7 Secrets of Warren Buffett’s Success (as per Charlie Munger)

In the 2008 shareholder meeting of Wesco Financial, a shareholder asked Charlie Munger to describe what caused Warren Buffett’s success.

“His success…is a lollapalooza,” Munger replied – a confluence of factors moving in the same direction.

Munger outlined the following seven key factors which combined together to cause Buffett’s success –

  1. Mental aptitude (Being seriously smart)
  2. Having great interest in the subject (“It’s very hard to succeed in something unless you take the first step – which is to become very interested in it.” ~ Sir William Osler)
  3. Early start (If something takes a long time to achieve, you better start early)
  4. Being a learning machine (Keep learning and learning)
  5. Reinforcement (Human beings work well if they get reinforcement – constant rewards for doing well, which drives you to do more of the same)
  6. Being correctly trusted by people
  7. Avoiding envy, jealousy, self-pity, vengeance, and extreme ideology

“I think there are lessons in it,” said Munger on these seven ideas that caused Buffett’s success. “I think that almost anybody can draw those lessons from Warren’s achievement at Berkshire.”

One more aspect of Berkshire’s and Buffett’s success, which both Buffett and Munger have mentioned at various times is that they have a had a temperamental advantage.

As Munger told investors at the 2014 DJCO meeting –

Warren and I know better than most people what we know and what we don’t know. That’s even better than having a lot of extra IQ points.

People chronically misappraise the limits of their own knowledge; that’s one of the most basic parts of human nature. Knowing the edge of your circle of competence is one of the most difficult things for a human being to do.

Knowing what you don’t know is much more useful in life and business than being brilliant.

Well, I have nothing to add.

Note: This post is an extract of my detailed note on “How to Succeed in Life and Investing” that formed part of the May 2015 issue of the Value Investing Almanack Special Report. To read the complete issue plus the archives, please subscribe here.

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