Since the new authorized biography of Warren Buffett, The Snowball by Alice Schroeder, will come out soon (9/29). We should expect to see more Buffett’s articles showing up in the media in the near future, which is good for me . The book’s name “Snowball” is from the following quote:

“Life is like a snowball. The important thing is finding wet snow and a really long hill.” – Warren Buffett

Warren Buffett probably didn’t pick these 10 tips himself but it’s always good to know more about this living legend.

Content below is directly copied from the source: 10 Ways to Get Rich – Parade Magazine.

1. Reinvest your profits

When you first make money, you may be tempted to spend it. Don’t. Instead, reinvest the profits. 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, 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 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 on Wall Street, and he refused to tell his partners 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 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. 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. 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. 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

Buffett invests in businesses run by managers who obsess over the tiniest costs. He once 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 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.

6. Limit what you borrow

Living on credit cards and loans won’t make you rich. Buffett has never borrowed a significant amount—not to invest, not for a mortgage. He has gotten many heartrending 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. 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 Buffett, Rose embodied the unwavering courage that makes a winner out of an underdog.

8. Know when to quit

Once, when 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. 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 risks

In 1995, the employer of Buffett’s son, Howie, was accused by the FBI of price-fixing. Buffett advised Howie to imagine the worst- and best-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, 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.”

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My friend recently recommended a very good video of a Warren Buffett’s talk at University of Florida in 1998 (video length around 1 hour 20 mins). Yes, it was a long time ago but it is always a pleasure to listen to his advices. We should be gratified that he is still so healthy and willing to share his knowledge with all of us. How often can you listen to a living legend on your computer screen anytime anyplace you want? With all the modern technology, we can easily spread his words and wisdom to all future generations of human beings. It is so amazing!

Every time you see Warren Buffett on the screen, you expect he talks about business and investment. However, in this video, my favorite part is when he talked about personal qualitative factors. He said that companies should hire people with all of the following 3 characteristics: Integrity, Intelligence and Energy. If one doesn’t have integrity, you don’t want him to have intelligence and energy (e.g. if not…). You want him to be dumb and lazy.

Long Position

Then Warren asked all the students to play a game with him. He asked if every students had to BUY 10% of a classmate as a future investment, who would you choose? He said that they shouldn’t choose someone with the highest IQ and school grades in the class. And they probably shouldn’t invest in the person who has the highest paying job or the best looking. Warren said they should look for someone who has Generosity, Honesty and Leadership. The one who will give credits to others even for his own ideas, the one who has the ability to carry out other’s interests, the one they can communicate the best to. Because he thinks that these are the keys to successful people, companies and investment.

In this game, he said people usually will end up choosing the one they admire the most in the class. So if you want to be admired, you should behave like the one you admired. Since you already own yourself 100%, you are stuck with it, you better be one that people choose to invest in.

Short Position

After that, Warren told them to choose a classmate that they would SHORT SELL. The one they expect his/her value will decrease over time. In this case, you shouldn’t choose the one who has the lowest grades, the lowest IQ or the worst job. Warren believes they should choose the person that turn them off. The one that they don’t want to be around with. It should be the person who is greedy, dishonest, likes to cut corner and always looks for shortcuts. These people will eventually suffer and fail to succeed.

The Benefit of Young Age

Warren Buffett thinks that we can get rid of those bad behaviors in a young age but a lot of his old friends can’t change anymore. They have a self destructive pattern and always turn off other people.

Treat Everyone Equally

Personally, I really hope I can treat everyone equally. I think I have done a pretty good job so far but I know I can do it better. There is a side story I would like to share. Although I didn’t pay much attention to NFL professional football, I recently know that the New England Patriots QB Tom Brady just gets the MVP award after a historical 16-0 season. When I read that article, I found something very interesting. Below are some of the quotes by the team owner:

“And the thing that I’ve found most interesting is if you talk to role players or backups how he talks to them and motivates them. He treats them like they’re going to the Pro Bowl, with that kind of respect.”

“He treats everyone in that locker room the same way he treats me or the coaches.”

It seems that all the successful person would have this quality, not only in the business world.

Moat of the Castle

When people asked what kind of company he would like to invest in, he talked about the concept of Economic Moat. If a business is a castle, he wants the castle has a wider moat to protect it. In business terms, it is talking about the importance of branding. A successful branding will help a business become a share of mind. When people think about happiness and dream, we will think of Disney. You won’t think of anything when we are talking about Universal Pictures or Warner Bros. This is something that will protect the company FOREVER. It is something that is very hard to get rid of in people’s mind. This is an idea I should pay attention to when I build my company in the future.

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