WARREN BUFFET- A MODEL FOR HIS BILLIONAIRE PEERS

By Moksha Grover

Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway.  Born in Omaha, Nebraska in 1930, Buffet is 91 years old. He is one of the most successful investors of all time and a model for his ultra-rich peers. Buffet also runs Berkshire Hathaway, which owns above 60 companies, including insurer Geico, battery maker Duracell and restaurant chain Dairy Queen.  He has a net worth of over $104.4 billion as of August 2021, making him the world’s ninth-wealthiest person[1].  “If you don’t find a way to make money while you sleep, you will work until you die” is a famous quote said by Warren Edward Buffet.

EARLY LIFE AND CAREER

Warren Buffet displayed his interest in business and investing at a very young age. At age seven, he was inspired for investing in the book “One Thousand Ways to make $1000”. Much of buffets childhood was filled with business ventures. He sold chewing gum, Coca-Cola bottles, and weekly magazines door to door. When in high school, he made money delivering newspapers, selling golf balls and stamps etc. As a sophomore, with one of his friends, he established a large paper route and invested in pinball machines. They are stationed in barber shops and split their profits with the shop owners. They started their business with just $25 and sold their business later for $1200. Buffet also bought 40 acres of Nebraska farmland, by age 15 with the proceeds from earlier business ventures[2].

After completing his graduate degree from Columbia University, Buffett worked for the investment legend Benjamin Graham, in New York City. He considered Benjamin Graham as his mentor and was inspired by him a lot. After Graham retired from his business, buffett went back to his hometown and started running a series of successful hedge funds, known as the Buffett Partnerships.

In late1960s, Buffet closed down his original investment business and took over Berkshire Hathaway, a struggling textile maker. He decided to close his business when he saw the stock market being overvalued and made Berkshire Hathaway his primary business activity. Over the decades, with the help of buffet, Berkshire Hathaway turned into a conglomerate with annual sales of $245 billion[3]. It has a market capitalization of $654 billion and employs roughly 360,000 people through its many subsidiaries[4]. With the rise in the value of Berkshire’s stock, many people became rich. Buffet declared employee Greg Abel as his successor, keeping in mind his age-related health risks and long-term, interests. Although buffet has not retired or declared his intention to retire from Berkshire Hathaway. Its shares gained about 25% in the first eight months of 2021[5].

Image source: IndiaStudyChannel.com

LIVING LIFE ON HIS OWN TERMS

Buffet got much of his philosophy from his father, Howard Buffet, who was an American businessman, investor, and politician. He describes this philosophy as trying to “keep up with the Joneses.”. This means that he enjoys living up his life on his own terms and doesn’t care about what others think of him.

Talking about buffet’s personal life, Although, Buffet is a Democrat, he has still voted and donated to both democrats and republicans. He has also described himself as an ‘agnostic ‘person. His late wife and the foundation named after her that he has funded, the Susan Thompson Buffett Foundation, were and are substantial supporters of reproductive rights organisations that favour access to legal abortions. Warren Buffet married Susan in 1952, who spent her later years in San Francisco. He spent more than 20 years considering himself to be happily married to Susan. After his first wife’s 2004 death, Buffett married another woman named Astrid Menks, who lived in Omaha, at the same time in a small and informal ceremony.

WARREN BUFFET’S CHARITY

Warren Buffet became the founder of ‘The Giving Pledge along with Bill and Melinda French Gates. The Giving Pledge is a campaign to encourage extremely wealthy people to contribute a majority of their wealth to philanthropic causes. Buffet also pledged that more than 99% of his wealth will go to philanthropy, either during his lifetime or at his death[6]. He could have started his own charitable foundation but has contributed his money to five foundations run by others.  Until 2021, he served Bill & Melinda Gates Foundation as a trustee and poured most of his charitable money into the foundation.

