The Difference Between The Successful And Really Successful, According To Warren Buffett

When I tell people that Warren Buffett follows the 5-Hour Rule and spends 80% of his time reading and thinking, they have an immediate and predictable reaction: "Well, he can do that because he's Warren Buffett, one of the richest people in the world. I could never do that."

While this response may help people feel better about themselves, it certainly won't make them smarter.

Because the reality is: Buffett has spent most of his time reading and thinking since he was in grade school. Having more money or managing a large company doesn't magically give you free time.

Having free time is never the default. People don't just fall into huge blocks of free time (unless they're retired). Rather, free time is the result of strategy. It's the result of looking at time differently.

Curious about Buffett's strategies, I've read several books about him, read most of his annual letters to stockholders, and watched nearly all of his interviews.

And make no mistake about it... behind Buffett's jovial demeanor may be the most stone-cold, ruthless prioritizer in the world.

Below are the top five strategies Warren Buffett has used throughout his career in order to have lots of reading and thinking time. I invite you to copy them.

As you read these strategies, be aware that these aren’t just random strategies that are thrown together like the typical listicle you see online. There’s a deeper pattern that most people miss—his #1 mental model.

Buffett Strategy #1: Kill busy work

Buffett has eliminated almost all of the obligatory CEO tasks from his schedule:

• He never talks to analysts (Buffet estimates that 20% of the typical public CEO's time is spent talking to Wall Street).
• He rarely talks to the media.
• He doesn’t attend industry events.
• He has lived outside of NYC in Omaha, Nebraska for almost his entire career.
• He barely attends any internal meetings like typical CEOs.
• He has never had a computer at his office or a stock ticker.

What’s important to see here is that these decisions don’t happen by accident. They require continually resisting immense social pressure.

We get insight into how Buffett deals with distractions via his personal pilot, Michael Flint. Buffett once walked Flint through his three-step strategy for prioritization, and I invite you to try it right now in order to truly get the message:

1. First, Buffett had Flint write down his top 25 goals on a piece of paper. Go ahead and write your goals down now.
2. Next, he had him circle the top 5. So far, nothing special.
3. Finally, he had Flint take the 20 goals he did NOT circle and put them on an "avoid-at-all-cost" list. This is the step where you see Buffett's true prioritization genius. At this point, most people would simply just focus on the top 5 goals and intermittently work on the rest of the goals. Not Buffett though. He advised Flint: "No matter what, these things get no attention from you until you’ve succeeded with your top 5.”

Buffett's strategy gets at this truth: the real threats to our time are not obvious distractions that we know are wrong. Rather, the real threats are the wolves in sheep's clothing—activities which make us feel like we're working hard, but that do not ultimately move the needle. Buffett's three-step approach inoculates us against these!

Buffett Strategy #2: Only work with people you could see yourself working with forever

Similar to how Buffett audits his work activities, he also audits who he works with.

Buffett ONLY works with CEOs he trusts, who get results, and who he can see himself working with for decades. As a result, he does incredibly little negotiation and due diligence before he buys a company, and doesn’t actively manage the CEOs of the business he owns. Furthermore, he enjoys the conversations with the CEOs he connects to.

(Notice the word “trust.” Buffett has passed up on purchasing many companies with attractive financials who had CEOs he did not trust.)

Buffett applies the same criteria to the people on his team—most of them have been with him for decades.

Buffett Strategy #3: Keep things super, super simple

Buffett has cut out nearly all of the bureaucracy in his company. Berkshire Hathaway’s portfolio companies have nearly 400,000 employees, but its actual headquarters has only two dozen employees or so. Here is a photo from the 2014 Christmas Party of one of the largest companies in the world:

Buffett’s personal life is also very simple. He lives in a modest home (the same one he has been in for 60 years), and he only spends $100,000 per year personally.

As we grow in our careers, in our companies, and in our lives, it’s extremely easy to add complexity. In fact, it’s the norm.

As you get more profit, it’s normal to hire more employees. As you earn more money, it’s normal to spend more and more.

What’s truly powerful is to keep things simple. That takes effort and skill. And, that is part of Buffett’s genius.

It’s odd to say this, but one of the world’s richest people may also be one of its biggest minimalists when you compare the lifestyle he could live to the one he chooses to live.

Buffett Strategy #4: Focus on a few, high-quality bets

Warren Buffett only makes a handful of investments per year.

I remember when I first heard this, I was shocked. “How can the wealthiest investor in human history do so few deals?”

William Thorndike gives us the answer to this question in his book, The Outsiders:

“Buffett believes that exceptional returns come from concentrated portfolios, that excellent investment ideas are rare, and he has repeatedly told students that their investing results would improve if at the beginning of their careers, they were handed a twenty-hole punch card representing the total number of investments they could make in their investing lifetimes. As he summarized in the 1993 annual report, ‘We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort level he must feel with its economic characteristics before buying into it.”

Buffett explains his philosophy in the following clip from the Becoming Warren Buffett documentary:

In short, Buffett says:

“The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot. If people are yelling, ‘Swing, you bum,’ ignore them.”

Buffett Strategy #5: Focus on long-term bets

Buffett holds his bets for extraordinarily long periods.

According to investor William Thorndike, author of The Outsiders...

“He has held his current top five stock options for over twenty years on average. This compares with an average holding period of less than one year for the typical mutual fund. This translates into an exceptionally low level of investment activity, characterized by Buffett as “inactivity bordering on sloth."

Buffett applies a similar concept to investing in knowledge that will pay him back forever. In the only authorized biography of Buffett, his biographer comments on what she learned from him:

“The things you do learn and invest in should be knowledge that is cumulative, so that the knowledge builds on itself. So instead of learning something that might become obsolete tomorrow, like some particular type of software [that no one even uses two years later], choose things that will make you smarter in 10 or 20 years. That lesson is something I use all the time now.”

Buffett’s Core Mental Model

Now, you understand. Warren Buffett's free time to read and think isn't just a fluke. He's designed his life for it.

And at the heart of this design is the 80/20 Rule—the fact that 20% of efforts cause 80% of the results in many domains.

Warren Buffett ruthlessly prioritizes what’s truly important and cuts out what isn’t.

Because of the usefulness of the 80/20 Mental Model, I made it the first model I cover in the Mental Model Club. As a member, every month you receive an in-depth masterclass and a 15,000-word Mastery Manual to help you apply the model to each area of your life. And, you also join a community of 1,000+ members.

Click here to learn more about the club and the power of the 80/20 Rule >>

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