Warren Buffett's Advice for People Who Want to Get Rich

Mr. Buffett, how can I make 30 billion dollars?

Start young! Charlie's always said that the big thing about it is we started building this little snowball on top of a very long hill. So we started at a very early age and rolled the snowball down. And, of course, the snowball, the nature of compound interest, behaves like a snowball of sticky snow. And the trick is to have a very long hill, which means either starting very young or living very to be very old.

You know, I would do it exactly the same way if I were doing it in the investment world. I mean, if I were getting out of school today and I had ten thousand dollars to invest, I’d start with the A’s. I would start going right through companies, and I probably would focus on smaller companies because I would be working with smaller sums, and there's more chance that something is overlooked in that arena. As Charlie has said earlier, it won't be like doing that in 1951, when you could leaf through and find all kinds of things that just leapt off the page at you. But that's the only way to do it.

I mean, you have to buy businesses or little pieces of businesses called stocks. You have to buy them at attractive prices, and you have to buy into good businesses. That advice will be the same 100 years from now in terms of investing. That's what it's all about. The biggest mistakes are the ones that actually don't show up. They're the mistakes of omission rather than commission.

We've never lost that much money on any one investment, but it's the things that I knew enough to do that I didn't do. We have missed profits of as much as maybe 10 billion dollars in things that I knew enough to do, and I didn't do. Now, the fact I didn't buy Microsoft way back is not a foregone opportunity because I didn't know enough to make that decision. But there have been other investments where I didn't know enough to make the decision, and for one reason or another, I either didn't do it at all or I did it on a small scale. I was sucking my thumb when I should have been writing checks, you know, basically. And you know, those don't show up. Yeah, there's no place where it shows missed opportunities, but I've missed some big ones.

Well, if you're interested in business, I definitely think you ought to learn all the accounting you can by the time you're in your early 20s. Accounting is the language of business. Now, that doesn't mean it's a perfect language, so you have to know the limitations of that language, as well as all aspects of it. So I would advise you to learn accounting, and I would advise you to be, in terms of part-time employment or anything else, work in a number of businesses. There's nothing like seeing how business operates to build your judgment in the future about businesses.

When you understand what kind of things are very competitive and what kind of things are less competitive and why that works that way, all of that adds to your knowledge. So I would do a lot of reading. If you're interested in investments, I would take the accounting courses, do a lot of reading about investments, and get as much business experience. I would talk business with people that are in business and find out what they think makes their operation tick, where they have problems, and why. I just think you should kind of soak it up every place that you can.

If I were working with a small amount of money, the universe would be huge compared to the universe of possible ideas I work with now. You mentioned that '56 to '69 was the best period; actually, my best period was before that, from right after I met Ben Graham in early 1951. From the end of 1950 through the next 10 years, actually, returns averaged about 50 percent a year, and I think they were 37 points better than the Dow per year or something like that.

But I was working with a tiny, tiny, tiny amount of money. So I would pour through volumes of businesses and find one or two that I could put ten thousand dollars into or fifteen thousand dollars into that were just ridiculously cheap. And obviously, as the money increased, the universe of possible ideas started shrinking dramatically. The times were also better for doing it in that time, but I think if you're working with a small amount of money with exactly the same background that Charlie and I have and the same ideas, whatever ability we have, I think you can make very significant sums.

But as soon as you start getting the money up into the millions, many millions, the curve on expectable results falls off just dramatically. But that's the nature of it. When you get up to things you can put millions of dollars into, you've got a lot of competition looking at that, and they're not looking as I did when I started.

When I started, I went through the pages of the manuals page by page. I probably went through 20,000 pages in the Moody's industrial transportation banks and finance manuals, and I did it twice. I actually looked at every business. I didn't look very hard at some. Well, that's not a practical way to invest tens or hundreds of millions of dollars. So I would say if you're working with a small sum of money and you're really interested in the business and willing to do the work, you will find something. There's no question about it in my mind. You will find some things that promise very large returns compared to what we will be able to deliver with large sums of money.

The key is to, certainly in terms of your personal life, the most important decision you will make is the spouse that most of you will likely have. It's very important to surround yourself with people that are better than you. You are going to move in the direction of the people you associate with. So I've been enormously lucky in that respect. I mean, I've just had teachers and friends and a spouse that really was a better person than I was. I had enough sense to learn from these people that life went better if you behave better yourself. It took a while.

So I advise you to seek out as your partner in business, your partner in life, whatever it may be, look for the people that actually are examples to you rather than somebody that you think you need to straighten out yourself. Simple rules like that: the lighting customers, working through other people, and associating with people that will cause you to move in a better path than you might otherwise have. They will take you so far in life that it's hard to believe.

There's nothing like following your passion. I mean, I love what I do, obviously, and I've loved it the whole time I've done it. Charlie, it's the same way. We have managers; some of them went to business school, some of them didn't. They're all types, but the common factor in them is they love what they do. You've got to find that in life. Some people are very lucky in finding it very early. I was, you know, through dumb luck that my father happened to be in the securities business. So when I would go to his office, there were a lot of books to read, and I got entranced with that. But, you know, if he'd been in some other occupation, I think I would have read those books eventually, but it would have been a lot later.

So if you find something that turns you on, my guess is you're going to do very well. And the beauty of it is, in a sense, there's not that much competition. I mean, there are not a lot of people out there that are going to be running faster than you in the race that you elect to get into. If you haven't found it yet, you may well have found it, but if you haven't found it yet, you've got to keep looking.

When we've got 70-plus managers, some of them, we had one guy that didn't go to high school. Charlie and Rosner, oh yeah, he quit in fourth grade, I think. Well, Mrs. B never went to school a day in her life, you know? And when you go out to the furniture market, I hope you go out this evening. We expect to set a record today in sales. What you are looking at on those 78 acres is the largest home furnishing store, about 400 million of sales, the largest store in the United States, and it comes from $500 of capital paid in by a woman that never went to school a day in her life and couldn't read or write, you know? I mean, she loved what she was doing.

I tell the story; this is a true story. When she was well into her 90s, she invited me over to her house for dinner. That was very unusual. She had a very nice house six or seven blocks away from the store. I went into the house, and the sofa, the chairs, the lamp, the dining room table, they all had little green price tags hanging down. That made her feel at home. I said to her, “Mrs. B, you are my kind of woman!” It signifies all around; I mean, this is my kind of woman. She loved it, you know, and she loved it all her life. Just think of what that produced. I mean, it’s incredible.

One time my dad used to quote Emerson that “the power of the lies within you is new in nature,” you know? Basically, the power that was within Mrs. B was new in nature, and over a lifetime, it produced amazing things. So, find your passion, and then don't let anything stop you.

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

Seventy years ago, I was in high school—almost a third as long as the country has been around. When I was in high school, I really only had two things on my mind: girls and cars. I wasn't doing very well with girls, so we'll talk about cars. But let's just imagine that when we finish, I'm going to let each one of you pick out the car of your choice. Sounds good, doesn't it? You figure out any color you name it; it'll be tied up with a bow, and it'll be at your house tomorrow.

You say, "Well, what's the catch?" And the catch is that it's the only car you're going to get in your lifetime. Now, what are you going to do knowing that that's the only car you're ever going to have, and you love that car? You're going to take care of it like you cannot believe.

Now, what I'd like to suggest is you're not going to get only one car in your lifetime, but you're going to get one body and one mind. That's all you're going to get. And that body and mind feels terrific now, but it has to last you a lifetime.