Buffet says that he has given very little money to his three children Howard Graham Buffett, Peter Buffett and Susan Alice Buffett, who themselves are millionaires and own hundreds of millions of dollars for the foundations they each run. For example, he’s one of corporate America’s strongest proponents of women in business. He mentored Tracy Britt Cool for more than a decade as she rose from a financial assistant to CEO of Pampered Chef, a Berkshire subsidiary. Later, she started her own private equity firm, modelled after Berkshire, with Buffett’s support.

Buffet also shared his knowledge of the financial markets and the economy in 1977 and conducted annual shareholder meetings.[7] His annual shareholder meetings, known as “Woodstock for capitalists” is akin to a Disney vacation for thousands of families each year. Buffett also voluntarily met with scores of college students for decades about eight times a year for a Q&A session and tour of his businesses[8]. Buffet has given more than $4.1 billion to charity[9].

BUFFET’S RULE

Buffet recently admitted that he pays tax less than his secretary. The reason behind this, he told is a system from which he has benefitted a lot. This system lets billionaires pay very low tax bills, partly because it taxes income instead of wealth. For years he advocated for the so-called “Buffett Rule,” a minimum 30% tax on those making more than $1 million a year to remedy the problem[10]. Rich pay less tax when they deduct it from what they have donated to charities is a fact, also recognized by the buffet.

 For his rules on business, Buffet is a very sensible investor. He only invests in those companies which he has thoroughly researched and understands. Buffett personally lost about $23 billion in the financial crisis of 2008, and his company, Berkshire Hathaway, lost its revered AAA rating[11]. The most important quality, as defined by buffet for an investor is temperament, not intellect. For a successful investor, being with or against the crowd is not the centre of attraction.

Buffet was inspired a lot by the book “The Intelligent Investor” by Benjamin Graham as it inspired and convinced him to invest in stocks. With the help of this book, he got to know that investing in stocks is equal to owning a piece of the business. So, when Buffet searches for stock to invest in, he always prefers the business that exhibits favourable long-term prospects. Buffet never buys anything unless he can write a particular reason to pay a particular price for that shares of the company and advises all the investors to do the same.

“Leave the children enough so that they can do anything but not enough that they can do nothing” is a famous quote said by buffet to wealthy families for charitable purposes.


[1] John M.Longo, ‘Why Warren Buffett Is a Model for His Billionaire Peers’, The Wire (August 30,2021) < https://thewire.in/business/why-warren-buffett-is-a-model-for-his-billionaire-peers> accessed 30th August 2021.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Ibid.

[7] Ibid.

[8] Ibid.

[9] Ibid.

[10] Ibid.

[11] Stephanie Loiacono,’ Rules That Warren Buffett Lives By’, Investopedia (Jan 12,2021) < https://www.investopedia.com/financial-edge/0210/rules-that-warren-buffett-lives-by.aspx> accessed 30th August,2021.

Big 5 Personality Traits

The Big Five personality traits is a proposed scientific classification, or gathering, for personality characteristics, created from the 1980s forward in psychological trait theory. At the point when factor analysis (a statistical technique) is applied to personality survey data, it uncovers semantic affiliations, which are words used to portray parts of character. These affiliations are regularly applied to a similar individual. For instance, somebody portrayed as conscientious is bound to be depicted as “arranged all of the time” rather than “untidy”. These affiliations recommend five broad aspects utilized in like manner language to portray the human personality, demeanor and psyche.

It is essential to take note of that every one of the five character factors addresses a range between two limits. For instance, extraversion addresses a continuum between extreme extraversion and extreme introversion. In reality, a many people lie some place in the middle of the two ends of each dimension.

The Big 5 personality traits are described below:

Openness

Characteristics like inventiveness and insight are present in this trait. 1 People that score well on this attribute also have a diverse set of interests. They are curious about the world and other people, and they are ready to learn new things and participate in new activities.

People with a high level of this personality trait are more daring and inventive. People that score low on this feature tend to be more traditional and may have difficulty thinking abstractly.

Conscientiousness

High degrees of thinking, good impulse control, and goal-directed behaviours are all common characteristics of this dimension. People that are highly conscientious are usually well-organized and detail-oriented. They think ahead, consider how their actions influence others, and keep track of deadlines.

