Framework by Buffett

12 key decisions, a map for just about anyone.

Photo by Hilthart Pedersen on Unsplash

Warren Buffett is known for two things: making money and giving advice.

In his Berkshire Hathaway letter to shareholders last year, he wrote that his success was mainly the result of "about a dozen truly good decisions -- that would be one every five years."

He listed just a few of these decisions, but having written a lot about Buffett (longtime readers know this; also, having studied all of his shareholder letters), I realized his well-documented life in business provides a fun framework to categorize truly good decisions.

So I came up with a checklist: 12 life decisions that lead to success, using Buffett's example.

1. The decision to nurture curiosity.

This one starts early; so early that I tend to think of it as something people might do to help their kids more than themselves.

In Buffett's case, we can point to two childhood moments:

The first was at age 7, when he says he borrowed a book called One Thousand Ways to Make $1,000 from the Omaha public library, and read it dozens of times.

The second was at age 10, when, once he started showing interest in finance and the stock market, his father took him on a tour of the New York Stock Exchange.

2. The decision to get started.

Curiosity is great, but the next step is about experimentation and execution. Buffett has talked a lot about the first businesses he founded -- things like a paper route, detailing cars, and buying cases of Coca-Cola from his grandfather's grocery store and selling the individual bottles at a markup.

Even at 93 years old, Buffett remembers many of these early ventures in detail -- and he has a highly unusual advantage: he's saved a copy of every single tax return he's ever filed, dating back to 1944. That has to be a record.

3. The decision to find mentors.

Nobody does anything worthwhile alone. Most of us mere mortals need mentors to show us the way.

Buffett has talked at length about his first and most important mentor in business: the man he describes as his "investing hero," Benjamin Graham, who died in 1976 at age 82. In fact, one of the reasons Buffett decided to attend Columbia University's business school was that Graham was a professor there.

4. The decision to be bold.

My favorite early Buffett story about boldness has to do with what he decided to do on a January weekend in 1951.

Having learned that Graham (see last item) was chairman of Government Employees Insurance Company (ake GEICO), Buffett took the train to Washington, showed up at the company, and asked about it.

Serendipitous result: Lorimer Davidson, who would later become CEO, gave Buffett a four-hour explanation and tour of the insurance industry. Fast-forward quite a few years, and Buffett's Berkshire Hathway wound up owning Geico.

5. The decision to be healthy.

"You only get one mind and one body. And it's got to last a lifetime," Buffett famously told a group of students. "It's what you do right now, today, that determines how your mind and body will operate 10, 20, and 30 years from now."

Irony: Buffett has never been known for exercise or healthy habits, and says he has "the diet of a 6-year-old." Actually, there's no way I'd let my 6-year-old consume as much candy, red meat, and can after can of Coca-Cola as Buffett does, but then again he has lived to be 94 and counting.

6. The decision to nurture relationships.

One of the decisions Buffett actually lists in the shareholder letter that sparked this whole exercise was his decision to work with Charlie Munger, who passed away last year.

Buffett talks about many other crucial partners and relationships as well, among them Thomas Murphy (no relation to me, as far as I know) who was chair and chief executive officer of Capital Cities / ABC Inc., and Chuck Feeney, a billionaire turned intention-former billionaire. (We'll talk more about Feeney below.)

7. The decision to plan for afterward.

Nobody lives forever, and once he began knocking on the door of nonagenarian status, Buffett began to acknowledge this himself -- although he does like to joke about being an exception to the actuarial tables.

Finally, in 2021, he explained the succession plan for Berkshire Hathaway, which will be led by Greg Abel, who is currently the head of all non-insurance businesses at Berkshire Hathaway. (Elon Musk should pay attention to this part, by the way.)

8. The decision to cut your losses.

So many people never learn this lesson, and as someone once put it, they wind up spending their entire lives in the wrong room rather than admit they might have picked an incorrect door.

In Buffett's case, one of the big examples and decisions involved his acknowledgment, after years of trying, that the textile business -- the core of Berkshire Hathaway's business for more than its first 100 years -- was no longer viable in the United States.

9. The decision to laugh.

Life is happier when you laugh more. And while Berkshire Hathaway is a serious business -- what's more serious than money, investments, and people's futures? -- it's striking how often Buffett's letters, speeches, and interviews are peppered with jokes.

