Warren Buffett, one of the richest men in the world, is widely respected for his honesty and humility. He is also admired for the extraordinary decision he took on June 26, 2006, to give away 85 percent of his Berkshire Hathaway stock, which was worth $37 billion at the time. In retrospect, his miserliness can be seen as a supreme act of altruism. He denied himself and his family unnecessary expenses, investing the saved capital wisely to increase it and give it away, in the end, to the people who need it most.

Warren Buffett’s amazing success story has been compiled in a mammoth authorized biography, “The Snowball: Warren Buffett and The Business of Life”, written by Alice Schroeder, a Wall Street analyst and a managing director at Morgan Stanley. Buffett convinced her to write full-time and with his disarming humility asked her to use the less flattering version whenever his version differed from somebody else’s.

However, many of us simply do not have the time to read 976 pages and for this reason, “The Tao of Warren Buffett” constitutes a great compromise. This little book is not only concise and easy to read but it also gives us the key behind this billionaire’s phenomenal achievement.

The “Tao” refers to the way, or the principles which have guided Warren Buffett on his road to success. Mary Buffett was married during twelve years to Warren’s son Peter and David Clark was part of a group of students nicknamed “Buffettologists” who were devoted to the master investor’s wisdom long before most of the world outside Wall Street had heard of Warren Buffett.

Warren Buffett’s sayings are smart, wise, helpful and practical; they cover a wide range of topics including investing, business management, mistakes to avoid and the folly of greed to name but a few. Each aphorism is followed with a useful interpretation which opens the door for further exploration.

These “words of wisdom” reveal the life philosophy and the business strategies that have helped Warren Buffett become the world’s richest man. A key to his success has been his ability to stand alone and to stick to his own ideas even when they were not shared by the majority.

“My idea of a group decision is to look in the mirror”, says Buffett who learned at an early age to stand alone and think independently.

Warren Buffet chose to live in Omaha instead of New York City because there was less influence from Wall Street and he became known as “the sage of Omaha”. He bought Berkshire Hathaway, American Foods and American Express when no one was interested. If he had asked for advice at that time, he might have missed out on those lucrative deals.

For the same reasons, Buffett was weary of management advisers, lawyers, analysts and consultants. “Never ask a barber if you need a haircut” is another of his sayings. Whenever you ask an adviser if there is a problem, he will always come up with a problem even if there isn’t one! Or in other words when people are hired to fix problems they will always find problems. If a consultant does not have a problem to fix, he has no work to do or in other words: no reason to be hired.

Warren Buffett’s unusual business flair combined with a powerful and sound reasoning has given him a remarkable understanding of the market.

“I look for businesses in which I think I can predict what they’re going to look like in ten to fifteen year’s time. Take Wrigley’s chewing gum. I don’t think the Internet is going to change how people chew gum”

Here, Warren Buffett explains that consistent products equal consistent earnings. Coca Cola has been producing the same beverage for over a hundred years and Wrigley has been making the same chewing gum for a century too. When a product doesn’t have to change, you can reap all the benefits of not having to spend money on research and development, nor do you have to fall victim to fashion.

Warren Buffett also noticed how people never learn from their mistakes and this is evidently true for people investing in shares. Investors overpay for a business in the hope of making money on the short-term price movements. And then a sudden change in the market can cause stock prices to sink abysmally thus wiping out the investors who had paid the inflated prices. When prices soar, Warren Buffett stays away from the market; when the prices fall, Warren is in the mood to buy and on the lookout to find the right company at the right price.

Buffett also believes that it is not wise to invest in a multitude of stocks: “I can’t be involved in fifty or seventy-five things. That’s a Noah’s ark way of investing; you end up with a zoo that way. I like to put meaningful amounts of money in a few things”.

Warren Buffett put a meaningful amount of money into his chosen investments because he believed that in reality there are very few great investment ideas. In other words, you only have to make a few right decisions to make a fortune. And those who think they are making more than one brilliant investment a year are clearly deluding themselves.

Warren Buffett also stresses the importance of integrity. He has always given his managers a tremendous operational autonomy; they are free to run the business as if they are the owners but they have to be honest.

“In looking for someone to hire, you look for three qualities: integrity, intelligence, and energy. But the most important is integrity, because if they don’t have that, the other two qualities, intelligence and energy, are going to kill you”.

In 2003, during a meeting with students, Buffett was asked what had been his greatest success. He answered that if at his age, nobody thought well of you, no matter how big your bank account is, your life was a disaster: “Wouldn’t it be great if we could buy love for $1 million? But the only way to be loved is to be lovable. You always get back more than you give away. If you don’t give any, you won’t get any. There’s nobody I know who commands the love of others who doesn’t feel like a success. And I can’t imagine people who aren’t loved feel very successful”.

“The Tao of Warren Buffet” is a classic. It summarizes in a series of sayings Warren Buffet’s main ideas on business, investment, management, ethics, mistakes to avoid and the danger of greed to name but a few.

This gem of a book is not only meant for managers and investors but also for the public at large. You will discover a man who never abandoned his ethical principles and most of all a man who felt that the money he made was just “claim checks that should go back to society”.

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