Lockdown Read : Warren Buffet by Richard Borrow

Lockdown Read : Warren Buffett

Author - Richard Borrows

I simply loved to read this book about Warren Buffett. 

Everyone wants to be rich. It’s one of the most common, universal goals, and yet, only 1 percent are extremely wealthy, while the other 99 percent are not. So what does it take to get wealthy? Certainly not only working hard at a steady job, as so many people do. If you truly want to be successful, you must enter into the world of stocks and investing in businesses, as Warren Buffett, once the richest man in the world (now no longer number one only due to the fact that he has given away billions to charity) does.

This book talks all about Warren Buffett, from his life story to his business methods to his portfolio and more. Warren Buffett was able to make his way to the top with hard work, persistence, and above all else, smart investing. With a few tips in your mind, you should be able to achieve some degree of success in investing and building your wealth as well, though not perhaps at the level as Warren Buffett, of course.

If you are afraid to get involved in the stock market than this book is for you . From reading this book, your mind will be opened in terms of the stock market, businesses, and the realm of entrepreneurship in general. Whatever  misconceptions and thoughts come to your mind when you think about investing, will definitely be changed with this book. This book is truly eye opening, and I recommend  you to give it a read, but if you find yourself without time, then the I have given below key points  that will do.

The fact remains that investing is not hard to do if you get your facts straight and follow your instinct that is precisely Warren Buffett’s secret . I did not find a single person who has never lost money in stocks  but you are good if you overall, earn. 

Warren Buffett has also made mistakes, but look at his current empire of billions. Do not be discouraged by mistakes you make or money you lose. We will all make mistakes, but the important part is to push past them and learn from them. I am sure that with this book you will be able to minimize your mistakes and risks and learn how to be a smart investor like Warren Buffett, and in turn earn your own fortune.

Even if you do not end up much wealthier or nearly as wealthy as Warren Buffett, you will at the very least gain insight into how the Business and Economy work and how investing works, rather than being kept in the dark and having misconceptions about how Wall  or Dalal Street runs.

Warren Buffett is known today as a massively successful entrepreneur and investor. However, all successful people had to make their way from the beginning, Warren Buffett included. It is often both inspiring and a key to understand looking at a successful person’s journey to success. Learn how Warren Buffett got to the place he is at today, with over 72 billion dollars of net worth. While we all have our own stories and none will be the same as Warren Buffett’s, it is still interesting and helpful to see his story. 

Warren was born in 1930 in Omaha, Nebraska. His father was a stockbroker later elected as a U.S. Congressman, causing his family to move to Washington, D.C., where Warren became interested in investing and math. Under his high school senior picture was written: “future stockbroker.”

Warren Buffett actually began being involved in business at quite a young age; as a child, he was selling gum and magazines around the neighborhood, and at the age of 11, he bought stocks for him as well as his sister. He bought 3 shares at 38 dollars each, and while their value dropped at first, he refused to sell them, waiting until they rose to 40 dollars to do so. However, eventually the stock value of the stocks he bought rose to over 200 dollars, and he regretted selling them early. Warren Buffett now says that this was a valuable learning experience for him. Warren Buffett was also a math prodigy from a young age, being able to do large amounts of calculations in his mind.

 At the age of 13, Warren Buffett filed his very first tax return, and claimed his bike, which he used in his job as a paperboy, as tax deduction. He continued to be extremely economical even as a youth, later on buying an old pinball machine, putting it in a barbershop, and using the profits to buy more, eventually selling his “business” for over a thousand dollars, while he only spent 25 dollars (to buy the first machine). When he was 14, he bought forty acres of farmland on which a tenant farmer worked for 1200 dollars. By the time Warren Buffett finished college, his savings were 90,000 dollars.

Warren Buffett attended the University of Pennsylvania's famed Wharton School of Business due to pressure from his father, as Warren Buffett himself would have preferred to continue being actually involved in business rather than attending college. He later transferred to the University of Nebraska-Lincoln, and after graduating, applied for Harvard Business School and was rejected. Instead, he attended Columbia University’s business school, since he found out that his hero, Benjamin Graham, taught there.

