Tuesday, 09 February 2010
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Tuesday, 09 February 2010
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Financial Buffett’s best investmentWill surprise many - partner Charlie Munger recommends a “must-read” book. Alec Hogg09 May 2008 00:00 When Warren Buffett talks about investments, everybody pays attention. Not all agree with him, of course. But because of his track record, even most arrogant money manager takes note when the Oracle of Omaha offers advice on growing wealth. Nobody else in history has grown their personal wealth from zero to $62bn in a single lifetime. So when Buffett talks about "the most important investment you can make", as he did during the question and answer session at Saturday' AGM of his Berkshire Hathaway group, it paid to listen up. His advice, though, would catch many left-brainers by surprise: "The most important investment you can make is in yourself. Very few people get anything like their potential horsepower translated into the actual horsepower of their output in life. Potential exceeds realisation for many people." Buffett then related a story he often uses when meeting student groups which make the long journey to his home town - Omaha is a long way from virtually everywhere in the US. He reckons: "Just imagine you're 16 and I was going to give you a car of your choice today, any car you wanted to pick. But there was one catch. It was the only car you were able to have for the rest of your life. You had to make it last. So how would you treat it? "Well, of course you'd read the owners' manual about five times before you turn the key in the ignition. You would keep it garaged; any little rust would get taken care of immediately; you'd change the oil twice as often as you were supposed to - because you would know it had to last a lifetime." He adds: "Then I tell the students you get one body and one mind. And it's going to have to last you a lifetime so you'd better treat it the same way. You'd better start doing it right now because it doesn't do any good if you start working on it when you are 50 or 60 and the little speck of rust has turned into something big." Buffett reckons anything invested in one's mind and body pays off hugely: "The best asset is your own self. You can become to an enormous degree the person you want to be." How to do it? Back in the area where his advice is most appreciated, Buffett says he often asks university students to imagine they had the chance to own 10% of any of their classmates for the rest of their lives. The most popular choice is not the one with the highest IQ or the best grades but, he says "the person who is the most effective." And: "The reason people are effective is because other people want to work with them, they want to be around them. There are qualities that an individual picks up - being generous; being on time; not claiming more than you deliver; helping other people; all kinds of qualities that turn other people on. And there are things that turn people off. These are habits you pick up." And working on having the right habits, he says, is a great investment. Berkshire's vice chairman Charlie Munger picked up the thread: "I would add to that by teaching them to avoid being manipulated to their disadvantage by vendors and by lepers using the standard tricks of the vendor and the leper. You couldn't start with a better book that Cialdini's Influence. He's got s new book that's coming out called Yes. Here's two books that I suggest you add." Cialdini is the Professor of Psychology at Arizona State University. He has spent years researching persuasion techniques, so in Munger's opinion, his findings provide a forewarned is forearmed approach towards marketing methods. Cialdini is also a Berkshire Hathaway shareholder and was one of the 31 000 who made the trip to Omaha last weekend.
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