The Secret To Achieving Warren Buffett’s Success

Warren Buffett gave a talk to Columbia business school students in late 2001 or early 2002, the last question that was asked was, “What is your secret?” And Buffett replied, picking up a big pile of papers, ”I read 500 pages a week, and anyone can do it. It’s like compound knowledge, so if you start today, it will build up over time.”

Watch Todd Combs, Buffett’s hand picked portfolio manager retell the story here:

For some reason, others have mistakenly heard 500 pages per day, and have written about it, which I too had believed. But they are making a mistake. That is why it is important to read direct from the original source. When reading a blog, make sure the author correctly references the original author or material and provides a link to it. If not, it’s best to avoid them.

If you tried to read 500 pages per day, I guarantee your quality of reading will deteriorate. Remember: quality over quantity! Plus you will be taking notes as you read.

The purpose is to cultivate quality reading. Reading to gain knowledge — not collect information or gather data — and the process will involve slowing down the number of words you read per minute. Of course the two overlap, but by first understanding that differences exist, it allows us to acknowledge our own ignorance and develop new skills. 

Reading an annual report is different from reading a newspaper. You should be able to comprehend reading a newspaper, online article or magazine without much effort. As you do, you become more informed, but to be informed means simply that something is the case.

Reading an annual report is to read to understand; this requires an enlightenment; What does it mean? What’s it all about? Why is it the case? What connections are there with other facts, in what respect is it the same and different, and so forth.

The process of reading to understand is a slow deliberate process!

Take an CEO’s letter to shareholders for instance. 

“The art of reading, in short, includes all the same skills that are involved in the art of discovery: Keenness of observation, readily available memory, range of imagination, and, of course, a reason trained analysis and reflection.” Mortimer

Mortimer advises that you start by selecting the important words and paragraph’s, and then trying to understand them, question them and try and make some connections.

For example read these two simple statements made by two different CEOs:

  1. For more than 12 years as a public company, our strategy has been consistent. We have remained fully committed both to driving diversified growth and to partnering with our clients. During this time we have built our businesses systematically.
  2. Our stock price is a measure of the progress we have made over the years. This progress is a function of continually making important investments, in good times and not so good times, to build our capabilities — people, systems and products. These investments drive the future prospects of our company and position it to grow and prosper for decades.

 

Did you spot the subtle differences?

The use of vague language is present in No. 1. The use of these buzz words “systematically” and “diversified growth” are meaningless.

In the case of No. 2, there is a big difference in the language used, and there much more information contained in that one paragraph.

For instance, the first sentence clearly states and anchors in tangible terms that their actions now and over the years will have real consequences for their share price and shareholders.

He then explains to the reader how their decisions — the capital allocation and human allocation decisions — made today will determine future profitability.

The first paragraph was written by Richard Fuld, chairman and CEO of the now defunct Lehman Brothers, and the second was written by Jamie Dimon, chairman and CEO of JPMorgan Chase (JPM) (no wonder Buffett recommends you read Dimon’s letters).

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Comments

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Adam Parris 3 years ago Author's comment

Hi Guys,

I appreciated your comments and suggestions. Keep them coming.

Wannabe Warren 3 years ago Member's comment

Good read.

Barry Hochhauser 3 years ago Member's comment

There's gotta be more to Buffett's success than simply "reading a lot." The man is brilliant. While reading may have added to his already vast knowledge, I'd garner he was already pretty darn smart to start.

Danielle Rogers 3 years ago Member's comment

If this works for #Buffett, I'll give it a try.

Carl Schwartz 3 years ago Member's comment

I enjoyed this. Warren Buffett is the best when it comes to investing. It's interesting that this is what he considered the secret to his success. However, I probably read close to 500 pages per week and don't have any where near as much luck in the stock market!

Beating Buffett 3 years ago Member's comment

@[Carl Schwartz](user:16874), you can't just read anything. Read what #Buffett reads. He's the master.

Ayelet Wolf 3 years ago Member's comment

Ah, but do you read critically and carefully as the author suggests? You have to TRAIN yourself to read in the right way, not just read.

Craig Newman 3 years ago Member's comment

If you read so much, why is your English so bad?

Bill Johnson 3 years ago Member's comment

What do you mean, looks fine to me.

Craig Newman 3 years ago Member's comment

I meant the original, unedited version on his own site. Lots of typos, bad grammar, etc.

Bill Johnson 3 years ago Member's comment

Got it, yes I see what mean. Well, luckily I'm reading it here. I thought it was a good read.

Ayelet Wolf 3 years ago Member's comment

Some really good tips here, thanks.