Making More Out Of Less the Buffett Way

You need not splurge to surge ahead in business Humankind has witnessed some highly influential business tycoons, investors and management gurus straddle across the world of commerce and money. Their accomplishments have won accolades galore and help boost economy and employment across the globe. However, a few of them have transcended the boundaries of business success and have emerged as icons and idols for society at large. Their unending compassion, unmatched philanthropy and simple living have changed the lives of millions of needy and underprivileged people. They are, no wonder, viewed as messiahs by the masses. I am about to discuss the story of a living legend. He is the world’s 87-year-old leading investment guru Warren Buffett, heading his renowned organisation Berkshire Hathaway. Buffett is currently the world’s second richest man with a net worth of $ 81.1 billion. He had the distinction of being the wealthiest person in 2008 till he was over taken by his much younger friend Bill Gates of Microsoft. And the most credible reason for the climb-down is considered to be his philanthropic donations worth billions going among others to Bill & Melinda Gates Foundation as well. You may be surprised to know that Buffett has pledged to allocate 99 %, yes 99 %, of his wealth for philanthropic purposes. It is obvious that Buffett is made of different clay. His wealth has failed to impact his simplicity. The glamour and glitz of the high business world have left him untouched. He continues to live in a house bought in Omaha, Nebraska. The house has no boundary wall; it is surrounded by a hedge. Other business barons less than one-hundredth his size whiz around in luxury private jets. But Buffett still prefers to fly economy class on short flights. And, mind you, he is 87. No wonder then that Warren Buffett’s style of business has come to be known as Buffettology. It has become an academic and research discipline in itself. That is the aura of Buffett, popularly and reverentially known as the Oracle of Omaha. Over 50 books, big and small, with Buffett’s name in the titles have been published so far. Differently titled as The Buffettology Workbook, The Tao Of Warren Buffett, etc. these books have been translated into 17 languages and have sold more than 1.5 million copies. However, the distinction of authoring Buffett’s most credible and award-winning biography goes to Alice Schroeder. Buffett did have his share of formal education doing his master of science in economics from Columbia Business School. But the germs of investing and business had infested his system even when he was in school. Obviously, he was not reading any tomes and treatises on the art and science of the stock market and investment. On the contrary, he drew his inspiration from Dale Carnegie’s famous book ‘How to Win Friends and Influence People’. Having been a salesman in the initial phase of his career, Carnegie knew his onions. He was an astute observer of consumer behaviour. Buffett paid heed to his findings like few else. He imbibed Carnegie’s observations and inferences and started practising them silently and intently. Young managers today need to follow in Buffett’s footsteps. The university of life can often teach us more and better than the portals of formal academia. The greatest entrepreneurs of current times have risen to the top of the heap this way. Being a college dropout seems to have become the in thing in the reigning high success business domain. Bill Gates, Steve Jobs, Mark Zuckerberg, Jack Ma, etc were not students in the conventional mould. They had launched companies while in their teens and then slogged to make them humungous. They were persons of vision. They believed in their dreams. But much before this young lot, 1930 born Buffett had begun his act. And as I stated in a paragraph above Buffett drew his inspiration from Dale Carnegie’s commonplace observations. He discovered the kernel of human nature in them and found it worked. No wonder, we still find Carnegie’s magnum opus selling briskly in posh book shops as well as with footpath book vendors. Buffett came across Dale Carnegie’s book ‘How to Win Friends and Influence People’ in his grandfather’s library when he was hardly 10. Carnegie’s writing made it straight it to young Warren’s heart which was beating hard to become a businessman. To us Carnegie’s rules like ‘If you are wrong, admit it quickly and emphatically’, ‘Everybody wants attention and admiration. Nobody wants to be criticised’ and ‘Call attention to people’s mistakes indirectly. Let the other person save face’, etc. may sound all too obvious. But these had a profound impact on Buffett, according to his award-winning biographer Alice Schroeder. “Warren’s heart lifted. He thought he had found the truth… This was a system. He felt so disadvantaged socially that he needed a system to sell himself to people, a system he could learn once and use without having to respond in a new way to each changing situation,” wrote Schroeder. Buffett returned to the book again and again for a decade. It served as the gospel for him. Though young in years, Buffett began putting Carnegie’s teachings into practice. “People around him did not know he was performing experiments on them in the silence of his own head, but he watched how they responded… He kept track of his results. Filled with a rising joy, he saw what the numbers proved: the rules worked,” Schroeder wrote. Without going into the intricacies of Buffett’s investment deals, it is obvious that he has grown beyond the dreams of most tycoons by following simple principles of life. How else does one get to own 88 businesses and employ 233,000 workers worldwide simply by “saving more than you borrow, making people feel good about themselves, and learning from your mistakes. Businessmen may become philanthropists, but philanthropists don’t become businessmen. St Francis of Assisi did not become the CEO of a global chain of bird shops.” Buffett is known for directing key managers of his companies to write him a letter telling him “who in the company would succeed them if they were to die tomorrow. These letters are updated each year. This way, if something does happen to one of his managers, time won’t be wasted in trying to find a replacement.” The multi-billionaire is known for enjoying a life with simple taste, frugal living and generous philanthropy. However, Buffett does not describe himself as frugal but just as a man with simple tastes. “I buy everything I want in life,” he told People magazine recently. “Will 10 homes make me more happy? Possessions possess you at a point. I don’t like a $100 meal as well as a hamburger from McDonald’s.” He lives in the same house which he bought in 1958 for $ 31,500, the equivalent of roughly $ 270,000 at this point in time. The Oracle’s logic is simple: consider buying less home than you can afford. Instead of paying pricey mortgage payments, you’ll be able to put more of your money toward savings, retirement or vacations. And if you must take out a loan, consider getting a 30-year mortgage. It is “the best instrument in the world,” Buffett told CNBC. Buffett took out a 30-year mortgage in 1971 when he bought a vacation home in California.“If you’re wrong and rates go to two per cent, which I don’t think they will, you pay it off,” he said. “It’s a one-way renegotiation. It is an incredibly attractive instrument for the homeowner and you’ve got a one-way bet.” It should be amply clear by now why the markets and investors have immense faith in Buffett.