Extraversion

Excitability, friendliness, talkativeness, assertiveness, and high levels of emotional expressiveness are all characteristics of extraversion (or extroversion).  People with a high level of extraversion are gregarious and thrive in social circumstances. They become invigorated and delighted when they are in the company of others.

People with low extraversion (or introversion) are more restrained in social situations and have less energy to exert. Introverts frequently require a period of solitude and silence to “recharge” after attending social activities.

Agreeableness

Trust, benevolence, friendliness, affection, and other prosocial actions are included in this personality characteristic. People with a high level of agreeableness are more cooperative, whereas those with a low level of agreeableness are more competitive and even manipulative.

Neuroticism

Sadness, moodiness, and emotional instability are all characteristics of neuroticism. Mood fluctuations, anxiety, impatience, and sorrow are common in those who score high on this attribute. Those who score low on this attribute are more emotionally stable and resilient.

Designing the Buyer Centric Funnel

In these industrial times, all the companies want to bait their customers, in fact for a much longer time than just one visit or purchase. This leads to continuous, relentless competition in the markets for the purpose of bagging more and more loyal customers. This is where the use of a Sales Funnel enters the talk. But is it possible to keep your customers devoted to your product without a well-designed, blockage-free funnel? The answer is ‘no’.  A sales funnel signifies the path which is taken by a customer from being just an explorer of your product to being a loyal customer for a long time. Through this article, we will go into depths of a customer’s psychology and get some insights on how to design a “buyer centric-funnel”.

Understanding the Funnel

The requirement of an effective method for better sales of a company’s product cannot be dismissed, keeping in view of the increase in a feud for loyal customers in the market. Also, with the coming up of e-commerce sites, grabbing a customer’s attention will be the predominant field to work upon, for the sellers. 

  1. Awareness- This is the key point that should be kept in mind while designing the funnel. Awareness does most of the work when it comes to putting the customer in a phase of scrutiny. To start with, we need to put forward a problem in front of the customer and provide a promising solution for the latter to build up the curiosity. At this stage, we wouldn’t mention our product to the customer.
  2. Consideration- Here, we need our customer to get so intimate with the product that he/she starts knowing about it like the back of his/her hand. We need to give out demos, free trials, triggers and customer stories to the customer to build up their trust in our firm because, to sell to a customer, you have to barge into the thought process of a customer.
  3. Purchase- Now you have to sell the product to your buyer and assure your product stands out from the products of all your competitors.
  1. Get into your buyer’s head- That’s where the whole concept of ‘Understanding the buyer’s psychology’ comes in. We need to ask ourselves questions like “What inspires them to buy our product?”, “How can our product be a solution to their problems?”, “How can we redesign our product to fit their needs?” and work on the answers to these questions.
  2. Slogans- Through close study, we come to a conclusion that firms with good slogans are doing better off in the market. The slogans and advertisements of these firms draw customers by getting stuck inside their brains.
  3.  Quality Maintenance- The quality of your product and extended benefits to loyal customers also gives your firm a new standing among the competitors. We also need to carefully appraise the field where our product fails to deliver and redesign it with wit.

Flipping the Sales Funnel refers to the process of retaining the loyal customers of the firm to gain new customers. Some firms in the market tend to forget its old customers in search of a bigger reach and new customers which lead to the degradation of the firm’s reputation in the market.

To gain ground, we need to build new customers on top of the old ones which can be done by referrals of the consumers to one another. Referral and reputation go and hand in hand. In fact, referrals are the leading intermediary stage for building a good reputation for the firm. According to a survey, 92% of people trust referrals from people they know.

We also need to adapt to the new rules of the market and focus more on redesigning products according to the wants of our targets for our technique to be successful. Rewarding the everlasting customers will be a plus point to this.

The design of a proper sales funnel is the most crucial part for the firm and should be done with patience and sheer determination through proper study and fact consideration, for the firm to leave its mark in this market race.

“The best sales questions have your expertise wrapped into them.”

-Jill Konrat