Warren Buffett: The Life-long Learner

Everybody knows Buffett compounded money. Far fewer notice what he compounded first, and for far longer: knowledge. The fortune is the visible half of a habit that began in a public library and never once stopped.

By the age of ten, Warren Buffett had read every book in the Omaha Public Library with the word finance in the title — several of them twice. As a young man he worked through the Moody’s manuals of industrials, transportation, banks and finance the same way, page by page, some twenty thousand pages of small print about companies almost nobody had heard of. He was not cramming for anything. There was no exam, no employer asking. He simply wanted to know what was in there.

That is the whole story, really. Everything else — the letters, the jokes, the record — grows out of a man who found businesses genuinely interesting and never got over it.

“It builds up, like compound interest”

Around 2000, Buffett spoke to an investing class at Columbia. He held up a stack of reports and trade publications and told the students: “Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest.” One student, Todd Combs, took it literally — began counting his pages each day, later reached a thousand a day, and some years afterwards was hired to invest money at Berkshire Hathaway. (The quotation reaches us through Combs’s own recollection of that class, which is worth saying plainly; he is, at least, the best possible witness to whether the advice worked.)

Buffett has estimated that he spends something like 80 percent of his working day reading. Charlie Munger put the same point with less charity and more force: “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time. None. Zero.”

The fact that ought to stop you

Reading a great deal proves nothing on its own; plenty of people read constantly and think exactly what they thought thirty years ago. What makes Buffett remarkable is that the reading kept changing him. Munger, who watched it happen from the next chair for fifty years, said it about as directly as it can be said:

“Warren is one of the best learning machines on this earth — and Warren’s investing skills have markedly increased since he turned 65. Having watched the whole process, I can report that if he had stopped with what he knew at earlier points, the record would be a pale shadow of what it is.”
— Charlie Munger, on how Berkshire became so unusually successful

Read that again slowly. A man widely regarded as the finest investor alive was still getting better at his craft after sixty-five. Not maintaining. Improving. Whatever age you are reading this, the runway is longer than you have been told.

He had to unlearn his own teacher

The clearest evidence sits in the record itself. Buffett began as a strict disciple of Benjamin Graham, hunting what he cheerfully called cigar butts: sad, cheap companies with one free puff left in them. It worked, and he might have done it forever.

Then in 1972 Berkshire paid $25 million for See’s Candies, a business carrying only about $8 million of net tangible assets — roughly three times book value, which to a Graham purist was close to heresy. Munger had been arguing for years that a wonderful business at a fair price beats a fair business at a wonderful price. See’s proved it: over the following decades it threw off billions in pre-tax earnings while needing almost no new capital to do it, because people will pay up for a box of See’s and will not accept a substitute at Christmas.

What Buffett learned from that one purchase — that a brand and pricing power can be worth more than a balance sheet full of assets — redirected the next fifty years of Berkshire. He could only learn it by being willing to be wrong about something his own mentor had taught him. That is the hardest form of learning there is, and it is available to anyone prepared to hold their opinions a little more loosely than their curiosity.

Why this makes life more interesting, not just richer

Here is the part that rarely gets said, and it matters more than the returns. Learning to understand businesses quietly rearranges how the ordinary world looks.

Consider the idea Buffett made famous. In his 2007 letter he wrote that “a truly great business must have an enduring ‘moat’ that protects excellent returns on invested capital,” because “the dynamics of capitalism guarantee that competitors will repeatedly assault any business ‘castle’ that is earning high returns.” The moat might be being the low-cost producer, as with GEICO or Costco, or a brand people ask for by name, as with Coca-Cola or American Express.

Once that idea is in your head you cannot switch it off, and this is the pleasure of it. Why can the coffee shop on the corner raise its prices every year while the one across the road cannot? Why does one airline seat cost what it costs? Why do you keep paying a subscription you never chose to renew? Why has that unglamorous company nobody discusses at parties earned 25 percent on its capital for two decades without a single exciting product? A walk down an ordinary high street stops being scenery and becomes a series of small, answerable puzzles — and the answers are genuinely interesting whether or not you ever buy a share.

This is also why the learning never runs out. Understanding businesses draws on almost everything: history, psychology, engineering, accident and luck, how people actually behave rather than how they say they behave. Buffett paired it with the discipline he called the circle of competence — you need not understand everything, only know honestly where the edge of your understanding lies. That is a liberating rule rather than a limiting one. It means learning can be unhurried and enjoyable instead of anxious, and that the circle can be widened, one business at a time, for as long as you find it fun.

The Shrewd insight: The returns are the by-product. The reward that arrives first, and lasts longest, is that the world becomes legible — and a legible world is a far more interesting place to spend a life.

What the research says about the habit

None of this is merely sentimental. Curiosity turns out to be a mechanism, and a measurable one.

In a 2014 study published in Neuron, Matthias Gruber, Bernard Gelman and Charan Ranganath scanned people while they waited to learn the answers to trivia questions. When a person was curious about an answer they remembered it far better — which is unsurprising. What was surprising is that they also better remembered unrelated material that happened to appear while they were in that curious state, and the effect held a day later. Activity rose in the midbrain and nucleus accumbens, the brain’s reward circuitry. Curiosity, in other words, does not merely make learning pleasant; it puts the mind into a state where everything nearby sticks better.

The wellbeing evidence points the same way. Todd Kashdan and Michael Steger, publishing in Motivation and Emotion (2007), had people report on themselves daily for three weeks. On the days they were more curious, they undertook more growth-oriented activity, reported more meaning in life and higher life satisfaction — and the sense of meaning carried over into the following day. Curiosity did not just accompany a good day; it appeared to build one.

Put the two findings beside Munger’s remark about a man improving after sixty-five and you have the case for this entire site in three sentences. Learning compounds. It feels good while it compounds. And there is no age at which the arithmetic stops working.

The teaching is the overflow

Buffett is rightly loved as a teacher — sixty years of letters written in plain words, with a joke and a Cherry Coke, no jargon and nothing for sale. But the teaching is not the source. It is what spills over the sides of a mind that will not stop chewing on ideas and cannot quite believe other people do not want to hear about them too.

Ask him for one book and the answer has never changed in seventy years: Benjamin Graham’s The Intelligent Investor, which he calls “by far the best book on investing ever written” and which he read at nineteen. He has been pressing it into other people’s hands ever since — not because he wants students, but because he is still, at heart, the boy who found something wonderful in the library and wants to show you the good bit. Explaining a thing is also the fastest way to discover the holes in your own understanding of it, which is one more reason the habit sustains itself.

It is exactly the atmosphere the Shrewd boards were built for: people who read for the pleasure of it, then write up what they found because keeping it to themselves would be no fun at all.

Which brings us to the arithmetic that all this patient learning is aimed at — the one force that rewards a long attention span almost unfairly. Not proportionally: unfairly. Wait twice as long and you are not twice as rich, you can be twenty times as rich, and Buffett has a single image that makes the reason unforgettable.