After graduating from Columbia, he found out that Graham was part of GEICO insurance, and so he aimed to get a job there. After speaking to the vice president of GEICO for hours, the vice president found him extraordinary, and along with Warren Buffett’s father, encouraged him not to work on Wall Street. Warren Buffett even offered to work Benjamin Graham without pay, but Benjamin Graham would not allow him to, so Warren Buffett returned to his hometown and started a firm there named Buffett Partnership, where he made many extremely successful investments by buying undervalued companies with stocks that quickly rose. He was dubbed the “Oracle of Omaha” and became very wealthy.

In 1952, Buffett married Susan Thompson and they had three children together. Warren made more and more partnerships in the meantime, eventually expanding to six, and after meeting Charlie Munger (who would later become his partner), his partnerships expanded even more. He found many partners willing to pool 10,000 dollars each, while he himself invested merely 100 dollars. He was wildly successful and became a millionaire by 1962, merging all of his partnerships into one large one.

Warren Buffett eventually bought Berkshire Hathaway, which, when it became selling high class shares in 1990, made Buffett a billionaire. 

During the Great Recession, Warren Buffett faced many difficulties and criticism, but was able to raise his company to the standard it was at before the recession. In 2008, Warren Buffett was named by Forbes as the wealthiest person in the world. After he donated billions of dollars to charity, he fell to the second wealthiest person in the world behind Bill Gates. He has pledged to donate 99 percent of his wealth to charity, not out of guilt but to enable the economy to flow.

He began venturing into business and investing at a young age, and from smart investments and an attitude in which he went out of his way and was persistent in getting what he wanted, was able to achieve great wealth early on in his life. And throughout it all, he has remained unarrogant, donating much of his wealth and taking on a relatively low salary.

I give below his famous quotes: 

1. “Someone is sitting in the shade today because someone planted a tree a long time ago.”

Never take anything for granted. Nothing comes from nothing; you need to consider where your gains are coming from rather than focusing on the gains themselves. Everything comes with a price, so keep your eye out on the smallest of details as well as the past. Appreciate foundations laid and lay strong foundations of your own so that you can benefit in the future.

2. “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.”

Reputations are difficult to build. They take a long time are are so easy to destroy, so be careful what you say and do in both the public eye and in private. Do not screw up relationships with companies and with individuals. Once trust is broken, it is nearly impossible to gain back, and is it worth it? No, because messing up happens in an instant. In an instant, all of your hard work could be for nothing, so keep this in mind in order to avoid mishaps.

3 .“The most important thing to do if you find yourself in a hole is to stop digging.”

Chances are, if you are in financial trouble or find your situation getting worse and worse, you yourself are the perpetrator. Sometimes, it is good to take a step back and evaluate where you are. If you keep losing money investing, stop investing. Do not make your loss any larger. Always note your own situation and be able to recognize when you have gone too far.

4. “Price is what you pay. Value is what you get.”

There’s a difference between what you pay and what you get. Price is not necessarily a reflection of quality. Look carefully at value, or quality, and try to pay less for better value.

5. “Honesty is a very expensive gift, Don't expect it from cheap people.”

Being cheap is not necessarily good. Be cautious when dealing with those who are stingy, as you may get cheated on. Look for those who are generous to ensure integrity, because people who do not give are selfish and therefore more likely to lie.

6. “There comes a time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don't like because you think it will look good on your resume. Isn't that a little like saving up sex for your old age?”

I give below some of the Warren’s advices given in the book : 

1 .“No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant.”

Do not expect everything to come quickly and easily. Certain things need time, so be patient and do not rush.

Two golden rules of Warren : 

 “Rule No. 1 : Never lose money. 

Rule No. 2 : Never forget Rule No. 1.”

These may seem like impossible rules, but do not worry. Nobody is perfect; you will always make mistakes, but if you keep these rules in mind, you will find yourself making less.

2. “It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.”

Being with better people will force you to better yourself. Being with people with qualities you do not want or who are worse than you will bring you to their level. Who you associate yourself with becomes who you are.

 3. “Risk comes from not knowing what you're doing”

There should never be such thing as risk if you are knowledgable. If you know things, then the risks you take are not really risks since you will know what the payout should be. Learn from experience and from facts and never make guesses that have no foundation.

4..“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.”

If things are getting worse or have been bad for a while, do not be so stubborn as to continue to try to fix your situation, especially if you have tried many times before and failed. Sometimes, it is wisest to move away from something and do something new or start over altogether. It is never cowardly to walk away, even from something you have spent a lot of time on. Do not let sentiment or yourself get in your own way. Look at things clearly and not always from your own perspective, which can be biased.

