Three Questions from a Small Town Billionaire
It sounds like the set-up from the latest Hillbilly reality television show.
The star of the show likes to drink Coca-Cola, play bridge, eat See’s candies, is buddies with a talking British lizard, and has lived in the same modest house in the same Midwestern city for over forty years.
Dull Dynasty or The Real Boring Billionaires of Omaha is what it might be called, if you were to have a reality show about Warren Buffet.
That’s the way it seems on the surface. Deep down, of course, it’s much different. There’s a lot going on in his razor sharp mind, even as he and his equally intelligent business partner, Charlie Munger, advance into their 80’s.
Shares of his company are worth almost $200,000 a piece. And while he didn’t beat the market last year – but who did? – Warren Buffet and Berkshire Hathaway continue to roll on like an 18-wheeler across the Midwestern plains on a clear spring day.
This May, thousands of Buffet-fanatics (Warren, not Jimmy) will trek to his annual meeting to ask the Oracle of Omaha a stupid question. What? Most of them probably ARE stupid questions, at least to him.
Fortunately, Warren once asked me three smart questions that led to one of my greatest investments. These questions made me a lot of money and have saved me a lot of trouble. So let’s share them with you…
Years ago I read a book that took all the stress out of investing.
The book was called, “The Winning Investment Habits of Warren Buffet and George Soros“, by Mark Tier (a friend of my friend, Tim Staermose).
This book struck a nerve with me, and I wrote down their 23 investment priorities and 12 criteria of a good investment, and for several months I reviewed one each morning during my “Daily Documents” readings.
But what really mattered most was the simple “Circle of Competence” that Buffet and Soros use to guide what they invest in.
All you have to do is ask yourself 3 questions.
1. What are you interested in?
2. What do you know now?
3. What would you like to know about and are willing to learn?
First, I answered those questions about stocks.
Am I interested in them? – Kind of.
Do I know anything about them now? – Not a bit.
Am I willing to learn about them? – Well, in theory, yes. But as my bookshelf will tell you, in practice, no. In the past 10 years I’ve ordered more than ten books on investing, and I’ve yet to even crack one open.
Listen, if I were to do my own investing, I’d be the guy that bought at the top and sold at the bottom.
I’d get fleeced.
But, when I answer those questions about other business opportunities, I was quickly reminded of where I should invest my money (and time and energy).
1. What are you interested in? – Information publishing.
2. What do you know now? – Quite a bit.
3. What would you like to know about and are willing to learn? – I live for this stuff.
My passion for information publishing (online and offline) lined up with Buffet’s obsession with stocks.
In fact, one of Buffet’s 23 investment priorities is, “Live and breath investing 24 hours a day“.
A few other ones on the list I liked are:
– Love what you do, not what you own
– It’s not about the money
– Create unique investment philosophy
– Focus on after-tax ROI
– Invest in what you UNDERSTAND (emphasis mine)
– Refuse investments outside your criteria
– Passionately avoid risk
To Buffet, investing is NOT a risk, because he is an expert in it. He lives it, and lives for it.
The best analogy in my life is information publishing.
And so that is what I’ve decided to invest in – information publishing.
In the past year I’ve put a lot of money into companies that I know are going to be winners, because that is what I know. I turned one of them from a $150,000 investment into a $250,000 return in less than 12 months. There’s simply no way I would ever have been able to do that in the stock market.
Information publishing has turned me into the eccentric multi-millionaire that I’ve dreamed of becoming ever since I was a little boy. I knew that I could do it too, once I found my Circle of Competence, and learned, as Buffet teaches, to build a moat around my business.
“If you have a castle in capitalism, people are going to try to capture it. You need 2 things – a moat around the castle, and you need a knight in the castle who is trying to widen the moat around the castle,” Buffet said.
“How did Coca-Cola build their moat? They deepened the thought in people’s minds that Coca-Cola is where happiness is. The moat is what’s in your mind. Railroad moats are barriers to entry. Geico’s moat is low prices. See’s Candies creates a moat in the minds of consumers. It is a more effective gift on Valentine’s Day than Russell Stover. See’s Candies has raised its price every year on December 26 for 41 years. BRK bought See’s Candies for $25 million in 1972. Today it earns $80 million. Snickers has been the number one candy bar for 40 years.
“Every day we try to widen the moat.”
What is the moat that you can build around your business?
Currently at ETR it is the secret front-end customer acquisition strategy that we are implementing. It’s bringing in hundreds of new customers per day and almost one thousand new leads. And we’re growing this moat every day.
We were able to do this through leveraging our Circle of Competence. It’s led to the greatest breakthrough in our business ever.
And it can happen for you, too. Just answer those 3 questions from the small-town Billionaire and you’ll be able to identify your greatest opportunity for earning your riches in this world.
[Ed Note: Craig Ballantyne is the editor of Early to Rise (Join him on Facebook here) and the author of Financial Independence Monthly, a complete blueprint to helping you take control of your financial future with a web-based business that you can operate from anywhere in the world – including a coffee shop, your kitchen table, or anywhere around the world where there is Internet access. Discover how you can achieve the American Dream and your financial independence here.]