Chris Lau - Seeking Alpha

Thursday, September 23, 2010

Warren Buffett & Jay-Z on Success

Warren Buffett and Jay-Z were interviewed on Forbes on the discussion of success. The contents is much like a 'mash-up' of ideas between finance and rap music in which the commonalities between the two breeding success is answered.

Disclosure: 'Empire State of Mind' was played full volume as these notes were compiled.

Much of what Buffett said was already posted on this blog. Nevertheless, the key points are posted below. My emphasis is in bold.
  • Buffett had a 15 year jump ahead of others
  • Need emotional stability
  • Need to think independently, think on own facts and act on it – few are able to do this
  • Stay within your circle of competence 
  • It’s like tennis: few of us will get to play in Wimbledon, but in tennis, get ball over the net and you will be fine
  • Investing is not about not having brilliant decisions, it is about avoiding the bad ones (it’s like baseball: hit singles and doubles)
  • Read Benjamin Graham’s book (The Intelligent Investor) at 19, started at 7 and read all he could in stocks by age 12
  • Buffett was never grounded to anything and but was never profitable – it was not until after reading Graham’s Intelligent Investor did he start to succeed
  • The two key ideas?
    1. Think of stock as part of a business, not as a stock price or ticker
    2. Margin of Safety
  • How did he break out of the pack of the other rappers?
  • Within all that chaos you are searching for the truth – his first album at 26, so had more maturity
  • What did he do when faced with fork-in-the-road moments? ...
  • Consistency: he did not fade away. Music is like stocks. Instead of jumping on that next hot thing, he had discipline and confidence in who he was
  • He treated music as a business
  • The greatest trick in music that people ever pulled was they convinced artists they can’t be an artists who can make money. It was set-up!
  • Hip hop broke that thing. At end of day, you need to separate music from the business. For example, it has to be about making music in the studio
  • Genius approach was about not giving up, created own buzz, and music recording company came back to them
About Luck
  • Buffett was born 1930 in US, odds 30:1 he would succeed. He had decent genes, but was wired for capital allocation
  • Buffett was turned down by Harvard which gave opportunity to study under Ben Graham
Business Models
  • Everything you do is cumulative: what was learned by Buffett at 20 is still useful now
  • Principles do not change – it is much like physics – know what makes a good manager, product – there is transference
  • Knowing what to leave out is as important: how do you beat Bobby Fisher, the great chess player? Play him in anything else besides chess
  • Napster was an opportunity to embrace: shutting it down and having arrogance resulted in million more “napsters”
  • Would have been better to have opened yourself up to change. Landscape changes, the way you go about business needs to change. You don’t necessarily need to change yourself
Business Moats
  • Buffett likes having a business that has moats, where competitors cannot get to you
  • The best moat to have is your own talent: taxes, inflation can’t take that away from you
  • When Buffett talks to student he asks if you’re a $1 million asset he’d pay 10% ($100,000), how do you make yourself worth 50% more?
  • Answer: Improve yourself, (ie) learn to communicate better might increase your worth 50% which equates to $500,000
  • Develop habits of success – look around you and list talents of others and follow
Making Mistakes
  • Discuss what went wrong, face up to it
  • Have ability to discuss an opposing position comfortably
  • Learn why and how poor decisions were made
  • Don’t expect perfection in yourself – it is too demanding to do so
Final Thoughts on Success
  • Buffett: Almost everyone who was successful had a teacher that has affected him – if you can pass that along, that is better than passing along money
  • Jay-Z: Apply yourself, stay true to who you are, how far where you come from. Hope.

Conclusion:  Take control of your destiny by learning about business, so you won’t lose what you’ve created

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h/t Marketfolly