Tag: Dwight D. Eisenhower

Warren Buffett on Scorecards, Investing, Friends, and the Family Motto

Farnam Street

This website is named after a street located in Omaha, Nebraska. An amazing place, Omaha is famous for being the home of Warren Buffett, one of the world's richest men. The headquarters of Berkshire Hathaway — and his house — just happen to be on “Farnam Street.” The name of this website is an homage to both Buffett and his business partner Charlie Munger.

While Buffett is famous for his investing acumen, he's also full of sage wisdom on life and living.

In October 2009, while the housing crisis was still in full effect, his authorized biography The Snowball: Warren Buffett and the Business of Life hit the shelves.

Here are some of his lessons on life and investing.

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Three Early Lessons in Investing

Having bought three shares of Cities Service Preferred at the age of 11, Buffett learned a valuable lesson. After the stock plunged from $38.25 to $27 a share. His sister Doris reminded him daily on the way to school that her stock was going down. Buffett felt “terribly” responsible. When the stock recovered he sold with a slight $5 profit. Almost immediately after, Cities Service quickly soared to $202 a share.

Warren learned three lessons and would call this episode one of the most important of his life. One lesson was not to overly fixate on what he had paid for a stock. The second was not to rush unthinkingly to grab a small profit. He learned these two lessons by brooding over the $ 492 he would have made had he been more patient. It had taken five years of work, since he was six years old, to save the $ 120 to buy this stock. Based on how much he currently made from selling golf balls or peddling popcorn and peanuts at the ballpark, he realized that it could take years to earn back the profit he had “lost.” He would never, never, never forget this mistake. And there was a third lesson, which was about investing other people’s money. If he made a mistake, it might get somebody upset at him. So he didn’t want to have responsibility for anyone else’s money unless he was sure he could succeed.

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The Scorecard

This is an important one to keep in mind. If we place too much emphasis on what the world thinks, we end up with an outer scorecard.

I feel like I’m on my back, and there’s the Sistine Chapel, and I’m painting away. I like it when people say, ‘Gee, that’s a pretty good-looking painting.’ But it’s my painting, and when somebody says, ‘Why don’t you use more red instead of blue?’ Good-bye. It’s my painting. And I don’t care what they sell it for. The painting itself will never be finished. That’s one of the great things about it.

The big question about how people behave is whether they’ve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard. I always pose it this way. I say: ‘Lookit. Would you rather be the world’s greatest lover, but have everyone think you’re the world’s worst lover? Or would you rather be the world’s worst lover but have everyone think you’re the world’s greatest lover?’ Now, that’s an interesting question.

This has implications if you're a parent: What you put emphasis on matters.

If all the emphasis is on what the world’s going to think about you, forgetting about how you really behave, you’ll wind up with an Outer Scorecard.

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Hang Around People Better Than You

After graduating from Columbia University, Buffett returned to Omaha to live with his parents. He spent part of that first summer fulfilling his obligation to the National Guard. While he wasn't a natural, it sure beat going off to fight in Korea. Part of his duties in the guard required him to attend training camp in La Crosse, Wisconsin, for a few weeks. That experience taught him an incredible lesson that he'd carry forward for the rest of his life.

“It’s a very democratic organization. I mean, what you do outside doesn’t mean much. To fit in, all you had to do was be willing to read comic books. About an hour after I got there, I was reading comic books. Everybody else was reading comic books, why shouldn’t I? My vocabulary shrank to about four words, and you can guess what they were.

“I learned that it pays to hang around with people better than you are, because you will float upward a little bit. And if you hang around with people that behave worse than you , pretty soon you’ll start sliding down the pole. It just works that way.”

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The Buffett Family Motto

As simple as it is powerful.

“Spend less than you make” could, in fact, have been the Buffett family motto, if accompanied by its corollary, “Don’t go into debt.”

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On Why he Wanted Money

Even when he was little he was always fixated on money. He wanted money. Why?

“It could make me independent. Then I could do what I wanted to do with my life. And the biggest thing I wanted to do was work for myself . I didn’t want other people directing me. The idea of doing what I wanted to do every day was important to me.”

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Principles

In July of 1952, Susie Buffett, having been married only a few months to Warren, went to Chicago with her parents and new in-laws for the Republican convention. The convention was covered on television for the first time in history. Warren, who stayed in Omaha, watched eagerly — “struck by the power of this medium to magnify and influence events.”

The front-runner was Senator Robert Taft, known as “Mr. Integrity.” He wanted three things: (1) small government; (2) pro-business; and (3) eradicate Communism. Taft's friend and Warren's father, Howard Buffett, was the head of his presidential campaign. Taft's main opponent was the moderate and popular war hero General Dwight D. Eisenhower.

While it might have been the first convention covered by television it still lives in the history books as one of the most controversial Republican conventions. Eisenhower backers pushed through a controversial amendment to the rules that handed him the nomination on the first ballot. Taft and his supporters were, of course, outraged.

