Warren Buffett is a familiar figure for most small business owners. Whether they’ve devoured his biography looking for tips, or caught any of his frequent appearances on stages and screens worldwide with everyone from Bill Gates to Jay-Z, the Sage of Omaha’s story is a well-known one.
Buffet isn’t solely responsible for the incredible results of Berkshire Hathaway. He credits a huge part of his overall success to his long-time partner Charlie Munger – a less visibly public figure, but one who’s something of a legend in savvy business circles.
Munger has kept a relatively low profile over the years, but when he speaks it’s always worth listening. We’ve pulled out four of his core teachings for you to enjoy, each of them a timeless lesson for entrepreneurs.
- Steer Clear Of Stupid
Munger famously attributes a large portion of his long-term success to simply avoiding obvious mistakes along the way. As he memorably summed up, “We’ve done a lot of stupid things but we’ve avoided a small subset of stupidity and that subset is important. It’s about avoiding the dumb things.”
This sounds like an obvious point, but consider the amount of entrepreneurs you probably know who’ve failed to heed that advice and taken decisions in the heat of the moment which were obviously doomed to failure in hindsight.
- Always Factor In Psychology
Though Munger’s world is defined by numbers and percentages, he’s always insisted that a basic understanding of psychological principles lies at the core of much of his best work. A clear grasp of popular cognitive biases, for example, will give you a substantially more solid handle on your own behaviour and that of others, and help you to steer clear of many avoidable issues in your wider business life.
- Build A Moat
The incredible returns delivered by Berkshire Hathaway over the years have come from companies with very defendable market positions. In fact, having a clearly identifiable “moat” is one of the key criteria Buffett and Munger use to weigh up investment opportunities. Regardless of the size of your company currently, you should be actively looking to put as much clear blue water between yourself and your competitors as possible.
- Know Who You’re Selling To
Munger’s approach to sales is best summed up in a fishing story he is fond of telling: I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, “My God, they’re purple and green. Do fish really take these lures?” And he said, “Mister, I don’t sell to fish.”
Are you and your sales team currently trying to sell to fish when anglers are standing there ready to give you money? It’s a question worth pondering.
The four points we’ve covered are just the tip of the iceberg when it comes to the lessons Charlie Munger can teach you. Make it a point to dig into his writings and speeches a little deeper and you’ll be treated to a treasure trove of widely applicable wisdom that you can use to steer your business towards sustainable success.