Buffett Way. And when I asked a client if they would like to invest in the same way, the answer was almost always yes, definitely! But as time passed, I discovered some investors who had chosen to invest like Warren were struggling. The gap between knowing why you own a stock and having the emotional wherewithal to withstand the push and pull of the market was, for many, too wide. I came to understand there was a big difference between knowing the path and walking the path.
But on that Saturday 30‐some years later, I finally realized what was needed to help people invest successfully had less to do with the investment tenets and much more to do with the right mindset. Although both Ben Graham and Warren had for years written about the importance of temperament, I had pushed aside that idea in favor of sharpening my pencil to figure out what a stock was worth. The harder it became for people to invest in the stock market, the more I sharpened my pencil. Then, on that Saturday morning I finally realized I had discounted the most important advice.
What does it mean to have a Money Mind? Exploring that question, and all its ramifications, is the goal of this book. We will accomplish this by starting at the beginning, where we find some early influencers that may surprise you. Example: Almost a decade before he first read The Intelligent Investor, 11‐year‐old Warren was intrigued by a book he found in the local public library. F. C. Minaker's One Thousand Ways to Make $1000 helped form his earliest ideas of a Money Mind. Example: The role and influence of Warren's father in shaping the underpinnings for Warren's investment philosophy has not often been addressed in writings about Warren. Example: We know that young Warren studied everything about finance and investing he could get his hands on, but he also began to incorporate the principles of rationalism and pragmatism, two precepts crucial to a true Money Mind.
Then, once he had acquired the basic building blocks of a Money Mind, how did Warren employ that mindset to successfully navigate the investment landscape these past 65 years? We will explore the ways others might incorporate those building blocks into their own mental framework, so that they ultimately become a person we can now call a Money Mind. And most importantly, we will show how such a person can best manage their portfolio in this new, fast‐paced, media‐frenzied world. Finally, armed with this knowledge, we will make the argument that those investors who work toward achieving a Money Mind will stand a much better chance of becoming successful.
Let me be clear. This is an entirely new book. It is not a new edition of The Warren Buffett Way. It is not an update of the second edition that 10 years later combined the Investment Strategies of the World's Greatest Investor with the portfolio management approach outlined in The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy. Neither is it similar to the third edition, which added an eight‐chapter investment workbook of questions, answers, and explanations meant to assess an understanding of the investment approach outlined by Warren Buffett. This is not a method book. It is a thinking book.
“Money Mind.” In his usual precise way, Warren gave us a memorable name for a complex notion. That easy‐to‐remember phrase describes, at one level, a way of thinking about major financial issues such as capital allocation. At another level, it summarizes an overall mindset for the modern business world. It identifies a person who has made a commitment to learning and stretching and facing down irrelevant noise. At a still deeper level, the profound philosophical and ethical constructs at its core tell us a great deal about the person we call a Money Mind, a person who is quite likely to be successful in many aspects of life—including investing. This Money Mind thing is a powerful idea. We should learn more about it.
CHAPTER 1 The Young Warren Buffett
Legends tend to accumulate around people who have accomplished something extraordinary in their lives. In particular, we seem to be fascinated with tidbits about their earliest years, wondering whether, if we look carefully, we could spot clues on how they became successful.
There are many popular stories that swirl around Warren Buffett, universally described as the world's greatest investor. You probably know most of them.
How at age six he set up a sidewalk table selling candy, gum, and soda pop. He bought a six‐pack of Coca‐Cola from his grandfather's grocery store for 25 cents and sold individual bottles for a nickel—a 20 percent return. The next year, he asked Santa Claus for a book about bonds. The year after that, he wanted more, so he began reading his father's books on the stock market. At age 11, he bought his first shares of stock. At age 17, he and a friend bought a used pinball machine for $25 and set it up in a neighborhood barber shop. With the proceeds, they bought two more machines. A year later, they sold the business for $1,200.
But there's one story you may not know, and it is quite possibly the most significant of all.
In 1941, 11‐year‐old Warren, browsing in the Benson branch of the Omaha Public Library, came across a distinguished‐looking book with a shiny silver cover—One Thousand Ways to Make $1000: Practical Suggestions, Based on Actual Experience, for Starting a Business of Your Own and Making Money in Your Spare Time by F.C. Minaker, published by the Dartnell Corporation in 1936. In the fashion of the time, Frances Mary Cowan Minaker used initials to disguise her gender.
Think about a young boy living in Omaha, Nebraska, in the 1940s. There were no televisions, no video games, no personal computers, no smartphones. Yes, there were radio programs and a rare Saturday afternoon movie at the downtown cinema. But for most people, including Warren, entertainment was reading—newspapers, magazines, and books.
Now imagine young Warren running home from the library, tightly clutching his new treasure, bursting into the house, plopping down in a chair, opening the book to page 1 and diving into a new world of how to make money—a world he had not yet fully understood or appreciated.
Minaker's book is long (408 pages) and comprehensive. In addition to hundreds of specific suggestions for new businesses, it offers clear, straightforward lessons on good salesmanship, advertising, merchandising, customer relations, and much more. It is filled with stories of people who turned a good idea into a good business, sometimes with stunning success.
Some of the names are familiar today.
There is the stirring story of James C. Penney, whose first job paid him a measly $2.27 a month. Penney combined his small grubstake with two other partners and opened the first J.C. Penney on April 14, 1902. That first year, store sales amounted to $28,891. James' share of the profits was a tad over $1,000.
Warren flipped another page and read the story of 23‐year‐old John Wanamaker, who persuaded his brother‐in‐law, Nathan Brown, to combine their piddling savings and open a gentleman's clothing store in their home town, Philadelphia. Before them lay the prospects of a national civil war. Behind them were the remnants of the 1857 banking depression that caused massive unemployment and the almost complete ruination of manufacturers and wholesalers. Undeterred, they opened the doors on April 27, 1861; eight years later Wanamaker & Brown was the largest men's retailer in the United States.
With daydreams mounting, Warren read on.
When he came to page 153, Warren must have broken out with a huge grin. Chapter 6 is all about starting a roadside business—something the young entrepreneur had already been doing for more than five years. Chapter 10 is filled with scores of ideas for service businesses, one of which involved placing coin‐operated pool tables in local stores and taverns. From our present‐day perspective, we can see a straight line from that story to Warren's pinball business six years
