10 Ways to Get Rich

Warren Buffett's

10 Ways to Get Rich
With an estimated fortune of $62 billion, Warren Buffett is the richest man in the entire world. In 1962, when he began buying stock in Berkshire Hathaway, a share cost $7.50. Today, Warren Buffett, 78, is Berkshire's chairman and CEO, and one share of the company's class A stock worth close to $119,000. He credits his astonishing success to several key strategies, which he has shared with writer Alice Schroeder. She spend hundreds of hours interviewing the Sage of Omaha for the new authorized biography The Snowball. Here are some of Warren Buffett's money-making secrets -- and how they could work for you.

1. Reinvest Your Profits: When you first make money in the stock market, you may be tempted to spend it. Don't. Instead, reinvest the profits. Warren Buffett learned this early on. In high school, he and a pal bought a pinball machine to put in a barbershop. With the money they earned, they bought more machines until they had eight in different shops. When the friends sold the venture, Warren Buffett used the proceeds to buy stocks and to start another small business. By age 26, he'd amassed $174,000 -- or $1.4 million in today's money. Even a small sum can turn into great wealth.2. Be Willing To Be Different: Don't base your decisions upon what everyone is saying or doing. When Warren Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he was dubbed an oddball. He worked in Omaha, not Wall Street, and he refused to tell his parents where he was putting their money. People predicted that he'd fail, but when he closed his partnership 14 years later, it was worth more than $100 million. Instead of following the crowd, he looked for undervalued investments and ended up vastly beating the market average every single year. To Warren Buffett, the average is just that -- what everybody else is doing. to be above average, you need to measure yourself by what he calls the Inner Scorecard, judging yourself by your own standards and not the world's.

   3. Never Suck Your Thumb: Gather in advance any information you need to make a decision, and ask a friend or relative to make sure that you stick to a deadline. Warren Buffett prides himself on swiftly making up his mind and acting on it. He calls any unnecessary sitting and thinking "thumb sucking." When people offer him a business or an investment, he says, "I won't talk unless they bring me a price." He gives them an answer on the spot.

   4. Spell Out The Deal Before You Start: Your bargaining leverage is always greatest before you begin a job -- that's when you have something to offer that the other party wants. Warren Buffett learned this lesson the hard way as a kid, when his grandfather Ernest hired him and a friend to dig out the family grocery store after a blizzard. The boys spent five hours shoveling until they could barely straighten their frozen hands. Afterward, his grandfather gave the pair less than 90 cents to split. Warren Buffett was horrified that he performed such backbreaking work only to earn pennies an hour. Always nail down the specifics of a deal in advance -- even with your friends and relatives.

   5. Watch Small Expenses: Warren Buffett invests in businesses run by managers who obsess over the tiniest costs. He one acquired a company whose owner counted the sheets in rolls of 500-sheet toilet paper to see if he was being cheated (he was). He also admired a friend who painted only on the side of his office building that faced the road. Exercising vigilance over every expense can make your profits -- and your paycheck -- go much further.

2. Limit What You Borrow: Living on credit cards and loans won't make you rich. Warren Buffett has never borrowed a significant amount -- not to invest, not for a mortgage. He has gotten many heart-rendering letters from people who thought their borrowing was manageable but became overwhelmed by debt. His advice: Negotiate with creditors to pay what you can. Then, when you're debt-free, work on saving some money that you can use to invest.7. Be Persistent: With tenacity and ingenuity, you can win against a more established competitor. Warren Buffett acquired the Nebraska Furniture Mart in 1983 because he liked the way its founder, Rose Blumkin, did business. A Russian immigrant, she built the mart from a pawnshop into the largest furniture store in North America. Her strategy was to undersell the big shots, and she was a merciless negotiator. To Warren Buffett, Rose embodied the unwavering courage that makes a winner out of an underdog.

   8. Know When To Quit: Once, when Warren Buffett was a teen, he went to the racetrack. He bet on a race and lost. To recoup his funds, he bet on another race. He lost again, leaving him with close to nothing. He felt sick -- he had squandered nearly a week's earnings. Warren Buffett never repeated that mistake. Know when to walk away from a loss, and don't let anxiety fool you into trying again.

