From Farnam Street:
This website is named after a street located in Omaha, Nebraska. An
amazing place, Omaha is famous for being the home of Warren Buffett, one
of the world’s richest men. The headquarters of Berkshire Hathaway —
and his house — just happen to be on “Farnam Street.” The name of this
website is a homage to both Buffett and his business partner Charlie
Munger.
While Buffett is famous for his investing acumen, he’s also full of sage wisdom on life and living.
In October 2009, while the housing crisis was still in full effect, his authorized biography The Snowball: Warren Buffett and the Business of Life hit the shelves.
Here are some of his lessons on life and investing.
***
Three Early Lessons in Investing
Having bought three shares of Cities Service Preferred at the age of
11, Buffett learned a valuable lesson. After the stock plunged from
$38.25 to $27 a share. His sister Doris reminded him daily on the way to
school that her stock was going down. Buffett felt “terribly”
responsible. When the stock recovered he sold with a slight $5 profit.
Almost immediately after, Cities Service quickly soared to $202 a share.
Warren learned three lessons and would call this episode
one of the most important of his life. One lesson was not to overly
fixate on what he had paid for a stock. The second was not to rush
unthinkingly to grab a small profit. He learned these two lessons by
brooding over the $ 492 he would have made had he been more patient. It
had taken five years of work, since he was six years old, to save the $
120 to buy this stock. Based on how much he currently made from selling
golf balls or peddling popcorn and peanuts at the ballpark, he realized
that it could take years to earn back the profit he had “lost.” He would
never, never, never forget this mistake. And there was a third lesson,
which was about investing other people’s money. If he made a mistake, it
might get somebody upset at him. So he didn’t want to have
responsibility for anyone else’s money unless he was sure he could
succeed.
***
Hang Around People Better Than You
After graduating from Columbia University, Buffett returned to Omaha
to live with his parents. He spent part of that first summer fulfilling
his obligation to the National Guard. While he wasn’t a natural, it sure
beat going off to fight in Korea. Part of his duties in the guard
required him to attend training camp in La Crosse, Wisconsin, for a few
weeks. That experience taught him an incredible lesson that he’d carry
forward for the rest of his life.
“It’s a very democratic organization. I mean, what you do
outside doesn’t mean much. To fit in, all you had to do was be willing
to read comic books. About an hour after I got there, I was reading
comic books. Everybody else was reading comic books, why shouldn’t I? My
vocabulary shrank to about four words, and you can guess what they
were.
“I learned that it pays to hang around with people better than you
are, because you will float upward a little bit. And if you hang around
with people that behave worse than you , pretty soon you’ll start
sliding down the pole. It just works that way.”
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