In 2015, Berkshire Hathaway achieved a new milestone — 50 years under Warren Buffet’s leadership. It is a record not only for being a CEO but also for value creation and philosophy. Buffet is known for his simple and understandable philosophies that help young people get on the right path when it comes to business, life and investment.

He runs the company together with long-time partner and friend, Charlie Munger. Today Charlie Munger, at 94 years old, is the vice chairman of Berkshire Hathaway, and his fortune exceeds $2 billion. Charlie is also the author of “Poor Charlie’s Almanack” and he is considered one of the greatest minds of the 20th century. His ideas and philosophy helped Buffet to take Berkshire to the next level and help it become what it is today.

Personally I admire the way Charlie and Buffet think and solve problems. Their company is still growing, because their internal philosophy almost never changed. Buffet and Munger laid foundational principles that anyone can apply to their business or life that will bring, as Munger says, “slow, but steady rise”. I believe everyone will get something for themselves from their knowledge. So let’s dive in.

Take full responsibility for your company

Munger and Buffet believe that a CEO must not delegate risk control. It’s just too important. At Berkshire, Buffet both initiates and monitors every derivative contract on their books. If Berkshire ever gets in trouble, it will be his fault. It will not be because of misjudgements made by a Risk Committee or Chief Risk Officer. Buffet said: “A Chief Risk Officer is an employee that makes you feel good while you do dumb things.”

You can afford to lose money — even a lot of money. But you can’t afford to lose reputation — even a shred of reputation

Measure everything you do in business and life not only against what is legal but also if you would be happy to have a front page article written by an unfriendly but intelligent reporter about what you did. Sometimes your associates will say “Everybody is doing this.” This way of thinking is almost always a bad one if it is the primary justification for a business or life decision.

Shortcomings of experience

To quote Robert Benchley “ Having a dog teaches a boy fidelity, perseverance, and to turn around three times before lying down.” These are the shortcomings of experience. Even so, it’s a good idea to review past mistakes before committing new ones.

Good jockeys will do well on good horses, but not on broken-down nags

When a management team with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the company that remains intact.

Don’t solve difficult problems, avoid them

“After 25 years of buying and supervising a great variety of businesses, Charlie and I have not learned how to solve challenging business problems. What we have learned is to avoid them. We have done better by avoiding dragons than by slaying them.” — Warren Buffet

Do not try to predict the future

Buffet once said in an interview that “Charlie and I not only don’t know today what our business will earn next year — we don’t even know what will earn next quarter. We are suspicious of those CEO’s who claim they do know the future — and we become downright incredulous if they consistently reach their target goals.” Managers that always promise to “make the numbers” will at some point be tempted to make up the numbers.

Boards and managers

The supreme irony of business management is that it is far easier for an inadequate CEO to keep his job than it is for an inadequate subordinate. If a secretary, say, is hired for a job that requires typing ability of at least 80 words a minute but she writes at 50 words a minute, she will be fired. Yet, if a CEO who doesn’t perform is frequently carried indefinitely. At too many companies, the boss shoots the arrow of managerial performance and then hurried paints the bullseye around the spot where it lands.

Assign for the brains and not only for conforming to social norms

The board of directors should be made out of ten or fewer people and ought to come mostly outside the company. The requisites for board membership should be business savvy, interest in the job, and owner-orientation. Too often, directors are selected merely because they are prominent or add diversity to the board. That practice is a mistake because it can take down an entire business.

Managers should talk the talk and walk the walk

H.H.Brown (shoe company) has one of the most unusual compensation systems. Some key managers are paid a salary $7,800 a year to which is added a designated percentage of the profits of the company after a charge for capital employed reduced from these. These managers genuinely stand in the shoes of the owner and walk the walk. This payment system has served both the company and its managers exceptionally well. Managers eager to bet on their abilities usually have plenty of capacity to bet on.

Go into business only with people whom you admire, like and trust

“We’ve never succeeded in making a good deal with a wrong person. An owner or an investor can do wonders if he manages to associate himself with such people in businesses that possess decent human qualities, worth admiring.” — Warren Buffet

At Berkshire, there has never been a master plan

Anyone who wanted to do it, they fired him because it takes on a life of its own and doesn’t cover new reality. They want people taking into account new information. Life is a dynamic place. Ever changing. Much like a battlefield, it changes rapidly, and no one has thought more about “master plans” being applied to a dynamic setting than Carl von Clausewitz, who wrote that battle “is a continuous interaction of opposites in which my opponent dictates to me as much as I dictate to him.” He also wrote that: “no war plan outlasts the first encounter with the enemy.”

Rules for a successful career

“Don’t sell anything you wouldn’t buy yourself; don’t work for anyone you don’t respect or admire, and work only with people you enjoy” — Munger. Work is our life, and one of the measures of living a productive life is enjoying what we do and who we spend time with. If we are miserable at work, even if we are making millions, it is a poor lived life.

Extreme specialisation is the way to succeed

Most people are way better of specialising than trying to understand the world. Charlie Munger once mentioned in an interview that, “specialisation protects us from the competition”. Why? Because it presents a barrier of entry to the competition. And the more difficult it is to become specialised the higher the barrier. If all we do is what everyone else does, we will spend our lives competing head-on with everyone else.

