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5 Lessons That Warren Buffett’s Trillion-Dollar Success Can Teach All Investors

Warren Buffett
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Berkshire Hathaway has joined the $1 trillion club.

The conglomerate so closely identified with legendary investors Warren Buffett and the late Charlie Munger is the world’s first company outside of the technology industry to reach $1 trillion in market capitalization — the total value of its outstanding shares of stock.

It’s a remarkable achievement that cements Buffett’s status as arguably the best investor of all time.

Berkshire Hathaway’s success also contains the following important lessons for those of us who will never be billionaires, but who nonetheless plan to make the most of the money we invest.

Patience pays off

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Make no mistake: Buffett is a great investor. But the outsized success that both he and Berkshire Hathaway have achieved is largely due to simple patience.

Buffett began investing as a kid and has never really stopped. He purchased Berkshire Hathaway in 1965 and steadily built it into a financial powerhouse.

Staying the course over many decades is what truly gave Buffett and Berkshire their breathtaking returns. There is a chart that you can find on the internet that makes this abundantly clear: Buffett accumulated more than 99% of his vast net worth after the age of 50.

That is the power of compounding.

The success of Berkshire also largely comes down to the power of patiently staying the course, which is why Berkshire Class A shares now hover around $700,000 apiece. As Buffett has said:

“Life is like a snowball. The important thing is finding wet snow and a really long hill.”

The lesson: Commit to a plan to grow wealthy and stick with it. Although you likely will not see big results for many years, you might achieve extraordinary success later simply because you hung around long enough for compounding to work its magic.

Mistakes don’t have to doom you

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Buffett purchased Berkshire Hathaway in a fit of pique. He has since said that doing so was a major mistake.

In 1964, Buffett already owned many shares of Berkshire. Management of the company wanted to buy the stock from Buffett, and he agreed to sell at 11.50.

But Berkshire later tried to change the terms with a tender offer of 11 and three-eighths. Miffed, Buffett decided not to sell and instead bought control of the entire company to get a little revenge.

Recounting the incident, the Oracle of Omaha once told CNBC that Berkshire was “the dumbest stock I ever bought.”

As Buffett said, “The truth is I had now committed a major amount of money to a terrible business.” Berkshire was loaded with textile assets “that weren’t any good,” he said.

And yet, over time Buffett was able to take those lemons and turn them into what might be the greatest lemonade in the history of finance.

The lesson: Don’t let a few stumbles trip you up. Brush yourself off and continue to push ahead.

Surrounding yourself with good people leads to success

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Berkshire Hathaway is a holding company with many great businesses. When Buffett brings a company into the Berkshire fold, he looks for a great management team that is driven to succeed without sacrificing integrity.

Buffett’s commitment to seeking integrity is admirable, but it’s also smart business. As he has remarked:

“Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. You think about it, it’s true. If you hire somebody without [integrity], you really want them to be dumb and lazy.”

The lesson: Even if you never run a business, you want to make sure you deal with financial advisors and firms that are upright and professional.

You improve by continuous learning

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Munger, who was vice chairman of Berkshire Hathaway, once observed that Buffett is a “learning machine,” and marveled at how his colleague became a better investor in his 70s and 80s.

A willingness to keep learning was behind Buffett’s ability to recognize great buys among railroad and technology businesses, two industries he had shunned in the past. Munger added that when it came to Berkshire, “the success came from changing our ways.”

More generally, Munger once said:

“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than when they got up, and boy does that help — particularly when you have a long run ahead of you.”

The lesson: Never become too wedded to your beliefs. Always check them against reality from time to time. When the world changes, so should you.

Keeping things simple is often best

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One of the most startling things about Berkshire Hathaway’s success is that the company reached the trillion-dollar mountaintop as a conglomerate. That makes it a bit of a dinosaur in an era when cutting-edge technology companies are often seen as the surest path to riches.

Berkshire is a shining example that solid, old-fashioned values still work in the 21st century.

Similarly, Buffett repeatedly urges investors to ignore the headlines and fancy sales pitches from Wall Street. His advice for growing wealthy couldn’t be simpler:

“Consistently buy an S&P 500 low-cost index fund. I think it’s the thing that makes the most sense practically all of the time.”

The lesson: Berkshire became successful by using an old-fashioned approach. Investors might do the same by steering clear of financial innovations and sticking to a tried-and-true, buy-and-hold strategy.

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