6. He hates to manage
Like getting rejected from Harvard, it may seem counterintuitive that Buffett’s disdain for managing others is one of the keys to his success. But that is indeed the case. While Buffett built Berkshire Hathaway Inc. (NYSE:BRK.B) into a massive industrial conglomerate with dozens of subsidiaries, the parent company itself employs less than two dozen people.
How does he do it? He delegates, choosing to buy businesses that will continue to be run by their founders or existing management team and then leaving them to do so. Toward the end of one such manager’s 20-year tenure, he told Buffett: “I’ll tell you why [our agreement] worked. You forgot you bought this business. And I forgot I sold it.”
7. He loves his work
It’s no coincidence that a recent book written about Buffett, authored by a longtime friend of his, is titled Tap Dancing to Work.
The reference comes from a conversation he had with Judge John Grant, a friend and fellow bridge player, in 1973 — that is, right around the time the market had crashed. After Grant mentioned that he had enjoyed trying a particular case, Buffett responded by saying, “some days I get up and I want to tap-dance.”
As Lowenstein goes onto elaborate, “His total delight in his work to the exclusion of all else … had a juvenile quality not uncommon to prodigies.”
8. A spiritual kinship with money
Most investors appreciate how money, if properly employed, can make more money. But what separates Buffett is his almost spiritual grasp of float, capital allocation, and compounding returns.
It’s almost unbelievable to think that Berkshire Hathaway was once a struggling textile company based in New Bedford, Massachusetts. But it was with the comparatively meager cash flow from that dying business that Buffett was able to build Berkshire into what it is today.
By capturing and then reallocating Berkshire’s cash into other companies and investments, many of which themselves generate float, Buffett has accomplished a track record of compound annual returns that is without precedent. Since 1964, it has delivered a compound annual growth rate of 19.8%, or more than double the S&P 500‘s 9.2%.
9. He recognizes his own circle of competence
In line with his contrarian nature, Buffett has been particularly adept at avoiding the countless investment fads that have sprouted up throughout his career. One of the reasons he’s been so successful at this is because he limits his investments to those that are within his circle of competence.
As he noted in his 1970 letter to shareholders: “My approach to bonds is pretty much like my approach to stocks. If I can’t understand something, I tend to forget it.” Or, as he said three years earlier about technology stocks: “We will not go into business where technology which is way over my head is crucial to the investment decision. I know about as much about semiconductors or integrated circuits as I do of the mating habits of the chrzaszez.”
10. Non-dogmatic approach to investing
Most people associate Buffett with Benjamin Graham’s philosophy of investing in only ultra-cheap companies trading far below their intrinsic value. But the reality is far more nuanced.
