Warren Buffett has become an amazingly successful investor by any measure. His mental approach to taking control of his time, not following the crowd, listening to his inner voice, and developing expertise, together provide a roadmap for any of us who are interested in fulfilling our potential and maximizing our success.
Behind Warren Buffett’s outlandishly outsized investment returns are winning mental habits and clearly defined ways of interacting with the world around him. In our last article, we discussed Warren Buffett’s approach to spending your life doing what you love, reaching higher by carefully picking your heroes and who you spend time with, and investing in yourself.
Here, we continue with Buffett’s strategies, in his own words, for how to succeed by creating and following your own path rather than being mindlessly swayed by others.
1. “Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.”
While Buffett was speaking specifically about investments, the underlying principle applies to most endeavors. As Buffett and many others have pointed out, stock analysts are frequently and stunningly wrong. People – even people who supposedly are making predictions based on expertise – are often swayed by their own emotions or other factors intrinsic to them.
Whatever you do, you’ll get plenty of advice along the way. If you want to be successful, you need to listen to your own voice, do your own analysis and draw your own conclusions. And just as others can be swayed by their emotions, you too need to become attuned to whether your decisions come from your best understanding of the situation, or instead are a result of your own emotions and prejudices.
2. "Don't get caught up with what other people are doing. Being a contrarian isn't the key but being a crowd follower isn't either. You need to detach yourself emotionally."
Understanding that advice-givers often reflect their own biases rather than a clear read on the situation is but the first step. Not only should you not be automatically swayed by what others do. You also should know why you are taking the actions that you are.
As Buffett so well explains, not mindlessly following others shouldn’t be done out of an equally mindless need to be contrarian, to simply do the opposite for the sake of doing the opposite. Rather, the key is to “detach yourself emotionally” and make your own decisions from your own knowledge with a clear head.
This is perhaps the greatest factor in Buffett’s success. As he has said elsewhere, “You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”
We all have heard kids justify an action by saying “But everyone else is doing it.” And we know that that doesn’t make an imprudent course of action any more prudent. We may have understandably done this ourselves as kids. However, it’s important to acknowledge that adults are just as susceptible to the “follow the crowd” mentality.
Buffett succeeded precisely because he didn’t do what everyone else was doing, but instead followed his own data, reasoning and intuition. If you want to succeed, you need to detach emotionally from the crowd and find a better path.
Or as Buffett put it, "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." Indeed this is one of the most important qualities to succeed in almost anything.
3. “I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business."
And how do you develop this temperament to pay attention to your own voice rather than the crowd? You need to spend time accessing and listening to that voice. Warren Buffett devotes a lot of time to thinking – not thinking about the opinions of others, but just thinking.
In Tribe of Mentors, Tim Ferris interviewed 140 leading lights from a variety of disciplines to see what made them so successful. Amazingly, nearly all of them had some kind of meditation or mindfulness practice. For some, it’s a more standardized formal meditation. For others, it’s keeping a journal. For Buffett, it’s making time “to just sit and think.”
Admittedly, this is challenging in the rough and tumble of everyday life. But the near-universal practice among the super-successful of making time to tune into themselves is hard to ignore. Even 20 minutes a day can make a huge difference. If you think you don’t have time, consider what you might be giving up by not finding a way to make the time.
4. “The difference between successful people and really successful people is that really successful people say no to almost everything.”
You will find this principle articulated in any number of time management books. Take a good look at the commitments in your life. How much time does each take up? And – be honest with yourself – which of them is furthering your goals and which are simply distractions?
The truly successful – Buffett included – are ruthless about cutting out activities and commitments that do not move them forward. Yes, of course there are situations that appear in your life that you can’t ignore simply because it’s not what you intended to do.
A child gets sick. The boss demands that you divert your attention to a crisis that you didn’t create. Sometimes you need to be seen at a meeting even if the meeting is a waste of time.
Nevertheless, if you want to move forward on your goals, you must at least start with your goals as the priority, and as much as possible, fit everything else around that. Which means saying no often, even when doing so may disappoint other people (because by saying no, you are opting to work on your goals rather than theirs).
It means asking yourself if there are meetings you could skip and commitments you could ditch. Very likely there are. The more you can do this, the more time, focus and energy you have to devote to what truly matters to you.
5. “Diversification is protection against ignorance. It makes little sense if you know what you’re doing.”
Buffett is famous for not following the conventional wisdom of diversifying his stock holdings. About 50% of Berkshire Hathaway’s immense holdings are in just 5 stocks, with another 30% in about 15 stocks. For a portfolio worth over $200 billion, this is very undiversified.
But Buffett gives the reason for putting his eggs in just a few baskets. Develop the skills and expertise you truly need to accomplish what you want. Then go do it. If you don’t know what you’re doing, then yes, it makes sense to spread your work in several directions, hoping one of them will pan out. But by definition, your chances of exceling at any one of them are minimal if your focus is scattered.
This is not to say that you should put all of your eggs in one basket. Even Buffet does not own just one stock, and it’s almost impossible for any of us to focus on only one thing in our lives. But focusing on a small number of things, and doing them well, is a surer road to success than “diversifying” our energies in multiple directions.
If you follow and implement Warren Buffett’s advice – here and in the previous article – it will be all but impossible not to significantly improve your abilities and move significantly forward toward your goals.
And finally, if something isn’t working despite your best efforts, don’t be afraid to shift your focus to a more productive endeavor. In Warren Buffett’s words, "Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks."