Focus on positioning and preparation rather than attempting to predict the future, as many things are unpredictable. Build resilience, adaptability, and durability into your strategies and assets to ensure long-term effectiveness.
Apply the principle of inversion by identifying potential causes of failure and actively working to avoid them, rather than solely focusing on achieving success. This helps prevent catastrophic outcomes and ensures progress over time.
View financial risk primarily as the potential permanent loss of capital and, more broadly, the loss of financial independence. Structure your investments and financial planning to preserve dignity and autonomy.
Engage in continuous reading and maintain an active sense of curiosity to broaden your knowledge and understanding across various domains. This practice helps you see more nuance and complexity in people and situations.
Engage in writing not just for external output, but for the internal learning and discipline it provides, as the process itself is valuable. Avoid outsourcing critical thinking and writing, as it can lead to a false sense of intelligence and an inability to see risks.
Model happiness and contentment for your children, as they are likely to imitate your lifestyle and values. Understand that parental influence, rather than wealth itself, is the primary factor in how children develop.
Be disciplined about not starting down a path of escalating luxury and consumption, even if it seems appealing, to avoid its potential negative consequences. Choose experiences and environments that are sustainable and affordable for future generations.
Invest in businesses that demonstrate resilience, adaptability, pricing power, low debt, global durability, and sufficient cash reserves for reinvention, especially in uncertain times. This strategy helps navigate unpredictable economic environments.
Maintain a significant cash reserve (e.g., 15-40%) in your portfolio, even if it seems suboptimal in efficient markets, as an insurance policy for future opportunities and stability. This provides flexibility during crises.
Reduce your spending to not only save more but also to lower your future consumption expectations, which significantly benefits long-term financial planning and independence. This is a powerful lever for financial well-being.
Structure your environment and routines to counteract personal weaknesses (e.g., ADD) and ensure that necessary but undesirable tasks get completed. For example, physically going to an office can enhance focus.
Use self-manipulation by linking a desired reward (e.g., a sauna) to a task you’d rather avoid (e.g., exercise) to motivate yourself to complete the task. This makes undesirable activities more palatable.
Practice moderation with potentially destructive habits like alcohol consumption by tracking intake (e.g., a weekly journal) to prevent it from getting out of hand. Use smaller portions and consider low-alcohol alternatives.
Cultivate a long-term focus in decision-making, recognizing that extended tenure in leadership often correlates with greater success and stability. Make decisions with a multi-generational perspective.
Foster trust and candor in high-stakes environments (like corporate boards) by creating informal, directors-only dinners before formal meetings to discuss real issues and build relationships. Smaller groups tend to foster more honest discussions.
Carefully choose friends and colleagues who complement your strengths and weaknesses, helping you to avoid pitfalls and improve. Surround yourself with people you deeply respect and don’t want to disappoint, as this motivates better performance.
Foster financial literacy within your household, teaching concepts like savings, interest rates, and compounding from a young age. Encourage summer jobs to instill a work ethic and financial independence.
Start each day with a mindset of gratitude and joy, appreciating the present moment and not taking current happiness for granted. This helps you savor life before circumstances potentially change.
Adopt the ‘work before play’ principle to ensure important tasks are completed before indulging in leisure activities. This simple rule can be a powerful motivator for productivity.
Take all potential health risks seriously, even seemingly minor ones like a bat bite, and seek appropriate medical attention to avoid severe consequences.
Identify unmet needs or inconveniences in your community as opportunities to start a service and earn money, as demonstrated by the dog walking service during the pooper scooper law.
Learn to frame complex information, such as business concepts or scientific principles, as engaging stories to enhance understanding and make them more memorable, similar to how biographies can inspire interest in STEM.
Seek out information formats that allow for serendipitous discovery (like traditional newspapers) rather than relying solely on curated or scrolling digital feeds, to broaden your perspective.
Recognize that each crisis is unique and requires a tailored approach, rather than applying past solutions blindly, to navigate challenges effectively.
Align your financial decisions with your long-term goals (e.g., retirement, college) rather than succumbing to professional incentives that might prioritize relative performance over absolute wealth creation.
