"The Buffett Formula- How To Get Smarter" - Farnam Street blog
How to get smarter
Read. A lot.
Warren Buffett says, “I just sit in my office and read all day.” What does that mean? He estimates that he spends 80% of his working day reading and thinking.
“You could hardly find a partnership in which two people settle on reading more hours of the day than in ours,” Charlie Munger commented.
When asked how to get smarter, Buffett once held up stacks of paper and said “read 500 pages like this every day. That’s how knowledge builds up, like compound interest.”
All of us can build our knowledge but most of us won’t put in the effort.
One person who took Buffett’s advice, Todd Combs, now works for the legendary investor. He took Buffett’s advice seriously and started keeping track of what he read and how many pages he was reading.
The Omaha World-Herald writes:
Eventually finding and reading productive material became second nature, a habit. As he began his investing career, he would read even more, hitting 600, 750, even 1,000 pages a day.
Combs discovered that Buffett’s formula worked, giving him more knowledge that helped him with what became his primary job — seeking the truth about potential investments.
But how you read matters too.
You need to be critical and always thinking. You need to do the mental work required to hold an opinion.
In Working tougher: Why Great Partnerships Succeed Buffett comments to author Michael Eisner:
Look, my job is essentially just corralling more and more and more facts and information, and occasionally seeing whether that leads to some action. And Charlie—his children call him a book with legs.