What Makes Warren Buffett Successful?

Mr. Buffett has explained it by acknowledging that he is “wired” in such a way that makes him very adept at capital allocation. This might be a disconcerting notion to some as it implies that you either have it or you don’t.

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But what is “it” anyway? To me, it is a combination of an array of characteristics, some very learnable, some less so. The learnable ones are characteristics every CFA charterholder probably has. These are things like strong analytical skills as well as simply a good knowledge of the financial markets. That is not especially hard to replicate. Moreover, with tens of thousands of CFAs in the world you would expect a few more Buffetts were this all it takes.

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It is the less-learnable characteristics that set Buffett apart and this is where watching Warren Buffett the person may help the most. People who have spent time with Mr. Buffett notice two things. For starters, he reads – constantly. Sometimes he can spend his entire day reading, and it’s not just for pleasure. He reads because he is hungry for information that will make him a more successful businessman. Very few people have the drive Warren Buffett has.

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Easy enough right? You are probably thinking, “Well if all I have to do to become a billionaire is read all the time then sign me up for the value investor’s book club.” Not so fast. A lot of people read a lot. The difference is Buffett’s memory. Not only does he read but he remembers everything he reads. Folks familiar with the man know how tremendous his memory is. Very few people have the memory Warren Buffett has.

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The most important less-learnable characteristic Buffett possesses, though, is very uncommon. It is emotional discipline. By this I mean the ability to resist the natural human instincts of fear, greed, pride, regret and all the other irrational biases to which people are inherently inclined to succumb. I have been trying myself to master these biases for years and, let me tell you, it is tough. Even once an investor is cognizant of these biases he may find it extremely difficult to control them. I can’t let myself buy because stocks are going up (greed) or sell because they are going down (fear). I have to base my decisions entirely on an unbiased assessment of the underlying business. This is far easier said than done.