The Warren Buffett formula on how to get smarter
âThe best thing a human being can do is to help another human being know more.â
â Charlie Munger
âGo to bed smarter than when you woke up.â
â Charlie Munger
Most people go through life not really getting any smarter. Why? They simply wonât do the work required.
Itâs easy to come home, sit on the couch, watch TV and zone out until bed time rolls around. But thatâs not really going to help you get smarter.
Sure you can go into the office the next day and discuss the details of last nightâs episode of Mad Men or Game of Thrones. And, yes, you know what happened on Survivor. But thatâs not knowledge accumulation, itâs a mind-numbing sedative.
But you can acquire knowledge if you want it.
In fact there is a simple formula, which if followed is almost certain to make you smarter over time. Simple but not easy.
It involves a lot of hard work.
Weâll call it the Buffett formula, named after Warren Buffett and his longtime business partner at Berkshire Hathaway, Charlie Munger. These two are an extraordinary combination of minds. They are also learning machines.
âI can see, he can hear. We make a great combination.â â
Warren Buffett, speaking of his partner and friend, Charlie Munger.
We can learn a lot from them. They didnât get smart because they are both billionaires. No, in fact they became billionaires, in part, because they are smart. More importantly, they keep getting smarter. And it turns out that they have a lot to say on the subject.
Warren Buffett says, âI just sit in my office and read all day.â
What does that mean? He estimates that he spends 80% of his working day reading and thinking.
âYou could hardly find a partnership in which two people settle on reading more hours of the day than in ours,â Charlie Munger commented.
When asked how to get smarter, Buffett once held up stacks of paper and said âread 500 pages like this every day. Thatâs how knowledge builds up, like compound interest.â
All of us can build our knowledge but most of us wonât put in the effort.
One person who took Buffettâs advice, Todd Combs, now works for the legendary investor. After hearing Buffett talk he started keeping track of what he read and how many pages he was reading.
The Omaha World-Herald writes:
Eventually finding and reading productive material became second nature, a habit. As he began his investing career, he would read even more, hitting 600, 750, even 1,000 pages a day.
Combs discovered that Buffettâs formula worked, giving him more knowledge that helped him with what became his primary job â seeking the truth about potential investments.
But how you read matters too.
You need to be critical and always thinking. You need to do the mental work required to hold an opinion.
In Working tougher: Why Great Partnerships Succeed Buffett comments to author Michael Eisner:
Look, my job is essentially just corralling more and more and more facts and information, and occasionally seeing whether that leads to some action. And Charlieâhis children call him a book with legs.
Maybe thatâs why both men agree itâs better that they never lived in the same city, or worked in the same office. They would have wanted to talk all the time, leaving no time for the reading, which Munger describes as part of an essential continuing education program for the men who run one of the largest conglomerates in the world.
âI donât think any other twosome in business was better at continuous learning than we were,â he says, talking in the past tense but not really meaning it. âAnd if we hadnât been continuous learners, the record wouldnât have been as good. And we were so extreme about it that we both spent the better part of our days reading, so we could learn more, which is not a common pattern in business.â
It doesnât work how you think it works.
If youâre thinking they sit in front of a computer all day obsessing over numbers and figures? Youâd be dead wrong.
ââNo,â says Warren. âWe donât read other peopleâs opinions. We want to get the facts, and then think.â And when it gets to the thinking part, for Buffett and Munger, thereâs no one better to think with than their partners. âCharlie canât encounter a problem without thinking of an answer,â posits Warren. âHe has the best thirty-second mind Iâve ever seen. Iâll call him up, and within thirty seconds, heâll grasp it. He just sees things immediately.â
Munger sees his knowledge accumulation as an acquired, rather than natural, genius. And heâd give all the credit to the studying he does.
âNeither Warren nor I is smart enough to make the decisions with no time to think,â Munger once told a reporter. âWe make actual decisions very rapidly, but thatâs because weâve spent so much time preparing ourselves by quietly sitting and reading and thinking.â
How can you find time to read?
Finding the time to read is easier than you think. One way to help make that happen is to carve an hour out of your day just for yourself.
In an interview he gave for his authorized biography The Snowball, Buffett told the story:
Charlie, as a very young lawyer, was probably getting $20 an hour. He thought to himself, âWhoâs my most valuable client?â And he decided it was himself. So he decided to sell himself an hour each day. He did it early in the morning, working on these construction projects and real estate deals. Everybody should do this, be the client, and then work for other people, too, and sell yourself an hour a day.
Itâs important to think about the opportunity cost of this hour. On one hand you can check twitter, read some online news, and reply to a few emails while pretending to finish the memo that is supposed to be the focus of your attention. On the other hand, you can dedicate the time to improving yourself. In the short term, youâre better off with the dopamine laced rush of email and twitter while multitasking. In the long term, the investment in learning something new and improving yourself goes further.
âI have always wanted to improve what I do,â Munger comments âeven if it reduces my income in any given year. And I always set aside time so I can play my own self-amusement and improvement game.â
Reading is only part of the equation.
But reading isnât enough. Charlie Munger offers:
We read a lot. I donât know anyone whoâs wise who doesnât read a lot. But thatâs not enough: You have to have a temperament to grab ideas and do sensible things. Most people donât grab the right ideas or donât know what to do with them
Commenting on what it means to have knowledge, in How To Read A Book, Mortimer Adler writes: âThe person who says he knows what he thinks but cannot express it usually does not know what he thinks.â
Can you explain what you know to someone else? Try it. Pick an idea you think you have a grasp of and write it out on a sheet of paper as if you were explaining it to someone else.
Another way to get smarter, outside of reading, is to surround yourself with people who are not afraid to challenge your ideas.
âDevelop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.â â Charlie Munger
I spend nearly all my free time reading and want to increase it. Reading is really one of my most treasured pastimes. Now, with a little baby, I carry a tote bag always, to house all the essentials at all times; this, gives me incentive now to carry more - specifically - books, and as I live near my local library, tomorrow, Iâm gonna check out a few books from my Goodreads and aim to read them in a week. Then repeatâŠ.
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