The Buffett Formula: Going to Bed Smarter Than When You Woke Up

The Buffett Formula: Going to Bed Smarter Than When You Woke Up

Introduction:

In an interview for his authorized biography, The Snowball, Warren Buffett shared a story about his business partner, Charlie Munger. Munger, a young lawyer at the time, considered himself to be his most valuable client and sold himself an hour each day to work on construction projects and real estate deals. This concept of investing in oneself and gaining knowledge became known as the Buffett formula. Both Buffett and Munger attribute their success to continuous learning and knowledge accumulation. In this article, we will explore the Buffett formula and how it can help individuals become smarter over time.

1. The Power of Reading and Thinking:

Warren Buffett famously said, "I just sit in my office and read all day." He estimated that he spends 80% of his working day reading and thinking. Buffett and Munger believe that reading is the key to accumulating knowledge and getting smarter. Munger once advised, "Read a lot. I don't know anyone who's wise who doesn't read a lot." They advocate for reading diverse materials and constantly seeking new information. They believe that knowledge builds up, much like compound interest, as you consistently read and learn.

2. The Importance of Critical Thinking:

Reading alone is not enough to become smarter. It is essential to develop critical thinking skills and constantly challenge your ideas. Munger emphasizes the need to think about the opportunity cost of each hour spent. He suggests setting aside time for self-improvement and cultivating curiosity. Munger and Buffett value the ability to hold an opinion and do the mental work required to analyze and solve problems. They believe in acquiring knowledge, not just opinions, and constantly striving to become a little wiser every day.

3. Surrounding Yourself with Challenging Perspectives:

Apart from reading and critical thinking, Buffett and Munger emphasize the importance of surrounding yourself with people who are not afraid to challenge your ideas. They believe that engaging in discussions with others helps refine your thinking and exposes you to different perspectives. Munger describes their approach as seeking facts rather than opinions. They value the ability to explain what you know to someone else, as it showcases your understanding and clarity of thought.

Actionable Advice:

• 1. Dedicate time each day for reading and learning. Set a goal to read a certain number of pages or books per week.

• 2. Develop critical thinking skills by actively questioning and analyzing information. Challenge your own ideas and seek alternative viewpoints.

• 3. Seek out diverse perspectives by engaging in discussions with others. Surround yourself with people who are not afraid to challenge your thinking and expose you to new ideas.

Conclusion:

The Buffett formula of going to bed smarter than when you woke up emphasizes the importance of continuous learning and knowledge accumulation. Warren Buffett and Charlie Munger attribute their success to reading, critical thinking, and surrounding themselves with challenging perspectives. By incorporating these principles into our daily lives, we can enhance our intelligence and make better decisions. Take the actionable advice provided and start on your journey to becoming smarter every day. Remember, it's not just about acquiring knowledge, but also about applying it and constantly striving for personal growth.