5.“There seems to be some perverse human characteristic that likes to make easy things difficult.

6 . “In the business world, the rearview mirror is always clearer than the windshield.”

The past is always something we can learn from when it comes to business. Do not always look straight ahead, as this may seem like the obvious way to get ahead, it is not. You do not know what

will happen in the future, and plunging straight ahead into the unknown is never a wise step. Be careful and learn from past experiences of those around you and your own mistakes.

7..“The difference between successful people and really successful people is that really successful people say no to almost everything.”

Saying yes to every single thing presented to you may seem like the quick way to achieving success, but often, doing less is more. If you want to be truly successful, you have to know when to back off or reject things, and you will find that this comes more often than not. Most things are not optimally beneficial in the long run. Do not waste your time on minor things, but rather look for big projects that will maximize benefits.

8. Warren said “I bought a company in the mid-'90s called Dexter Shoe and paid $400 million for it. And it went to zero. And I gave about $400 million worth of Berkshire stock, which is probably now worth $400 billion. But I've made lots of dumb decisions. That's part of the game.”

Do not worry if you make big mistakes. Everyone makes them, including Warren Buffett. He has thrown away millions of dollars due to poor choices, but look at him now. He is one of the richest men in the world, and this goes to show that you should not let mistakes you make, no matter how big, hold you back or bring you down. Move on from them. Learn from them. But never let them discourage you or make you think that you are destined to be a failure, because you will move past them.

Now, finally few tips for investment :

TIP #1 - The Time is Now

Knowing that the US has just gotten out of (or is still in the midst of?) the huge recession of 2008, it might make you shy away from investing in the weak market. In the early days of the housing crisis, stockholders were panicking and quickly trying to sell all their stocks as soon as possible before the value dropped any farther. Of course, this effect on a macroeconomic Keynesian perspective is completely destructive, as it only weakens the economy further and hastens the fall. But rather than losing hope and selling stocks with the rest of the general public, Buffett and his vice chairman Charlie Munger took advantage of the current lowered stock prices to pick up bargain deals that will no doubt pay off when the economy revives itself.

Notwithstanding the inevitable pessimists that will crop up, the economy is on the way to its upswing once more, and the cycles of boom and bust it goes through are perfectly normal. The longer the boom, the harsher the bust, and already the economy has been seen to be improving daily. If you want to try investing stocks then you can just catch the tail end of the bargain period with lowered prices before the value begins increasing once more alongside the economy.

TIP #2 - Think of the Long Term when Choosing which Stocks to Invest In

Buffett claims that there is a general misnomer that stocks are a risky business, and while this is true, as long as you think of the long term it isn’t really. The key is creating a diverse portfolio, so when value declines in stocks will inevitably occur, they won’t be as much of an issue. If you think in the long term, a short term fluctuation in prices isn’t that much of an issue as long as the overall trend of the stock is a value increase.

However, Buffett does list the mistakes that can change a long term stock’s potential value. If the owner of the stock keeps an undiverse portfolio then there is a higher risk of a crucial stock in the portfolio failing. Paying exorbitant prices to hire financial advisers and managers do not always pay off in the end. The risk of borrowing high amounts of leverage on credit to invest in stocks that fail and must be paid back, as discussed earlier in the chapter on Warren Buffett Stocks.

TIP #3 - Do Not Place Your Trust in Claimed Stock Market Experts

If you have the money (or even if you don’t), it can be extremely tempting to hire a proclaimed professional and expert at ‘playing’ the stock market. They might show you their successful record, highly qualified Ivy League education, and impress you with their sophistication, but Buffett points that the market is highly unpredictable.

No matter how much or how hard someone may claim they have the formula or trends of the market figured out, Buffett notes that in reality even he cannot predict the future on what happens with stock prices. As a result, do not waste your money hiring countless overpriced financial advisers for your stocks. They might have an educated prediction, but a clear counterexample would be the housing bubble crash that I have referenced throughout this book. Although some business moguls predicted the bubble crash coming, many other people just as prominent, such as the then chairman of the US Federal Reserve Alan Greenspan, singlemindedly claimed that the economy was not on the cusp of a downswing. As quoted from Buffett, “anything can happen anytime in the markets,” so learn not to grow comfortable and assume a trend will continue. Count on the unpredictability and make contingency plans. Above all, the stock market is an extremely mercurial and dynamic environment.

I do not want to take away thrill of reading the book so I am not covering all aspects covered in the book.