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

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

Introduction:

Warren Buffett, one of the most successful investors of all time, has emphasized the importance of continuous learning and knowledge accumulation. He believes that the best thing a human being can do is to help another human being know more. Buffett, along with his partner Charlie Munger, has made a habit of reading extensively to constantly expand their knowledge. In this article, we will explore the Buffett formula for going to bed smarter than when you woke up and how it can be applied to our own lives.

The Power of Reading:

For Buffett and Munger, reading is a way of life. Buffett once said, "I just sit in my office and read all day." They have cultivated a habit of reading productive material, which has become second nature to them. However, it's not just about the quantity of reading; how you read matters too. It's important to be critical and always think while reading. Reading should involve mental work that allows you to form opinions and make informed decisions.

The Importance of Thinking:

Buffett and Munger value thinking as much as reading. They believe that it is crucial to think for oneself and not rely on other people's opinions. They prioritize getting the facts and then engaging in thoughtful analysis. Buffett once stated, "Look, my job is essentially just corralling more and more facts and information, and occasionally seeing whether that leads to some action." By thinking critically and independently, they are able to make well-informed decisions.

The Power of Partnership:

Buffett and Munger recognize the value of having a partner to think with. They have often referred to their partnership as the key to their success. Munger's children even call him a "book with legs" due to his immense knowledge and wisdom. However, it is interesting to note that they never lived in the same city or worked in the same office. This separation allows them to bring different perspectives to the table and avoid groupthink. They rely on each other to make decisions, acknowledging that neither of them is smart enough to make important decisions without taking the time to think.

The Long-Term Investment in Learning:

Buffett and Munger understand the long-term benefits of investing in learning and self-improvement. They prioritize the opportunity cost of their time, realizing that every hour spent on learning something new has a significant impact. They believe in cultivating curiosity and striving to become a little wiser every day. Buffett once said, "Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day."

Actionable Advice:

1. Develop a habit of reading: Make reading a daily practice and set aside dedicated time for it. Choose productive material that helps you expand your knowledge and think critically.

2. Prioritize independent thinking: Don't rely solely on other people's opinions. Take the time to gather facts and analyze them critically to form your own opinions and make informed decisions.

3. Find a thinking partner: Seek out someone with whom you can engage in thoughtful discussions and bounce off ideas. Having a partner who challenges your thinking and brings a different perspective can be invaluable.

Conclusion:

The Buffett formula of going to bed smarter than when you woke up emphasizes the importance of continuous learning, critical thinking, and finding a thinking partner. By following these principles, we can expand our knowledge, make better decisions, and ultimately improve ourselves. So, let's make a commitment to invest in our own personal growth and strive to become a little wiser every day.