Getting smarter: using the Buffett Formula

Inspiration brings knowledge, that’s my opinion anyway. The problem is one can’t exist without the other, and inspiration doesn’t always bang on the door in the dead of the night, like an unexpected guest who you would gladly invite in. Similarly knowledge doesn’t just jump out at you, you have to go chase it which requires inspiration to begin the pursuit in the first place.


In an industry such asĀ web design, you need to magnetise inspiration and knowledge to be at the vanguard: to pioneer. It is an industry that waits for no one, it is a manifestation of the ‘early bird catches the worm’ lesson. The problem is at times the fountain of knowledge dries up when you are the most thirsty and inspiration comes and goes sporadically, so maintaining the lead can sometimes be tough.

Lately I have been reading a lot of articles about the illustrious Warren Buffett; the great American business magnate, the richest man in the world 2008, the business philosopher and the entrepreneur that inspires all others. In my reading I encountered an article that inspired me greatly, outlining something called the “Buffett Formula”; a simple way to get smarter inspired by the teachings of the man himself.


This formula is like a gospel for expanding the mind to absorb knowledge and inspiration and I would like to share it with you in my own words.


Knowledge is discipline

Gaining knowledge begins with discipline, as it requires putting in the work yourself, as I said earlier, it won’t just come to you. At the end of the day most people, exhausted from a days work will go home, eat, vegetate on the sofa in front of the TV or computer and aimlessly potter the hours before bed away pursuing fruitless endeavours that give your brain no nourishment; nothing to take with you into the next day.


This is a common trait of most of us who work full-time, we crave sedatives to help us unwind- so we think. We commit ourselves to activities that don’t cultivate knowledge but only serve to circulate small talk around the workplace the following day.


The Buffett formula battles this. Named after Warren Buffett and his long standing business partner atBerkshire Hathaway, Charlie Munger, the Buffett Formula is the way to constantly absorb knowledge in the manner that these two never-relenting learning machines do. From their methods not only have they become super wealthy, but they never cease to become more knowledgeable, which has resulted in them becoming luminaries in the world of business.


‘I just sit in my office and read all day’

Firstly you need to read, and read a lot. Buffett says, ‘I just sit in my office and read all day’, and he means it; Buffett estimates that he spends 80% of his working day reading and thinking about what he has just read. When asked how much one needs to read to get smarter, apparently Buffett once held up a stack of paper and said, ‘read 500 pages like this every day. That’s how knowledge builds up, like compound interest’.


Committing to that much reading will certainly build up your knowledge, but there is a reason that there isn’t more Buffetts out there: few of us will put in the effort.


It isn’t just how much reading you do that matters; how you read matters just as much. It is so easy to read in the same manner in which a sieve funnels water. You can take what you read in and then let it go in an instant. To build your knowledge you always need to read critically and always be thinking about what you are reading. You need to possess the mental faculty to form an opinion as you read.


Read critically and form an opinion as you go along

Reading constitutes continuous learning. Buffett and Munger never lived in the same city as one another; it seems absurd that one of the most successful business twosomes of the century never lived in the same city. The reason for this according to Munger was that if they were together they would have spent all their time talking as opposed to reading for the ‘better part of their days’. The way that Munger treated it was that reading was part of a continuous learning procedure that needed to be adhered to, to keep the ‘record’ good.


Think you know how it works? You are probably wrong

If you think you know the way ‘it’ works, then you are mistaken. If you think that the pair sit in front of their respective computer screens all day studiously obsessing over numbers and figures then you really have no idea.


According to Buffett, ‘(they) don’t read for other people’s opinions. We want to get the facts and then think.’ After reading comes intense studying. Munger would be the first to admit that his genius is accumulated, rather than bestowed upon him naturally, ‘We make actual decisions very rapidly, but that’s because we’ve spent so much time preparing ourselves by very quietly sitting and reading and thinking’.


Sell your most important client an hour of your time

Reading and thinking takes time; time out of a very busy workplace where every minute counts. So how do you find the time to take time out to read and think? Well according to Buffett you sell yourself an hour of your time, as ‘you are your most important client’.


Buffett says, ‘It’s 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, you’re 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.’


I’m sure that this quote has had many of you fiscal obsessed entrepreneurs crying blasphemy, but from the words of Munger himself, profit isn’t everything, ‘I have always wanted to improve what I do even 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.’


You think you know, but do you really know?

If you think that what you have read until now is enough then you still don’t know how it works. Reading and thinking isn’t enough. As well as knowing what you are thinking you need to be able to express it; can you engage in a conversation about the topic? Would you be able to fill two sides of A4 writing about it? If not then you haven’t quite got there yet.


Even once you have got to this stage, you need to be sure that you can defend your knowledge, try engaging in a debate with someone about it. If you can defend what you are trying express to the bitter end, only then can you be sure that you know what you are talking about. Acquiring knowledge leads to inspiration.


The more knowledge you have in your head the more inspiration you will find, which subsequently will lead to more ideas being made. The road to knowledge isn’t an easy route or short, in fact someone quite famously pointed out once that learning is an experience that lasts a lifetime.