request reports by telephone and by mail.

Warnings.

Stay away from companies that offer to repair your credit report or score. Many times these agencies will contest all the debts shown on your report. This process works temporarily, as creditors are required to verify debt within 30 days or it is removed from your report. At this point you will appear to have a "clean" record and the agency may collect a hefty fee from you. When the creditors do get around to verifying your debt, it will simply be added to your report again.

None of the advertised credit offers have accurate reporting from the credit bureaus.

There are many companies out there who will offer "free" credit services like reports and score monitoring to first-time customers. Be advised that while you may receive an initial report for free, you may be required to sign up for some kind of paid membership after your trial period is over. These reports are not directly from the credit bureaus, and they are not always accurate.

Credit bureaus do not maintain reporting agencies. There is only one agency maintained, an which deals directly with the bureaus. This site deals with both the FTC and the credit bureaus.

January 22, 2020

Warren Buffett shares advice on becoming successful.

Warren Buffett shares advice on becoming successful.

Billionaire Warren Buffett just turned 89—here are 6 pieces of wisdom from the investing legend.
Berkshire Hathaway CEO and self-made billionaire Warren Buffett turned 89 on Friday, August 30. He’s also celebrating his 13th wedding anniversary with his wife, Astrid.

In honor of the Oracle of Omaha’s big day, CNBC Make It rounded up seven of his best pieces of life advice.

Marry the right person.
Buffett made his fortune through smart investing, but if you ask him about the most important decision he ever made, it would have nothing to do with money. The biggest decision of your life, Buffett says, is who you choose to marry.
“You want to associate with people who are the kind of person you’d like to be. You’ll move in that direction,” he said during a 2017 conversation with Bill Gates. “And the most important person by far in that respect is your spouse. I can’t overemphasize how important that is.”
It’s advice he’s been giving for years. As he said at the 2009 Berkshire Hathaway annual meeting: “Marry the right person. I’m serious about that. It will make more difference in your life. It will change your aspirations, all kinds of things.”

Invest in yourself.
“By far the best investment you can make is in yourself,” Buffett told Yahoo Finance editor-in-chief Andy Serwer earlier this year.
First, “learn to communicate better both in writing and in person.” Honing that skill can increase your value by at least 50%, he said in a Facebook video posted in 2018.
Next, take care of your body and mind — especially when you’re young. “If I gave you a car, and it’d be the only car you get the rest of your life, you would take care of it like you can’t believe. Any scratch, you’d fix that moment, you’d read the owner’s manual, you’d keep a garage and do all these things,” he said. “You get exactly one mind and one body in this world, and you can’t start taking care of it when you’re 50. By that time, you’ll rust it out if you haven’t done anything.”
By far the best investment you can make is in yourself.

Associate yourself with ‘high-grade people’
Who you associate with matters, Buffett told author Gillian Zoe Segal in an interview for her 2015 book, “Getting There: A Book of Mentors.” “One of the best things you can do in life is to surround yourself with people who are better than you are,” he said.
If you’re around what he calls “high-grade people,” you’ll start acting more like them. Conversely, “If you hang around with people who behave worse than you, pretty soon you’ll start being pulled in that direction. That’s just the way it seems to work.”

Work for people you respect.
“Try to work for whomever you admire most,” Buffett told Segal. “It won’t necessarily be the job that you’ll have 10 years later, but you’ll have the opportunity to pick up so much as you go along.”
While salary is an important factor when thinking about your career, “You don’t want to take a job just for the money,” said Buffett.
He once accepted a job with his mentor and hero, Benjamin Graham, without even asking about the salary. “I found that out at the end of the month when I got my paycheck,” he said.

Ignore the noise.
Investing can get emotional, and it doesn’t help that you can see how you’re doing throughout the day by checking a stock ticker or turning on the news.
But no one can be certain which way the financial markets are going to move. The best strategy, even when the market seems to be tanking, is to keep a level head and stay the course, Buffett says.
“I don’t pay any attention to what economists say, frankly,” he said in 2016. “If you look at the whole history of [economists], they don’t make a lot of money buying and selling stocks, but people who buy and sell stocks listen to them. I have a little trouble with that.”

Success isn’t measured by money.
Buffett is consistently one of the richest people in the world, but he doesn’t use wealth as a measure of success. For him, it all boils down to if the people you’re closest to love you.
“Being given unconditional love is the greatest benefit you can ever get,” Buffett told MBA students in a 2008 talk.
“The incredible thing about love is that you can’t get rid of it. If you try to give it away, you end up with twice as much, but if you try to hold onto it, it disappears. It is an extraordinary situation, where the people who just absolutely push it out, get it back tenfold.”

August 04, 2020