He's partial to the corny kind, and also to the bawdy kind that, if you heard your grandfather tell them, would leave you on the fence about whether to laugh or cringe. Here's one from the 2011 shareholder letter that I don't mind quoting:

A good underwriter needs an independent mindset akin to that of the senior citizen who received a call from his wife while driving home.

"Albert, be careful," she warned, "I just heard on the radio that there's a car going the wrong way down the interstate."

"Mabel, they don't know the half of it," replied Albert. "It's not just one car, there are hundreds of them."

10. The decision to teach.

They call Buffett the Oracle of Omaha, and he clearly loves the role. In fact, there are so many moments in his letters and other communications in which he makes asides to offer advice or hard-learned lessons that teaching truly seems to be his second calling.

One of my favorite examples here is the advice he gave verbatim twice over the years, in both the 1987 and 2003 shareholder letters. (Maybe he thought the audiences had turned over sufficiently in the interim?)

Anyway, it's this, and it really goes back to the first item on the list: "Develop your eccentricities when young."

11. The decision to do nothing.

This one is important: Besides the limited number of very good decisions Buffett says he's made, the other key to success is simply not to do anything when you don't see any good option. Instead of the old adage, "Don't just stand there, do something," Buffett suggests the opposite: Don't just do something, stand there!

Actually, let's use his precise quote: "The trick is, when there is nothing to do, do nothing."

12. The decision to give back.

This is where we get back to Chuck Feeney, who I mentioned all the way back in item No. 6 on this list. Feeney was a multi-billionaire who made it his life goal to give away all of his money.

It was Feeney's example that inspired Buffett to team up with Bill Gates to launch the Giving Pledge, and get more than 200 other billionaires to sign it as well.

More than his wealth, more than his advice, more than his 12 decisions -- many years from now, these are the kinds of things for which Buffett will be best remembered.

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Why write about Buffett today? I'll just level with you: I was saving this for another day, but then the plan I had for today's newsletter fell apart at the last minute.

Welcome to live newsletter writing, folks!

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7 other things …

• The Federal Reserve on Wednesday enacted its first interest rate cut since the early days of the Covid pandemic, slicing half a percentage point off benchmark rates in an effort to head off a slowdown in the labor market. (CNBC)

• Thousands of walkie talkies used by Hezbollah fighters have detonated across Lebanon, killing 14 and wounding hundreds of people including mourners at a funeral, witnesses and security sources have reported. The second wave of carnage comes a day after thousands of exploding pagers used by the group left almost 3,000 people injured and a dozen dead, including civilians and children. (Daily Mail)

• How the Trump campaign ran with rumors about pet-eating migrants—after being told they weren’t true. A woman the campaign cited as having called police about a pet abduction said her missing cat was found safe in her own basement, and that she "apologized to her Haitian neighbors with the help of her daughter and a mobile-phone translation app." (The Wall Street Journal)

• What it's like to have your vote for president actually matter, by a writer who lives in a swing district in the key swing state: Wilkes-Barre, Pennsylvania. It's been visited by both Trump and Harris in the last few weeks, TV ads are all about the election, and their mail is swamped with campaign literature. "I have to say I’m not a fan." (Prospect)

• A federal judge in Las Vegas allowed 10 women to proceed with their sexual assault lawsuit against Bill Cosby Jr. in the wake of a state law last year that lifted the statute of limitations for civil claims by survivors of sexual violence. U.S. District Judge Gloria Navarro on Monday rejected Cosby's argument that the law, Senate Bill 129, violates Nevada's prohibition on laws that only apply to a select group of people—in this case, victims of sexual assault. (Courthouse News)

• Google won a court challenge on Wednesday against a 1.49 billion euro ($1.66 billion) European Union antitrust fine imposed five years ago that targeted its online advertising business. The EU’s General Court said it was throwing out the 2019 penalty imposed by the European Commission, which is the 27-nation bloc’s top antitrust enforcer. (Fortune)

• For the first time in decades, public health data shows a sudden and hopeful drop in drug overdose deaths across the U.S. National surveys compiled by the Centers for Disease Control and Prevention show an unprecedented decline in drug deaths of roughly 10.6 percent. That's a huge reversal from recent years when fatal overdoses regularly increased by double-digit percentages. "This is exciting," said Dr. Nora Volkow, head of the National Institute On Drug Abuse [NIDA], the federal laboratory charged with studying addiction. "This looks real. This looks very, very real." (NPR)

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Thanks for reading. Photo credit: Photo by Hilthart Pedersen on Unsplash. I wrote about some of this before at Inc.com. See you in the comments.