How Warren Buffett Measures Success
⚡️ This piece was created for my email newsletter. You can read the original here.
There are 2 ways to measure success:
- The Outer Scorecard
- The Inner Scorecard
This concept is at least as old as the Stoics, but Warren Buffett (who is worth ~$100 billion) is often credited for it today:
“The big question about how people behave is whether they’ve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard.” — Warren Buffett
Here’s the difference between the 2 scorecards, why it’s important for you to have an Inner Scorecard, and how to develop your own:
The Outer Scorecard
Most people operate by The Outer Scorecard which focuses on things like:
- Fame
- Money
- Status
- Accolades
- Recognition
The problem with The Outer Scorecard is twofold:
- It’s based on extrinsic motivation. If you use The Outer Scorecard your life will be defined by what people think of you.
- It’s outcome-focused, and you don’t have control over outcomes.
Playing by this scorecard is a fool’s game.
The Inner Scorecard
World-class people use The Inner Scorecard.
It focuses on things like:
- Effort
- Values
- Principles
- Standards
- Commitment
The Inner Scorecard is based on intrinsic motivation. If you use this scorecard your life will be defined by what you think. No one else can define success for you but you.
It’s also process-focused, which is entirely in your control. You may not be able to control outcomes, but you can control the actions which lead to those outcomes (you can control the controllables).
While everyone’s Inner Scorecard looks a little different (more on that below), there are some overlapping principles:
- Live in the present
- Focus on the process
- Ignore external voices
- Perform to your standard
- Forget about the outcome
Nothing else matters.
Nick Saban (head football coach at Alabama who has won 7 national titles) calls it the “scoreboard”:
“The Inner Scoreboard vs the Outer Scoreboard. Which one is more important? If you’re going to accomplish your goals, it’s always the Inner Scoreboard.” — Nick Saban
Saban doesn’t care about the scoreboard on the field; he cares about each individual player’s inner scoreboard, and whether that player does his specific job on every play. If not, there’s room for improvement.
Earning Success
If you’re trying to achieve any kind of success in this world, you need an Inner Scorecard. Without it, even if you reach your goal, it will feel empty.
It’s not enough to win praise, we must deserve it. The satisfaction we feel from external sources will always be trumped by any dissatisfaction we feel with ourselves.
As Charlie Munger put it, we must “earn and deserve the success we desire.”
We do this by living in accordance with our inner scorecards.
Your Inner Scorecard
In the “The Inner Scorecard” section above I underlined the 4th overlapping principle: Perform to your standard.
Buffett is famous for not laying people off or selling unprofitable holdings, even when it would make his business much more profitable, simply because it would violate his own standard.
Defining “your standard” is highly individual — it’s up to you to figure out what that means exactly.
Here are 3 questions to help guide you:
Question 1: What are my core values?
Your values drive your behavior. Your values should be the bedrock principles by which you live your life.
Mine are Excellence, Ownership, Simplicity, Poise, and Courage.
Question 2: What is my personal standard?
Your “standard” is the unwavering commitment you make to how you live your life.
How you do anything is how you do everything.
Question 3: How good do I want to be?
It’s OK to be average. But anything above average is a choice.
You can:
- Choose to be good
- Choose to be great
- Choose to be your absolute best
Which one is it?
Your choice will determine your mindset, behavior, and habits, and those will determine your outcomes.
⚡️ This piece was created for my email newsletter, In Pursuit of Capital.
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