Warren Buffett’s biography, “The Snowball“, is a remarkable book that covers both his incredible career as an investor and businessman, as well as the details of his unusual personal life. Buffett gave his biographer Alice Schroeder full access, with the proviso that she not be afraid to be hard on him. Her portrait of Buffett doesn’t shy away from his eccentricities and imperfections, or the tragedies in his family (as well as the combination of the two, such as his habit of finding ways to escape from his overbearing mother). It’s a great book that gives you the full sense of a great man’s life.
But this is not a book review; rather, it is my take on Warren Buffett’s secret of success. Buffett made money on a wild array of investments, ranging from insurers (GEICO) to candy sellers (See’s Candy). The common thread was his desire to invest in CEOs whom he saw as kindred spirits, regardless of industry.
The Buffett formula boils down into three principles that are easier said than applied:
1) Make a good product.
2) Work hard.
3) Don’t waste money.
Time and time again, Buffett’s investments followed these three principles, and in most cases, they paid off handsomely.
You don’t need to have Buffett as an investor to follow these principles, which I think are as relevant to startups as they are to furniture retailers.
Sadly, we tend to focus the most on point #2, lionizing the crazy hours that founders work. We don’t emphasize #1 and #3 enough, especially during boom times, when hype and fancy parties are taken to be more indicative of success than steady software releases and frugality.
Yet Buffett’s career illustrates the long-term power of these principles, which Buffett himself would probably consider self-evident. After all, if you make a good product, work hard, and don’t waste money, you ought to be able to succeed in any industry.