Avoid intense ideology because it cabbages up one’s mind

Charlie believes that youth is easily influenced and often becomes obsessed with an ideology. The obsession comes to a point that it is impossible to think of anything else or to see another side of an argument. Passion blinds young people to any rational thought process.

“I am getting more experienced at ageing. I am like the man who jumped off the skyscraper and at the 5h floor on the way down says, ‘So far this is not a bad ride.’”

Charlie has never taken a prostate exam because he doesn’t want to know if he has prostate cancer. He figures that since most men eventually have prostate problems, why worry? Nor does he worry about other things. That’s made for an almost stress-free life and may be the reason he is now pushing to 95.

All human beings work better when they get what psychologists call “reinforcement”

If you get constant rewards, even if you are Warren Buffet, you’ll respond. Learn from this and find out how to prosper by reinforcing the people who are close to you. The secret to getting friends is to be a friend. The secret to getting help when you need it is to give support to those in need. The secret to learning is to teach. The secret to getting people to excel is to reinforce their positive qualities. When Bono asked Buffet to help him in convincing the US Congress to assist his African aid project, Buffet advised him to appeal not to their sympathies but their greatness.

People who multitask pay a considerable price

Many people believe that when they multitask, they are super-productive. Charlie finds that if you don’t have time to think about something genuinely, you are giving your competitors, who are thinking deeply, a significant advantage. Munger’s ability to focus and think about something has been his competitive edge in beating Wall Street at its own game.

“Most men would rather die than think. Many have” — Bertrand Russel (quoted by Charlie)

In a fascinating digression, Munger pointed out that no one has ever found a way to teach, so all are wise. Munger rued that he has had great difficulty communicating even with his children. “It’s extraordinary how resistant some are to learning.” Buffet continued “especially when it is in their interest to do so.”

Improve your friends by reading biographies

To a question about what books to read, Munger replied that he is a biography nut. He recommended biographies as a way to “make friends among the eminent dead.” Buffet quipped, “And they don’t talk back.” Munger went on to say that biographies give you fabulous experience, extend your range and may even improve the quality of your friends. He noted that Golden Arches and The Big Store offer great lessons on business.

Most people underestimate how important good habits are

Munger added that it is critical to “avoid dumb stuff” like going to a race track, risking AIDS, experimenting with cocaine or getting into debt. He suggested developing good character and good mental habits and learning as you go. He warned that it is always tempting to spend more money than you make. Buffet also recommended hanging around people that are better than you. Buffet concluded with the story of a woman who turned 103 and was asked: “What do you like about being 103?” She responded, “No peer pressure.”

Envy is the least fun of the seven deadly sins because it leaves you feeling awful

Envy and jealousy are two out of the ten commandments. Those of you who have raised siblings you know about envy. Ever tried to run a law firm or investment bank or even a faculty? Then you know. Warren Buffet said many times “It’s not greed that drives the world, but envy.”

The best investment you can make

Buffet suggested that the best investment one can make is in oneself. He noted that few people get the most horsepower out of life. Potential exceeds realisation for so many. Keep learning over time. Or as Charlie said, “dedicate 1 hour a day to learning something new.” When Buffet speaks to students, he suggests they adopt the mindset of someone who is picking one car for the rest of their lives. How would they treat it? They would read the manual carefully, change the oil twice as often and clean up the rust spots. Well, each of us gets one mind and one body for life. How will you treat yours?

Keys to good health

Buffet joked that good health starts with a balanced diet: some Coca-Cola, some See’s Candy, some Wrigley’s gum and a Mars bar. (Berkshire owns stocks in all these companies). But speaking seriously, he noted the importance of a right mental attitude. To love what you do and do it with other people who love what they do. He also stated that he was lucky to find his passion so early in life. And getting the right spouse is essential. He told the story of the man who spent 20 years looking for the perfect woman before he finally found her. Unfortunately, she was looking for the ideal man.

Spend each day trying to be a little wiser than you were when you woke up

Discharge your duties faithfully and well. Systematically you get ahead, but not necessarily in fast spurts. Nevertheless, you build discipline by preparing for fast sprints. One inch at a time, day by day. At the end of the day — if you live long enough — most people get what they deserve.

Learning money lessons

Buffet noted that people do crazy things from time to time and it is not a function of IQ. You cannot change the madness of humanity. He emphasised how important it is to form good financial habits early on.

He noted that he and Charlie got lucky to grow up in households that taught them the basics of money. It is far more critical to understand the elementary lessons than the advanced ones.

Buffet also share some of his classic bits of wisdom about growing wealth:

  • Spend less than you make
  • Know and stay within your circle of competence
  • Don’t lose

Munger said that by following these 3 simple steps “you might rise slowly, but you are sure to rise”.

Advice for life

Asked about their theory of life, Munger said “Pragmatism! Do what suits your temperament. Do what works better with experience. Do what works and keep doing it. That’s the fundamental algorithm of life — REPEAT WHAT WORKS FOR YOU.” Buffet also recommended doing what turns you on. He’d never done anything well that he didn’t like to do.