Warren Buffett earned his place as a master of finance and business not only because of his massive success — his net worth sits at more than $100 billion — but because of his commitment to being a frugal, philanthropic and generous businessman.
After attending the University of Nebraska – Lincoln, Vinod Gupta was afforded the opportunity to get to know the renowned businessman in a personal context. It was through this relationship he learned a number of invaluable principles that ultimately lead him to his most recent endeavor, Infofree.com, a top sales leads service that helps small businesses and sales people grow their sales.
Below are two key lessons Vinod learned from Buffett and implemented in his own ventures that are essential to long-term success. Although these lessons are simple in theory, implementing them has proven to be a challenge for many business owners, investors and leaders.
A famous quote from Buffett reveals that his success comes down to a high level of discipline and patience, stating: “You can’t produce a baby in one month by getting nine women pregnant.” In business and investing, this means a good result cannot be rushed. In many facets of business, whether it’s general operations, negotiating an acquisition or future growth strategy, discipline is key.
Buffett’s lessons about discipline show how important it really is to take slow and measured steps and to take the time to consider each move carefully. In the context of acquisitions, he would often encourage others to be introspective. With this in mind, it’s important to ask oneself questions such as, “Why do I want this business?” “What are my intentions and goals for this business?” and “Does this business really have a viable future?”
According to a report from Harvard Business Review, the failure rate for mergers and acquisitions sits between 70 and 90 percent. Threequarters of acquisitions don’t work out and the reason why may be that many larger companies acquire other businesses purely for egotistical purposes. They consider themselves so large, innovative and untouchable that they expect to acquire a business and turn it into an even bigger success overnight. In reality, these bigger companies usually end up overpaying, try to rush in and change everything immediately and ultimately lower the value of the company.
From Vin’s own experience, this rush is illustrative of how essential discipline is in the context of acquisitions and takeovers, as well as general investing. Buffett teaches us that you should only consider investing in or acquiring a business if you believe in every part of it — from the end-product offering to the way business is conducted. Don’t buy into a fixer-upper, instead buy a company you believe in and exercise discipline by moving slowly and incentivizing the improvement of existing teams and structures.
Philanthropy, Integrity and Honesty
Company leaders like Vinod have a lot of responsibility to do the right thing and some key knowledge Buffett has imparted is the weight of that responsibility. They have the power to negatively impact people’s livelihoods and lifestyles and have wider negative impacts on the environment and planet. However, if they operate in the same way Buffett teaches us, with integrity and honesty, they also have the power to do good and positively impact everyone and everything the business touches.
A key example of a business that lacks integrity and honesty is Purdue Pharma, which is largely responsible for the ongoing opioid epidemic affecting the United States. The company put profit over people with horrible consequences, as the opioid overdose rate rose from under 10,000 in 1999 to more than 90,000 in 2020. This epidemic is something that has touched Vinod personally — in 2011, his son Benjamin passed away due to a lethal combination of opioid painkillers and alcohol. If Purdue Pharma had operated with integrity and honesty, it’s likely that Benjamin and many others lost to this epidemic would still be with us.
Buffett’s lessons on integrity and honesty even extended to the way in which a business should rectify a potentially damaging situation. In 2014, Buffett discovered that his business, Berkshire Hathaway, had neglected to file the necessary paperwork regarding a stock deal that was boosting its stake in building products company USG Corp. Instead of covering it up and hoping it would go away, he worked with regulators to rectify the issue. This example of honesty and integrity, no matter the size or apparent “power” of a business, is something Vinod continues to learn from in each of his ventures.
Although Buffett’s story isn’t necessarily one about the journey from absolute poverty to vast wealth, Vinod believes a key reason why he has garnered many admirers is his focus on philanthropy. This is shown in the way he treats his children, who are only receiving a small fraction of his net worth, approximately $2 billion each, which is allocated to foundations they run, not as play money for themselves. The remaining amount is being divided among a group of non-profit and other charitable organizations.
While the principles of discipline, honesty, integrity and philanthropy may be simple in theory, the implementation in practice has been the downfall of many. However, if we look at Warren Buffett as a clear example of a person who can be both successful and ethical and model our own business and investment strategies in line with his principles, it’s possible to achieve the same level of success with a clear conscience.