Warren Buffett on investing in yourself

I’ve been thinking about this excerpt from Warren Buffett’s 2002 Berkshire Hathaway shareholder meeting on investing in ourselves. It resonated.

Let’s assume a genie appeared to you when you turned 16, and the genie said, “You get any car you want tomorrow morning, tied up in a big pink ribbon, anything you name. And it can be a Rolls Royce, it can be a Jaguar, it can be a Lexus, you name it, and that car will be there and you don’t owe me a penny.”

And having heard the genie stories before, you say to the genie, “What’s the catch?” And of course, the genie says, “Well, there’s just one. That car, which you’re going to get tomorrow morning, the car of your dreams, is the only car you’re ever going to get. So you can pick one, but that’s it.”

And you still name whatever the car of your dreams is, and the next morning you receive that car.

Now, what do you do, knowing that’s the only car you’re going to have for the rest of your life? Well, you read the owner’s manual about 10 times before you put the key in the ignition, and you keep it garaged. You know, you change the oil twice as often as they tell you to do. You keep the tires inflated properly. If you get a little nick, you fix it that day so it doesn’t rust on you.

In other words, you make sure that this car of your dreams at age 16 is going to still be the car of your dreams at age 50 or 60, because you treat it as the only one you’ll ever get in your lifetime. And then I would suggest to your students in Phoenix that they are going to get exactly one mind and one body, and that’s the mind and body they’re going to have at age 40 and 50 and 60.

And it isn’t so much a question of preparing for retirement, precisely, at those ages, it’s a question of preparing for life at those ages. And that they should treat the importance of taking care and maximizing that mind, and taking care of that body in a way, that when they get to be 50 or 60 or 70, they’ve got a real asset instead of something that’s rusted and been ignored over the years.

And it will be too late to think about that when they’re 60 or 70. You can’t repair the car back into the shape it was. You can maintain it. And in the case of a mind, you can enhance it in a very big way over time. But the most important asset your students have is themselves.

You know, I will take a person graduating from college, and assuming they’re in normal shape and everything, I will be glad to pay them, you know, probably $50,000 for 10 percent of all their earnings for the rest of their lives. Well, I’m willing to pay them 10 percent for — $50,000 for 10 percent — that means they’re worth $500,000 if they haven’t got a dime in their pocket, as long as they’ve got a good mind and a good body.

Now that asset is far, far more important than any other asset they’ve got, unless they’ve been very lucky in terms of inheritance or something, but overwhelmingly their main asset is themselves. And they ought to treat their main asset as they would any other asset that was divorced from themselves. And if they do that, and they start thinking about it now, and they develop the habits that maintain and enhance the asset, you know, they will have a very good car, mind, and body when they get to be 60. And if they don’t, they’ll have a wreck.

(H/T: Jana’s post)

Day Traders or Venture Capitalists

We have a unique opportunity in front of us today – to choose between being day traders or venture capitalists. However, the opportunity comes with a twist (doesn’t every opportunity?). Few realize that the opportunity exists and fewer know that the default option is day trading.

Day trading requires us to engage with all the goings on in the day. The nature of the day dictates our mood. We like good weather and good news and generally struggle to find motivation otherwise. We invest in the now and avoid crazy swings. It is the default option and works just fine.

However, a few realize that there’s an alternative. When we play venture capitalist, we look at things differently. Yes, we’re engaged with today but, really, we’re focused on building for a few years from now. We’re on the lookout for opportunities to invest in ideas and people who might building something of value. They key word is might, of course. There are no guarantees. Unlike in day trading, there’s more risk and more volatility. But, there’s also tremendous excitement about possibilities.

So, today, we get to choose if we want to live this day and week as a day trader or venture capitalist. One feels safe and the other feels full of tension, discomfort and risk.

Then again, sometimes avoiding risk is the greatest risk of them all.

Plant trees now

Plant trees now. Plant them well before you need the fruit.

If we aren’t careful, our life and careers can become an exercise of searching for answers to the question – “But, what can I do to make that happen now?” This could be about looking to build a strong collection of referrals to a job we want. It could also be about meeting the desire to work on a fulfilling side project. But, we can rest assured that the moment we ask the “But, what can I do now?” question, it is already too late.

It is impossible to find the perfect referral for a job we want tomorrow, unrealistic we will find a great story filling that gap in our application for our essays to university day after and unlikely we will get healthy enough to pass our annual physical in a week.

But, how could we have known?