Resist the temptation to use excessive leverage, even if it could theoretically boost returns, if it compromises your core values of risk aversion and stability.
Shift from a ‘free capital’ mindset (assuming easy bailouts and continuous growth) to a more realistic mindset that acknowledges the repricing of capital and emerging market cracks.
Re-evaluate traditional investments like fixed income and real estate, especially in current economic conditions, if their risk-adjusted returns don’t compensate for the risks.
Be wary of investment strategies (like some private equity) that prioritize short-term exits, as this can conflict with long-term value creation and stability.
Consider securities lending as a way to earn additional income (e.g., 1-2% annually) from appreciated stock holdings, especially for in-demand shares like Berkshire Hathaway.
Practice ‘intelligent loss of sales’ by strategically deterring undesirable customers (e.g., through membership requirements) to improve the quality of your customer base and reduce costs like fraud.
Identify and target customer segments with inherently lower risk profiles (e.g., military officers for USAA) to offer better pricing and reduce fraud costs, as this creates a more reliable customer base.
Prioritize being the best in your field over being the biggest, even if it means strategically turning away clients or opportunities that don’t align with your values or goals.
Be aware that in some professions, the most profitable clients may be those who operate unethically, and consider if this aligns with your personal values.
Use physical gestures or reminders (like kneeling to pray, wearing a tie, having a bust of an admired figure) to influence your mindset and reinforce desired behaviors or values.
Dress conventionally to manage perceptions, allowing others to assume you are more conventional than you might be, which can serve your interests by reducing preconceived notions.
When borrowing money, reassure creditors of your trustworthiness by consistently paying interest a day early and actively demonstrating industriousness, as advised by Ben Franklin.
Study and understand common pitfalls (e.g., group decisions, conformity, over-diversification, inertia) that lead to underperformance, and actively avoid them to achieve above-average results.
Instead of solely focusing on improving weaknesses, sometimes the most effective strategy is to strengthen other areas to avoid encountering those weaknesses in the first place, as exemplified by Tiger Woods.
Carefully choose friends and colleagues who complement your strengths and weaknesses, helping you to avoid pitfalls and improve.
Be mindful of the decision to open a second bottle or continue drinking, as this is often the point where moderation is lost and problems can begin.
Set clear expectations for adult children regarding employment and living at home (e.g., three months without a job) to foster independence.
Expose children to diverse travel experiences, including less luxurious ones, to foster flexibility and adaptability, even if it means personal discomfort.
Offer children a choice between a luxury experience (e.g., business class) and a cash equivalent to teach them about value and trade-offs, allowing them to make informed decisions.
Prioritize experiences that foster genuine connection and engagement over isolated luxury, as connection is what people truly crave and often leads to greater satisfaction.
Avoid intentionally creating hardship for children to ‘build character,’ as forced suffering can be counterproductive and lead to resentment, as seen in some wealthy families’ attempts.
View suffering as an opportunity to demonstrate resilience and behave well, adopting a stoic perspective when faced with adversity.
Foster a work environment where you genuinely love and are curious about your colleagues, as this contributes to job satisfaction and a positive life experience.
Continuously strive to have the best team, even if it means gradual turnover, ensuring individuals are in roles where they can succeed and contribute meaningfully.
If talented individuals are not succeeding, consider if they are in the wrong job and help them find a role that better aligns with their strengths, as this benefits both the individual and the organization.
Adapt parent-child relationships as children mature, transitioning from a parental role to one of a supportive peer who cares and admires, rather than trying to parent adult children.
Understand the critical role of a board in preventing the ruin of a company, even if it cannot solely create greatness, by focusing on governance and strategic oversight.
Be aware of the potential for misalignment between personal investment strategies (buy and hold) and fund management rules (diversification, rebalancing), which can lead to suboptimal personal outcomes due to tax inefficiencies.
Define success by envisioning your own funeral and considering what you would want people to say about your life, then live backward from that vision to align your actions with your values.
Prioritize your life’s commitments and relationships in concentric circles, starting with broader responsibilities (e.g., work, community) and moving inward to immediate family and spouse, ensuring peace and alignment at each level.