Startup Buffettology: Introduction
Warren Buffett is the world’s most respected investor.
That he is an investing genius is not in doubt: a $1,000 investment in his investment vehicle Berkshire Hathaway in 1965 would be worth over $15,000,000 now. Had that $1,000 been invested in the same year in a fund whose value was linked to the value of the S&P 500 (a major index comprising of 500 “blue chip” American stocks) it would be worth less than $200,000 today. The difference is clear.
Buffett isn’t a guy who sits at a terminal trading stocks, as Bill Gates famously thought before meeting him (Buffett eventually became a mentor to Gates). He’s a long-term investor and a deep thinker about business in general, and makes his investments based on a thorough understanding of the long-term prospects of the business, the industry, and the management team.
Given that he knows a thing or two about business, and since he’s been in the game for a zillion years, it is natural to wonder what entrepreneurs may be able to learn from him.
To my wonderment, I couldn’t readily find a well-organized summary of his investment philosophy, which one could then quickly translate into entrepreneur-ese. The Internet is full of articles on Buffett, but the vast majority are a grab bag of aphorisms or randomly compiled “lessons” which fail to identify truly overarching themes.
To generate “Buffett for the Startup/Entrepreneur” it became necessary to actually do some real work — re-read old books, online research, etc — and compile a few quotes from Buffett, his partner Charlie Munger, and his mentor Ben Graham to illustrate each point.
In summary, I believe Buffett’s investment philosophy, translated into advise for entrepreneurs, can be boiled down to six lessons:
· Less Is More
· Know The Ledge
· Know Your Friends