I Got RICH When I Understood THIS — Warren Buffett

When I was 11, I picked stocks. I had the whole wrong idea. I was interested in watching stocks and I thought stocks were things that went up and down and I charted them. I read books on technical analysis. I read Edwards and McGee. I think that was the classic then. Hundreds and hundreds of pages. And I read that whole thing over and over again. I read everything. And I thought the first eight years, I thought the important thing was to predict what a stock would do and predict the stock market. And then I read Ben Graham, you know, when I was 19 or 20. And I realized that I was doing it exactly the wrong way, but it didn't hurt that I had that background and everything. And I rejiggered my mind. And when I read the book, Intelligent Investor, from that point, I never bought another stock. I bought businesses that happened to be publicly traded, but I became an owner of a business. And I did not care whether a stock went up or down the next day or the next week or the next month or the next year. And I didn't have any idea what it would do. I didn't know what the stock market would do, but I knew businesses. I'm a bright guy who's terribly interested in what he does. I've spent a lifetime doing it. I've surrounded myself with people that bring out the best in me. And you don't need to be a genius in what I do. That's the good thing about it. If I went into physics and a whole lot of other subjects, I'd be an also rat. But I am in a game that you probably need 120 points of IQ, you know, but 170 doesn't do any better than 120. It may do worse, probably do worse, but you don't really need brains. What do you need? You need the right orientation. You know, 90% of the people, I'm putting a figure out of the air, but 90% of the people that buy stocks don't think of them the right way. They think about something they hope goes up next week. And they think about the market as something they hope goes up. And if it's down, they feel worse. I feel better. And you think about? I think about what the company is going to be worth 10 or 20 years from now. And I hope it goes down when I buy it, because I'll buy more. I try to keep my competitive spirit in a game where I can win. I do know this. When I want to do something, I always want to do it big. I put my whole net worth in city service preferred, $114.75. And I've never since that day, in March 11, 1942, I have never had less than 80% of my money in American business. You can call them stocks. Or equities. But I see them as American business. I've owned a piece of American business. At least 80% at all times. I just, I don't want to own anything else. I want to own a home and things my family wants and all that. But owning five homes doesn't mean anything to me because I'm going to be happy in one home. And there's a certain amount of things that go wrong with everything. And if I got two homes, I know I've got more problems and I don't have more happiness. What brings you the happiness? What makes me happiest is what I'm doing, what I'm doing. I enjoy two things about it. One, I know I'll win over time. That doesn't mean I'll beat everybody else or anything like that. But I mean, the game is very, very, very easy if you have the right lessons in your mind about what you're buying. I'm not buying stocks. I'm buying pieces of overwhelmingly American business. And I'm happy when I'm doing it. I'm happier when stocks are going down because I can buy more of them with the same amount of money. I'd be happy if I were as a farmer, I'd want farmland to go down so I could buy more acreage. It just makes sense. I'll tell you the second thing I really like. I like being trusted by people. I would rather do what I do with partners than do it sitting in a room myself, even though I might make more money that way. Let's pretend there is no stock market. Let's say I had to buy these privately, like you buy a farm privately, like you buy an apartment house private. They're investments. So you're looking to say, what can I do with the money I've saved to put it away so I feel good about getting it back later under any circumstances, but not necessarily on a given moment. But if I have a farm, it's going to take me a while. But people would be so much better if they actually didn't have a stock market in terms of buying businesses. United States economy, and it's very easy to look at the statistics on it. I mean, more people, a greater percentage of the American population is wealthy now or having more income now than they've ever had. And if you look at whether Bank of America would give you their average deposit, I mean, you just look at the wealth. That doesn't mean everybody's wealthy, but it does mean relative to any other period of time. I mean, people have more money now. They get mortgages at lower rates than they've ever gotten. So if they want to buy a house or something right today, you live in an environment where the bottom 2% in terms of income in the United States, the bottom 5% and for sure the top 1% all live better than John D. Rockefeller was living when I was six years old. John D. Rockefeller was the richest man in the world. And today you can get better medicine, better education, better entertainment, better transportation. You can do everything better than he could. It's astounding. That's in my lifetime. If he wanted to watch a football game, he still had to go there. And I can sit there with this big screen and they keep showing me the replay. So they're explaining to me what happened. And maybe everybody doesn't have a screen as big as mine, but damn near everybody has a screen or an iPhone or a computer or access to one. And they have access. When I was born, the dentist didn't use Novocaine. So there has been progress, obviously, and nowhere more than in the United States. There's no country that's done what our country's done. If you go back three of my lifetimes, you're looking at less than 1% of the world's population, closer to half of 1% are sitting in this land. They don't work harder than people in all the rest of the world. I mean, in terms of hours of unpleasant labor, everybody's got hours of unpleasant labor in those days, practically. They don't come laden with gold. And they are half of 1%. And they work the same hours. They got the same IQs. They may be a little self-selected in terms of enterprise, in terms of going across oceans and things. And fast forward a couple of lifetimes, and they've got 20% plus of all the bounty in the world. I mean, that is something that has worked like nothing. Just imagine that. If you've gone to anybody, Constitutional Congress, in 1789, if you go to any one of the representatives there, and you said, I want to tell you what this place is going to look like in three more of your lifetimes, your great-great-grandchildren are going to be flying in the skies. They're going to be watching sports all over the world. They're going to be entertained. They're going to hold you off to a lunatic society of what he's doing. He's getting 50 cars, and he's getting a whole bunch of little claim checks. Just think of it. When Thomas Edison did all the things he did, he made some money. But we're using it. It belongs to us. If you take what an hour of labor delivered to you 100 years ago, and what an hour of labor delivers to you now for you and your family, it's unbelievable. Capitalism doesn't just say, get rid of a referee and a government. We've got a government that can tell capitalism what to do. And they do. And that's just what they should do. And they do it in different ways, at different times, and all kinds of things. But it's claim checks on future output. The claim checks belong to me. So if I want to buy 50 superyachts, I can do it. But what does it mean to me? It can buy more things for other people that are useful to them. It's not evil. The federal government is the boss in the end. And they shouldn't screw up capitalism. And capitalism shouldn't screw up the federal government. It's very simple. It's evolving, always. We started in 1789. We had business. And it's gotten far, far, far, unbelievably more productive for people. And the only thing it can do with what it produces is give it to other people. It isn't like the 50 richest guys in the country can say, I'm just going to eat everything. They're turning out products. I have, which I'm probably the least capable guy in the world of working with it. But it makes life better. But that comes with government. So far, we've got the best system. We've got a better system than we used to have. And we'll have a better system 50 years from now. Why are you so sure? Well, I've seen 91 years of it. I've never seen a period where I didn't believe that. Not every aspect. We can go backwards in something. No, it's not. But it's unbelievable what has happened. I mean, just think of it. You know, we've had a civil war. We've had a Great Depression. We've had all these things. Pandemics. Yeah, I'll guarantee you, we'll have something, you know, next year, and the year after, and the year after. But in a herky-jerky, but dramatic matter, business moves forward, government moves forward, more important, people move forward. I mean, I am happy to tell people the same thing I've told them before, but they'll never get the message, most of them, but a few do, that the most, you know, best thing to do, if you want to invest for the long term- Is index. And it's the S&P 500 index. And what's happened, of course, is that organizations like to grow. So they set up indexes on different industries, different countries. And as soon as you do that, you're violating, basically, what Jack Bogle said. He says, you don't know enough to pick the right businesses, which means you don't know enough to pick the right countries, the right, you know enough.