Warren Buffett’s 10 Rules for Success have become part of our lore. They first appeared as a list in a 2008 article in Parade Magazine and were based on an interview with Alice Schroder, author of Warren Buffett and the Business of Life. Buffett’s own story is inspiring, and his ten rules have helped many entrepreneurs take positive action in their own lives and businesses.
Below is the list. I encourage you to read it with the following five (OK, seven) questions in mind.
- What are my personal 10 rules of success?
- Is there something I would add to or remove from this list?
- So far this week, have I operated in accordance with my rules for success?
- Have I shared my rules for success with my team? If so, what has been the result? If not, what might be the result if I do?
- Have I paused lately to celebrate my successes?
Warren Buffett’s 10 Rules for Success
1. Reinvest Your Profits.
When you first make money, you may be tempted to spend it. Don’t. Instead, reinvest the profits. In high school, Buffettt and a friend 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, Buffettt used the proceeds to buy stocks and to start another small business.
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 inOmaha, 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.
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.”
4. Spell Out the Deal Before You Start.
Your bargaining leverage is always greatest before you begin a job – when you have something to offer that the other party wants. Buffett learned this lesson the hard way as a kid, when his grandfather 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, the pair received less than 90 cents to split.
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 (turns out one time he was). He also admired a friend who painted only the side of his office building that faced the road.
6. Limit What You Borrow.
Buffett has never borrowed a significant amount – not to invest, not for a mortgage. He has gotten many heart-wrenching 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 pawn shop into the largest furniture store in North America. Her strategy was to undersell the big shots, and she was a merciless negotiator.
8. Know When To Quit.
Once, when Buffett was a teenager, 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 worth of earnings. Needless to say, that mistake was never repeated.
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.
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. “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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