By teaching ourselves to think longer term and continuously investing in ourselves and others. Every minute we spend thinking long term is a minute spent planting trees. Every minute we spend investing in our growth or that of others is also a minute spent planting trees. This includes all the time we spend studying, connecting, helping, thinking and working toward becoming our best self. This isn’t about moving toward specific goals as much it is moving in their direction. Want to be a healthy person? Start today by making small changes to your lifestyle. Want to work in virtual reality in year? Start today by connecting with people in Virtual Reality with no intention but to learn about what they do.

There isn’t a shortcut to this. There’s no point looking back at lamenting un-planted trees either. For a more healthy, fulfilling life, we need to plant more trees than we’ll ever need. As the Chinese proverb goes, the best time to plant them was twenty years ago. However, if we let that pass us by, there’s no point in fretting.

After all, the second best time is today.

Planting trees before you need the fruit

If you feel you need fruit 10 years from now, it is best to plant a tree today.

The trouble, though, is that you don’t often know what sort of fruit you’ll need. So, how do you strategically plant trees that’ll give you exactly what you need later?

While there might be minds who might be able to engineer such circumstances, an approach that might work better is to just plant trees anyway and tend them carefully as the years go by. Invest in people, in learning, in great relationships, in yourself and share what you learn on your journey. Create your own podcast, your own not-for-profit along the way, or join other creators who you feel are creating impact. And, no matter what you decide to do, approach it like a gardener would – plant, tend and nurture.

There is a chance that all the trees you plant will be useful. Most likely, it’ll turn out that a few are incredibly useful while many of the others aren’t. It really won’t matter. The journey would have been so much fun that the result will only feel like a small addendum. The truth about the final analysis is that there never is a final analysis. Any analysis is just a part of the greater journey.

And, as it turns out, it is rarely about the fruit. The fruit disappears in a few bites. The planting, however, lasts a lifetime. And, what a great way to spend a lifetime..

A few thoughts on making money work for you

Working for money is not a nice place to be. You only work for money when you can’t do without it. When you live well below your means, you firmly ensure that it works for you. The good news is that you can work towards turning the relationship around with a few changes to your lifestyle. A few ideas –

1. Drink more water. The cost of carbonated beverages and alcohol add up over time. Water is largely free, incredibly tasty and, as an added bonus, great for your health too. Easy way to save $35-$40 per week / $1600 per year.

2. Eat food at/from home. If you need a lot of food to be energetic, consider taking a few simple sandwiches and fruits with you. The biggest benefits come when you begin packing lunch. And, definitely eat dinner at home. That can save about $140 a week  / $7280 per year.

3. Develop a taste for low cost fun. Every weekend needn’t be expensive. Try board games, pot luck dinners, and simpler gatherings. Yes, I recognize that this list appeals more to introverts. Mix it up a bit perhaps.

4. Allow space in your budget for some guilt free spending. This way, you keep your willpower reserves intact and also enjoy your money.

5. Spend money where you spend your time. If you spend 12 hours on a computer desk – invest in a nice screen, a comfortable keyboard, and a nice mouse. Don’t skimp on stuff that you will use a lot and definitely don’t skimp on tools that help you get more done – e.g. if you can clear more emails or listen to more books on your commute on a tablet, invest in one. Similarly, don’t compromise on a comfortable duvet. If you don’t sleep well, the rest of your day is useless.

6. Invest in your long term happiness by spending on great experiences rather than things. Go for that iconic trip to the Canadian Rockies or that road trip to the Gold Coast. They’re memories that will stay with you forever. You get used to regular luxuries (e.g. an expensive car) real quick.

7. Invest in your learning. Don’t skimp on a good education or books on a regular basis. These things generally pay themselves forward with better jobs and higher earning potential.

8. Give. Giving helps us gain some perspective about how much we have. Happiness is key to spending wisely.

9. Invest for the long term in indexes. I gave estimates on the first two items just to illustrate the power of long term decisions. Assume you have around $10,000 this year by saving on food and water and invest in an S&P 500 index that Warren Buffet recommends, that will be worth $102,000 in 40 years assuming a standard 6% real return. Imagine if we did this every year and if the amount were bigger with the aide of low cost fun and other savings.

Money is just a tool. We just need to learn how to use it well so it doesn’t get in the way of our happiness. Live frugal by investing in things you really need. Spend consciously.

It may sound a bit boring.. but, not having to worry about whether you have enough money for this or that sure is a lot of fun.