The billionaire next door: The wisdom of Warren Buffett

Warren Buffett is one of my heroes. He's the second-richest man in the world, yet he lives more frugally than I do. CNBC recently broadcast an interview with Buffett. Naturally, it's been posted to YouTube. Here's the show in its entirety (with notes and excerpts I made while watching). [Update March 7, 2018: The show is no longer available online]

As a kid, Buffett would go door-to-door selling chewing gum and Coke. He'd buy six bottles for a quarter, and then sell them for a nickel each. He bought his first stock at the age of eleven. He bought a 40-acre farm at the age of fourteen using money he had saved from a paper route.

Some of his fundamental tenets for investing are:

  • Patience pays: buy 'em and hold 'em.
  • Invest in businesses you understand.
  • Look for businesses with “durable competitive advantage”.
  • Look for honest, able management.
  • Buy at a reasonable price.

Buffett notes that students today have a better standard of living than John D. Rockefeller once did. “Really getting to do what you love to do everyday — that's really the ultimate luxury… Your standard of living is not equal to your cost of living.

Buffett is happy if he can have a big-screen television, a bucket of popcorn, and sit in his sweats watching Nebraska football games. “The second-richest man on the planet lives the way he invests: simply and without much fuss.” He eats burgers, fries, and cherry cokes. His doctor gave him a choice: eat better or exercise. He chose to exercise.

CNBC: “You're not one to accumulate a lot of things.”
Buffett: “No. Most toys are a pain in the neck.

Aswath Damodaran, a professor at NYU's Stern School of Business says: “I think what Warren Buffet embodies is the importance of thinking for yourself, not letting other advisors, other experts, tell you what the right stock to invest in, because they're coming from a very different place than you are.” In other words: do what works for you!

Buffett hasn't made a penny off all the products that are pitched using his name. His favorite book about himself is by Lawrence Cunningham, The Essays of Warren Buffet: Lessons for Corporate America. (The same author wrote How to Think Like Benjamin Graham and Invest Like Warren Buffett, which also looks interesting.)

CNBC: “What is the one thing that young people should be doing about money?”
Buffett: “I tell them two things, generally. One is stay away from credit cards… The second thing I tell them is to invest in themselves.”

CNBC: “What's the number one thing you've learned from doing business with Warren Buffett?”
Business Owner: “Ethics.”

CNBC: “What is the Warren Buffett secret to success?”
Buffett: “If people get to my age and they have the people love them that they want to have love them, they're successful. It doesn't make any difference if they've got a thousand dollars in the bank or a billion dollars in the bank… Success is really doing what you love and doing it well. It's as simple as that. I've never met anyone doing that who doesn't feel like a success. And I've met plenty of people who have not achieved that and whose lives are miserable.”

You can find more information on Warren Buffett at The Warren Buffett fan center.

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Wesley
Wesley
13 years ago

I had not seen that interview before, and really enjoyed it. Thanks for sharing. Mr. Buffett seems like an extremely well-spoken, polite person who cares about ethics, yet keeps a healthy distance from the management of his companies. An interesting guy to say the least.

gotrootdude
gotrootdude
13 years ago

He hit several good points. 1. Do everything honestly. Help other’s while helping yourself. This isn’t that hard to do. You can provide employment, and by spending constantly on investments, you build and better the whole economy. 2. Never get involved in management, it’s other people’s work. The real payoff is always in finding a way to get other people to do the work. Find someone else to sell your product. You’re going to be tied up watching the balance sheet. 3. Don’t accumulate. Accumulating lowers the whole economy and hurts everyone. Better to sell at a profit. Everything you… Read more »

BxCapricorn
BxCapricorn
13 years ago

You probably would not be surprised to know that in 2006, the number one stock screening method for returns was….The Benjamin Graham approach to investing. Who was Mr. Graham’s star pupil? Warren Buffet of course. Graham developed his methods in the 1940’s. All this technology and the only thing that has changed in the world of stock picking is how fast you know you’ve won or lost.

BxCapricorn
BxCapricorn
13 years ago

Since many of your readers would probably like to know which book Benjamin Graham wrote (that Buffet has memorized), it’s “The Intelligent Investor” and can be had on Amazon, used, for $7. The next time you’re buying something on Amazon and are a few bucks short of free shipping, consider throwing this book in the mix. This year, you would’ve gained 58% on your portfolio’s value using his screening criteria (source: http://www.aaii.com). Happy investing.

gotrootdude
gotrootdude
13 years ago

I still believe 58% is pretty low. Personally, I’d feel pretty bad about my investments if I only earned 58% in a year off of them. It’s possibly good for someone who doesn’t feel the need for more immediate money, or doesn’t want to leave a legacy, but a better return can be had for those willing to work at it.

Maybe I should write a book, or start a finance blog. 🙂

R. Edward Banderob
R. Edward Banderob
13 years ago

A personage (a status granted by those who have been born)who does not believe in, nor is willing to manifest, an unconditional love and respect for the sanctity of unique unborn human life can not be considered to be as ethical (honorable and good) as he and this interview (Warren Buffet: The Billionaire Next Door) would like to lead you to believe he is.

