Warren Buffett, famously called the “Oracle of Omaha,” is not only the world’s greatest investor, he is a lifelong student of prudence in finance. His life is a well of enduring wisdom for anyone who aspires to achieve long-term profits. The Economic Times recently enumerated five rules from Buffett’s personal experience, and if analysed in terms of Indian as well as international case studies, these rules acquire fresh importance in times of uncertain business operations faced by today’s investor.

Buffett’s first lesson was from reinvestment of profits. He and a friend purchased a pinball machine in high school and installed it in a barbershop. Instead of collecting the meagre profits, they reinvested in a few more machines and then a few more, till they had eight installed throughout town. This small action demonstrated the astounding power of compounding. Albert Einstein once called compound interest the “eighth wonder of the world,” a fact that those who understand it thrive, and those who don’t pay the price. The same philosophy has inspired Indian corporate leaders like N. R. Narayana Murthy, who reinvested Infosys’s initial profits in setting out technology infrastructure, constructing a platform upon which a global IT titan was built. Around the world, Jeff Bezos refrained from hoarding profits in early Amazon in favour of reinvesting all of it in infrastructure and new initiatives like cloud computing. That act facilitated Amazon’s transformation into one of history’s most valuable companies. For the small investor, that is a lesson to start early, preferably through regular investments in mutual funds, index funds, or in gold bonds, and let time do its miracle in multiplying gains.

Equally important is Buffett’s need to be different. When he started his partnership in investments in 1956, he had mustered only $100,000 from a few, select investors. He never disclosed where he was investing their money, nor did he move to Wall Street, then and now the financial center of the United States. Working from Omaha, he was greeted sceptically by most who predicted disaster. But fourteen years later, there was a fund in over $100 million. His popular dictum, “Be greedy when others are fearful and fearful when others are greedy” is a reflection of this contrarian behaviour. Indian investor tales are no different, most prominently being that of Rakesh Jhunjhunwala’s bold bet in Titan Company when no one thought it could do wonders. Around the world, Buffett himself gave a classic example during the 2008 financial crisis when he invested in Goldman Sachs and General Electric when others were fleeing from the market. Independent thinking aided by research is normally what separates great things from averageness.

Buffett also appreciates keeping a close eye over tiny expenses. He has never thought poorly of managers fanatical over minuscule costs. He once praised a businessman who went to counting sheets of paper to ensure people weren’t wastng any, and another who painted that side of his building exposed to the road. These may sound ridiculous, but Buffett knew that tiny leaks have a tendency to sink great ships. What Mahatma Gandhi said was, “A small leak can sink a great ship.”In India, Dhirubhai Ambani of Reliance Industries was no less mythical for his operational thriftiness, such that every rupee was optimized for value creation. Across the globe, Southwest Airlines under Herb Kelleher constructed decades of profitability by obsessively managing its costs, such that it even standardized its fleet on a lone airplane type to simplify operations. For households, it means keeping tabs over unnecessary subscriptions, moderating lifestyle inflation, and appreciating that tiny recurring expenses have a tendency to erode longer-term savings.  

Another tenet of Buffett’s philosophy is disdain for debt. He has personally stated that he never resorted to enormous loans, either in personal life or in investments. Many have, he argues, written to him concerning how they believed things would go if only they borrowed, only to founder under interest payments. Buffett is famously quoted as stating, “If you’re smart, you don’t need debt; if you’re dumb, you have no business using it.” India’s 2008 real estate bubble painfully demonstrated this maxim. Developers who over-borrowed during boom periods went bankrupt when times changed, and developers who borrowed modestly survived. Around the globe, in 2010, a Greek debt crisis demonstrated how entire countries could tear themselves apart over unsustainable debts. For individuals, repaying high-interest loans like credit cards prior to investments, as well as keeping home loan payments in sensible limits, is crucial in attaining financial independence.

The most valuable of Buffett’s lessons is probably patience. In 1983, he acquired Nebraska Furniture Mart from Rose Blumkin, a Russian immigrant who through a lifetime of toil and imagination developed the furniture store into North America’s largest furniture retailer. He was a fan of her grit, highlighting how long-term successes so frequently stem from virtues that are normal in principle yet rare in practice. The Bhagavad Gita extols patience, calling upon you to have a right to action, not a right to outcomes of action. The history of Indian business has similar lessons. Tata Motors’ acquisition of Jaguar Land Rover was received sceptically, but slowly and surely, operations were refocused and went on to successfully globalize the brand. Around the world, Steve Jobs’ victory was not overnight, as he battled for decades of dogged innovation and determination, bringing about a revolution in the iPhone. Steve once remarked, “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.” Investor amateurs, too, must learn that in marketplaces, stability is paid, and panic selling destroys wealth.

If seen collectively, Buffett’s five rules create a direction guide for finance management and investments. Returning earnings to reinvestment lets compounding perform its silent wonders. Independent thinking keeps investors from being carried away by herd mentality. Monitoring expenses allows wealth to be saved and not squandered. Debt avoidance keeps people fiscally flexible, and developing patience lets things work out in the longer run. All these rules are not meant only for billionaires, but are no less applicable to a young professional in Bengaluru who is starting off her very first systematic investment programme or a retired person in Mumbai who is protecting their savings.  As Buffett instructed, “The stock market is a device for transferring money from the impatient to the patient.” Within Indian culture, wisdom about patience may be found in this ancient Sanskrit saying, “Dharyam Sarvatra Sadhanam” – patience is a means of accomplishment in all walks of life. Financial independence, accordingly, is not a result of shortcuts or fads. It is built over time, through discipline, stickiness, and prudent choices, as Warren Buffett has shown to the world.

Dr. Prahlada N.B
MBBS (JJMMC), MS (PGIMER, Chandigarh). 
MBA in Healthcare & Hospital Management (BITS, Pilani), 
Postgraduate Certificate in Technology Leadership and Innovation (MIT, USA)
Executive Programme in Strategic Management (IIM, Lucknow)
Senior Management Programme in Healthcare Management (IIM, Kozhikode)
Advanced Certificate in AI for Digital Health and Imaging Program (IISc, Bengaluru). 

Senior Professor and former Head, 
Department of ENT-Head & Neck Surgery, Skull Base Surgery, Cochlear Implant Surgery. 
Basaveshwara Medical College & Hospital, Chitradurga, Karnataka, India. 

My Vision: I don’t want to be a genius.  I want to be a person with a bundle of experience. 

My Mission: Help others achieve their life’s objectives in my presence or absence!

My Values:  Creating value for others. 

Source reference: The Economic Times – “5 rules from Warren Buffett’s own life experiences you should follow, if you want to create long-term wealth.”

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