The Buffett Formula: Going to Bed Smarter Than When You Woke Up

Most of us aspire to become better at what we do through a process of continuous improvement. But we also recognise it is easier said than done. So, here’s a timely revisit of the ‘why’ and ‘how’ of it from the folks at Farnam Street using the example of the best-known learning machines in the investment world – Warren Buffett and Charlie Munger.
The Buffett Formula, as they call it involves step number one as ‘Reading. A lot’.
“Warren Buffett says, “I just sit in my office and read all day.”

What does that mean? He estimates that he spends 80% of his working day reading and thinking.
…When asked how to get smarter, Buffett once held up stacks of paper and said, “Read 500 pages like this every week. That’s how knowledge builds up, like compound interest.”
Of course, it is not simply about endless reading. For the knowledge to assimilate, we need to apply critical thinking.
“You need to be critical and always thinking. You need to do the mental work required to hold an opinion.”
Quoting Buffett: “Look, my job is essentially just corralling more and more and more facts and information, and occasionally seeing whether that leads to some action.”
“…Munger sees his knowledge accumulation as an acquired, rather than natural, genius. And he’d give all the credit to the studying he does.
“Neither Warren nor I is smart enough to make the decisions with no time to think,” Munger once told a reporter. “We make actual decisions very rapidly, but that’s because we’ve spent so much time preparing ourselves by quietly sitting and reading and thinking.”
Whilst we all would love to read 500 pages a week, how do we motivate ourselves to do it after a tiring work day. It is so tempting to sink into the couch and browse Netflix or Twitter. Here’s Buffett talking about how Munger motivated himself:
“Charlie, as a very young lawyer, was probably getting $20 an hour. He thought to himself, “Who’s my most valuable client?” And he decided it was himself. So he decided to sell himself an hour each day. He did it early in the morning, working on these construction projects and real estate deals. Everybody should do this, be the client, and then work for other people, too, and sell yourself an hour a day.”