Raewyn Gwilliam
Raewyn Gwilliam
13 years ago

Dear Sir/Madam I have long been fasincated with Warren Buffet. (As of course have so many others before me). But I was so fascinated by his ‘secrets’ that I got into the stock market too. And as a result have become successful. So I have written my own book. I’m interested in your views and opinions on it. Please have a look at it at http://www.crwmc.com/ebook. There really is no book like it. It is for absolute beginners, and I mean REAL beginners. Many people have already read it and have become driven to get into investing. Anyway I hope… Read more »

Mahesh GunaSekara
Mahesh GunaSekara
13 years ago

I was blown away by his simple method of living. Being a billionaire, but still living in home that an average American can afford, by it self, is mind blowing. I also like his interpretation of ‘success’ and his willingness to share his ideas with the public. I think I like him a lot.

Dr. Artfredo C. Abella, New York-USA
Dr. Artfredo C. Abella, New York-USA
13 years ago

What Warren Buffett is doing is he walks his talks – his billions of dollars could be attributed by his sterling display of entrepreneurship. His advice of telling young people to get away from credit cards and invest in themselves are the utterance of a business guru and a wizard, after all he is the second richest man in this world. Lastly, I admire him by telling us that it doesn’t matter whether we have 100$ dollars or billion dollars in the bank what matters most is that success is doing what we really love and doing it well.This reminds… Read more »

Todd
Todd
13 years ago

awesome post man! i am also a huge buffet fan

upendra k menon
upendra k menon
13 years ago

with all this money and fame what is your ambition of life Burtrand russel was once asked.

To love and to be loved!

There is an echo in W Buffets words
Pursuits of great lives

menon upendra

Matt
Matt
13 years ago

Warren Buffet seems to have a great view on life. He is not only the best investor but also a great person. Donating all of his fortune to charity was an amazing step that will hopefully lead more to do the same in the future.

I feel Buffet’s buy and hold strategy and focus on holding companies rather than focusing on unpredictable market elements is key to his success.

Matt
Matt
13 years ago

I forgot to mention in the previous post that Warren Buffet’s florida MBA interview is very intersting. If you liked the CNBC interview you would like this MBA inteview.

I have a link on my blog at
http://investingandfinanceinformation.blogspot.com/2007/06/another-great-warren-buffet-video.html.

Joyce
Joyce
12 years ago

I would like to view the interview again, however it’s no longer on you tube. Anyone know where other place you able to view the video?

LAMIA ZIA
LAMIA ZIA
12 years ago

I am impressed by warren’s actions and words.Such people are rare in this world.really!

retirerichblog
retirerichblog
12 years ago

Anytime Warren Buffett is on TV. I tape it and watch it over and over again hoping to grab any nugget I can. Yes, I’m a nerd.

robbyn veil
robbyn veil
12 years ago

I would like to forward a letter to Mr. Buffett. Is there a address that a letter can be forward to or to his sister. I was watching a program yesterday and saw that you could send a letter to him or his sister.

Thank you.

Doris Wallace
Doris Wallace
12 years ago

I would like the address of Mr. Buffett so that I might send him a letter.

Thank you.

Blitz
Blitz
12 years ago

this has been taken of youtube because of copyright complaints. but i really wanna see this, any other way to get this material?

Dave Conal
Dave Conal
12 years ago

How do I contact Warren Buffett?

(Google is your friend)

Simply visit his website http://www.berkshirehathaway.com for his Omaha mailing address and send him a letter. Warren does not have an email address.

Michael
Michael
12 years ago

Hey guys, you can check out the video using this link:

http://www.cnbc.com/id/17400211/

P.S. The video loading was a bit wonky in Firefox. I had to click on the video window to activate it, click the play button to watch an ad, then click the play button again to watch the interview.

robert
robert
12 years ago

It is fine watching the best making billions such as it is equally fun watching Tiger Wood playing golf.

I just wonder, out of the many many ‘Value Investment’ club out there, how many actually got rich? I am not saying billions but let’s say enough for the kids and retirement,etc.

Alfred Towers
Alfred Towers
11 years ago

If anyone reads this, please send this to Mr buffit. See if he can do something to help us people on Social Security our only in come. Gas is up/rent is up/food is up , dont know what isnt, but our Social Security is not.I am a vet and I was willing to give my life for this country. now we need help and NOBODY in the Gov. is doing anything to help us. Thank You Al Towers

Michael
Michael
10 years ago

By Warren’s definition of wealth, it means that many of us are indeed wealthy.

Simple formula:
LBYM
Live Simply
Enjoy what you do
Love Others
Have Others love you

I accept that definition of wealth and would add one more:

Have lots of free time

Buffett Fan
Buffett Fan
10 years ago

Warren Buffett is well-known for his long-term investing but even he has been lightening up recently

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