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It is known that Warren Buffett and Bill Gates are two of the most successful men in the world. In 1998, Buffett gave a lecture alongside Gates at the University of Washington, where they shared how important forming good habits early is to their current success.
Buffett’s company, Berkshire Hathaway, consistently outperforms the S&P 500 in returns. For example, Berkshire Hathaway’s compound annual gains over the past 60 years have been 19.9%, which is nearly double the S&P 500’s annual return of 10.4% in the same period, according to the company’s 2024 annual report.(1)
Gates co-founded Microsoft in 1975 with his friends, believing that chip technology would allow everyone to have a computer at home one day, and now we cannot imagine our lives without a computer in our pockets all the time.
It’s no surprise that their advice to students from decades ago still resonates with investors today.
Buffett was clear in his advice: IQ doesn’t matter as much as you think it does when it comes to success.
“Everyone in this room has enough IQ to do my job,” Buffett said. “The important thing is rationality. I always look at IQ and talent as a kind of representation of the power of the engine.”
In other words, you can be the smartest, most talented person in the room, but if your habits are bad, you won’t get far:
“In terms of output — the efficiency with which the engine runs — it comes down to rationality because a lot of people start with 400-horsepower engines and get 100 horsepower out of the output. It’s better to have a 200-horsepower engine and get it all in the output.”
Buffett reiterated that anyone in the room could achieve what he has in their career, but some won’t “because you’re going to get in your own way — it won’t be because the world doesn’t allow you to — it will be because you don’t allow yourself to.”
Suggest that students look around the room and find the peer they respect most, and write down the qualities they really admire in that person.
He then suggested doing the opposite, i.e. finding the person they “can tolerate least in the whole group” and writing down the qualities that bother them in that person.
Once you know what those good qualities are, you can build powerful habits that push those qualities forward within you, and get rid of the bad qualities within you that remind you of the person you don’t want to imitate. This is how you convert all your horsepower into output.
“So I suggest you just look at the habits that you like in other people, or the behavior that you admire in other people, and make those your own,” Buffett said.
If Buffett is the investor you most admire, it may be wise to emulate his investing habits.
Buffett’s favorite retail investing tip is to invest as early and as often as possible in a simple, low-cost index fund like the S&P 500, and hold on to it. (2) But many people find it difficult to start investing, as they may sometimes feel that you need to save a lot of money before you start.
In fact, even small investments can pay off thanks to compounding, so starting with a small amount of money each month can change the course of your retirement.
Platforms like Walnut It can make investing easy by automatically rounding the purchase price to the nearest dollar and investing the extra change.
For example, if you buy lunch for $15.30, Acorns will round up the amount to $16.00 and invest the 70 cents difference for you. Over the course of a year, all that extra change can add up to a significant amount of money invested.
As Buffett famously said: “Price is what you pay, and value is what you get,” and this is an important principle to keep in mind when evaluating which companies are worth investing in. (3)
If you’re looking to manage your investments yourself, researching price versus value can be time-consuming when there are thousands of companies you may want to invest in.
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When Buffett handed the audience over to Bill Gates, he agreed that strong habits built early were the key to Microsoft’s success.
He talked about an early vision he and friends had, which was to come together as a team and see what kind of tool the “Information Age” could be.
“By pursuing this with incredible focus, and being there at the beginning of the industry, we were able to build a company that played a very central role in what was a very big revolution,” Gates said.
At that time, in 1998, computers were beginning to enter homes, but they were not yet as ubiquitous as Gates had hoped they would be when he started Microsoft in 1975.
He continued: “Fortunately, the revolution is still at the beginning.” “It was 23 years ago when we started the company, but there’s no doubt that taking the habits we’ve formed and sticking to those — which will be hard to change — the next 23 years will give us a lot of potential and probably get us a lot closer to that original vision, which was a computer on every desk and in every home.”
His dream of having a computer on every desk and in every home was realized long before 2021.
His good habits have not only made computers the tool around which our lives now revolve, but have also made him incredibly wealthy. Bill Gates was the richest man in the world for many years, although he recently dropped to 15th on that list. (4)
His investing habits are no secret.
Gates invests heavily in real estate, with huge properties in Seattle and Florida, as well as an island off the coast of Belize, according to Investopedia. (5)
If you want to invest in real estate like Gates does, receipt It can help you enter the home sharing market.
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Gates is also known to invest in fine arts. Over the years, he purchased many valuable pieces, including Andrew Wyeth’s “Distant Thunder” for $7 million, Winslow Homer’s “Lost on The Grand Banks” for $36 million, George Bellow’s “Polo Crowd” for $28 million, and William Merritt Chase’s “The Nursery” for $10 million, and Frederick Childe Hassam’s “Room of Flowers” for $20 million, based on the same. Investopedia report. (5)
While the price of investing in fine art is inaccessible to the average investor, Masterpieces It changes that by allowing investors to buy partial shares of the works of artists like Picasso and Banksy.
Masterworks handles the process of finding, purchasing and storing the artwork for you.
When Masterworks sells the painting, you make a profit. Typically, this can take between three and ten years, but you can sell your shares yourself on the secondary market before then.
Through 23 exits to date, Masterworks investors have achieved representative net annualized returns of +17.6%, +17.8% and +21.5% among assets held longer than one year.