But Eisenhower soon made peace with them by promising to combat “creeping socialism.” Taft insisted that his followers swallow their outrage and vote for Eisenhower for the sake of regaining the White House. The Republicans united behind him and his running mate, Richard Nixon; “I Like Ike” buttons sprouted everywhere. Everywhere, that is, except on Howard Buffett’s chest. He broke with the party by refusing to endorse Eisenhower.

This was an act of political suicide. His support within the party evaporated overnight. He was left standing on principle— alone. Warren recognized that his father had “painted himself into a corner.” From his earliest childhood, Warren had always tried to avoid broken promises, burned bridges, and confrontation. Now Howard’s struggles branded three principles even deeper into his son: that allies are essential; that commitments are so sacred that by nature they should be rare; and that grandstanding rarely gets anything done.

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Still Curious?

While reading about Buffett won't make you as smart as he is, you might learn something in the process. Pick up a copy of The Snowball: Warren Buffett and the Business of Life and give it a shot.

Master Productivity and Eliminate Noise Using the Eisenhower Matrix

Dwight Eisenhower wasn't only the 34th President of the United States. Before that, he was a five-star general in the Army, responsible for command of the Allied Forces in Europe during World War II. He was also the Supreme Commander of NATO and President of Columbia University.

In other words, he was incredibly accomplished.

“The most urgent decisions are rarely the most important ones.”

—Dwight Eisenhower

Eisenhower's productivity is legendary not only because of his accomplishments but also because his methods stood the test of time and worked in various situations. Through various roles and environments, Eisenhower delivered with remarkable consistency for decades.

The Eisenhower Matrix is his best-known technique. It's a simple decision-making tool that you can draw on a napkin and start using today.

The Eisenhower Matrix

The Eisenhower Matrix has four parts, which you use to categorize the work in front of you:

  1. Important, but not urgent
  2. Urgent and important
  3. Urgent but not important
  4. Not important and not urgent

If you think about it for a second, you realize that the Eisenhower Matrix can help you not only with prioritizing what you work on today, but also with deciding which big projects to work on. The matrix helps you distinguish between what is important and what is urgent.

The Eisenhower Matrix

The Difference Between Urgent and Important

Whenever something lands on your desk, begin by breaking it down and deciding how to proceed.

The key to making the Eisenhower Matrix work is distinguishing between the urgent and the important.

Urgent tasks are time sensitive, sometimes because we have put them off until we can't anymore. These tasks can be anything from responding to emails and returning phone calls, to realizing that you're almost out of gas and have a report due in 20 minutes.

If we've put off doing an urgent task that's also important, then when we finally tackle it, we're probably not going to think about it as much as we had intended to or as much as we should. We're setting ourselves up to make poor decisions.

Whether or not they used to be important, urgent tasks cause us to be reactive. We're stressed. We're full of anxiety. As a result, we're rarely thinking optimally. Rushing through things often causes poor decisions that reverberate into the future, destroying our future productivity. We have to spend large amounts of time fixing problems that were caused because we were reactive and rushed.

Important tasks are more strategic. They are things we want to get done, such as launching a new product. These tasks are deliberate. We want to pay attention to them and they mean something to us. Rather than being reactive and irrational, we can, with the right planning, be thoughtful and engaged. Because we're not reactive, we can avoid mistakes. This will free up future time.

“Being busy is a form of laziness — lazy thinking and indiscriminate action.”

—Tim Ferriss

The default for most of us is to focus on what's urgent and important. It's only natural that we'd want to focus on the things that need to be dealt with immediately. In so doing, we tend to crowd out things that are important but not urgent.

Ask yourself when you're going to deal with things that are important but not urgent. Ask yourself why you're avoiding what's important but not urgent. Are you scared of something? Are you procrastinating? Are you too distracted?

The Eisenhower Matrix in Practice

I use this matrix routinely as part of my productivity system. It's helped me stay focused on where I want to go and not get too bogged down in things that don't add much value.

The conventional wisdom is that you should immediately do tasks that are both urgent and important, schedule time to do tasks that are important but not urgent, delegate tasks that are urgent but not important, and do the not-important and not-urgent tasks later.

In practice, I use the tool differently. For instance, the bar to become a task on my radar is higher. Non-important and non-urgent tasks often get dropped.

Important and non-urgent tasks are scheduled.

Important and urgent tasks are worked on right away or scheduled, and are always evaluated. While I can't plan for everything, when things get piled up here, it's often because of a breakdown in the system — something went wrong.

The urgent and not-important tasks are usually, though not always, delegated.

Delegation is a bit of a tricky subject for knowledge workers. As a member of the Board of Directors for several companies, I generally advocate that companies never outsource their core businesses. Among other things, doing so makes you dependent on the goodwill and competence of others. You become fragile.

So, while I delegate a lot of the not-important, not-urgent tasks, I keep the ones that are part of my core business.

Footnotes