   9. Assess The Risk: In 1995, the employer of Warren Buffett's son, Howie, was accused by the FBI of price-fixing. Warren Buffett advised Howie to imagine the worst-and-bast-case scenarios if he stayed with the company. His son quickly realized that the risks of staying far outweighed any potential gains, and he quit the next day. Asking yourself "and then what?" can help you see all of the possible consequences when you're struggling to make a decision -- and can guide you to the smartest choice.

   10. Know What Success Really Means: Despite his wealth, Warren Buffett does not measure success by dollars. In 2006, he pledged to give away almost his entire fortune to charities, primarily the Bill and Melinda Gates Foundation. He's adamant about not funding monuments to himself -- no Warren Buffett buildings or halls. "I know people who have a lot of money," he says, "and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. When you get to my age, you'll measure your success in life by how many of the people you want to have love you, actually do love you. That's the ultimate test of how you've lived your life."

How to Become Rich, and 24 Other Insights from Warren Buffett

Warren Buffett is a true genius as he is able to simplify complex ideas into quotes that will stand the test of time. Warren Buffett spent his life dispensing advice to all who would listen, earning him the nickname of the Oracle of Omaha. In the 1960s, this advice came about twice a year in letters to investors in his investment partnerships. Starting a few years later, Warren Buffett’s wisdom was distilled through the Berkshire Hathaway annual meeting and the annual shareholder letter, and in the past 20 years, Warren Buffett has become a household name through appearances on TV and interviews in magazines.

Read on for Warren Buffett’s best quotes on life, investing, and his top five insights.

On life

1. “You only have to do a very few things right in your life so long as you don’t do too many things wrong.”
2. “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be a more productive than energy devoted to patching leaks.”
3. “It is not necessary to do extraordinary things to get extraordinary results.”
4. “What we learn from history is that people don’t learn from history.”
5. “Chains of habit are too light to be felt until they are too heavy to be broken.”
6. “There seems to be some perverse human characteristic that likes to make easy things difficult.”
7. “Nothing sedates rationality like large doses of effortless money.”
8. “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
9. “It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.”
10. “Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

On investing

1. “The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.”
2. “Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.”
3. “I don’t look to jump over seven-foot bars; I look around for one-foot bars that I can step over.”
4. “In the short term, the market is a popularity contest. In the long term, the market is a weighing machine.”
5. “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”
6. “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”
7. “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value.”
8. “The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”
9. “I am a better investor because I am a businessman, and a better businessman because I am an investor.”
10. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Top five insights

Einstein said there are 5 ascending levels of intelligence: Smart, Intelligent, Brilliant, Genius, Simple. Warren Buffett’s top 5 insights each explain a truth about life or investing in the simplest way possible.

1. “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”

It is a gross oversimplification to say that the key to investing is to buy low and sell high. This quote from when Warren Buffett has been the basis of his most successful investments over time and the basis of how you could have avoided the last few bubbles.

2. “I tell college students, when you get to be my age you will be successful if the people who you hope to have love you, do love you.”

Warren Buffett has spent a lifetime studying conventionally successful people. It’s important to hear that at the end of the day, money is not the thing that matters most in life.

3. “The difference between successful people and really successful people is that really successful people say no to almost everything.”

Numerous greats including Steve Jobs, Bill Gates, and Warren Buffett have attributed their success to focus. Many people have long to-do lists and work on becoming more productive, when in fact, having a not-do list is more important if you want to do great things.

4. “I’ve seen more people fail because of liquor and leverage — leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.”

People succeed in life countless different ways but failures group around a few key themes. As such, you learn more from people’s failures than people’s successes.

5. “What an investor needs is the ability to correctly evaluate selected businesses. Note that word ‘selected': You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”

One of the quotes I hate the most in investing is Peter Lynch’s “Buy what you know” as it oversimplifies investing. The above quote is sort of the same idea but highlights that the important thing is being able to evaluate companies and also avoid companies you don’t understand. It’s that simple.

Warren Buffett is quoted so much because he has developed a great deal of wisdom over his lifetime. How did he do it?

The secret to Warren Buffett’s success

The secret to Warren Buffett’s success is that he continuously learns. Buffett is a far better investor today than he was 50 years ago. As Charlie Munger has explained:

Warren Buffett has become one hell of a lot better investor since the day I met him, and so have I. If we had been frozen at any given stage, with the knowledge we had, the record would have been much worse than it is. So the game is to keep learning, and I don’t think people are going to keep learning who don’t like the learning process.