Wildly successful billionaires and millionaires are people with substantial net worth who inspire, support and contribute to others. I met many of them at Warren Buffett’s
Consider these four below. They may seem common to you, but when practiced by the Oracles, they become uncommon. These habits help to short circuit our self-destructive human wiring; the kind that makes us snatch defeat from the jaws of victory or to trust others, before we verify they deserve our trust. They are competitive advantages in the game of life. Can you cultivate these uncommon habits? Read on.
Independent Thought That Dares Not To Care: Even when we know better, we find it easier to go along with the crowd. Independent thinkers don’t. Buffett and Munger trust their observations and experiences to solve problems and take actions that differ from the crowd. As continuous learners, they expect to make mistakes. These are discussed openly. Lessons are learned and they move on.
Choosing this less-traveled road, however, is not easy. It requires a conscious summoning of will. Going against the crowd and taking positions that others deride or dismiss can make us feel vulnerable and foolish. We dread this. But Buffett and Munger don’t mind looking foolish – especially when following principles they steadfastly believe in. What could we gain if we risked looking foolish?
Courage That Is Natural, Not Unnatural: Plato said that courage is the only unnatural virtue (the natural ones are wisdom, moderation and justice). Think about having to rush into a burning building or sky dive from a small plane, or even make a speech to thousands of people. Can you feel the paralysis of fear? We have to summon courage to overcome our natural instinct to flee. What makes it so difficult?
Neuroscience offers a clue. When we face danger, our brain releases hormones that disable our executive, problem-solving brain and trigger our primitive, survival brain. We lose our capacity to act rationally. When markets are in free fall, people react from fear, not reason. So what causes Buffett to buy when everyone is selling? What sustains his rationality?
He’s anticipated this situation. Remember the pig, who built a house of bricks and survived the wolf? Similarly, Buffett has turned Berkshire into a house of liquidity. Keeping a solid cushion of cash, Berkshire not only survives falling markets, it thrives. Buffett’s ability to ignore criticism for holding too much cash in good times, and to take the long-term high road, gives him grace to act with natural courage.
Patience To Choose Inaction Or Action: Patience may be a virtue, but it’s not easy to practice. No one likes waiting for something we want badly. The uncertainty is painful. A loss of patience can lead us to make unprofitable or life-defeating decisions. For Buffett and Munger, however, patience is easy. They create wealth by resisting the temptation to act when motion gives only the illusion of progress.
LJ Rittenhouse with authors Lawrence Cunningham and Roger Lowenstein
At the 2016 shareholder meeting, Buffett reported on the million-dollar bet he had made in 2008 with a hedge fund manager. He wagered then that putting money in an S&P 500 index fund would return more over the next ten years, than would the manager’s personal picks of hedge funds, net of fees, costs, and expenses.
With two years left, Buffett showed that the hedge fund portfolio was up only 21.9 percent compared to the index fund’s 65.7 percent return. So far, paying for activity to chase higher returns can’t beat the inactivity of an index fund – especially after adding in fees.
Knowing Exceptions As Well As The Rules: Oliver Wendell Holmes once observed: “The young man may know the rules, but the old man knows the exception.” He meant that clever people know the rules, but wise ones know both rules and exceptions. By continuously learning and applying “exceptions” to rules, even when they were young, Buffett and Munger have long exhibited the wisdom of “old men”. This gives them a wider range of options and broader, clearer sight when making long-term investing decisions.
The word “clever” means “quick reasoning, intelligence, imagination, and agility. It also means “calculating or contrived”. Wisdom, however, is the ability “to judge what is true, right or lasting”. It embodies the courage, patience and independence needed to act rationally during desperate times.
What if we applied a standard of wisdom to our financial and political leaders today? How many would pass this test?
