To maximize your potential, ask yourself this question
Warren Buffett is used to giving advice.
For decades, the Berkshire Hathaway chairman has sat in front of a packed arena during his company’s annual shareholder meetings, fielding investors’ questions on everything from artificial intelligence to the ins and outs of his insurance business to marriage advice.
In “Warren Buffett: A Life and a Legacy,” airing Jan. 18 at 3pm ET on CNBC, Becky Quick asks the Oracle of Omaha the toughest questions and best advice he’s ever given. Buffett eventually comes up with a challenge he poses to college students.
Buffett was asking students to consider a scenario in which, given a class of 300 or more peers, five of them could receive 10% of their lifetime earnings. Who would they choose and why? So who will they short sell? The people you choose don’t necessarily have to be the best-looking, smartest, or most athletic, he says.
“Sure, I explained at the end, you might be the one to buy from,” Buffett says. “There’s nothing impossible. Because it’s not about whether you can throw a football 60 yards, and it’s not… it’s not about who has the highest IQ. You could be one of five people.”
How to get on the list?
So what could put you on the list of someone with high lifetime earnings expectations?
“It’s largely a matter of luck. If you pick the right parents, you’ll be rich when you open up,” Buffett says. “You won the lottery; the ovary lottery.”
But Buffett told the students they could still be one of the people their classmates should bet on.
“You can achieve this by being a good person, reading a lot, and spending less than you spend,” he says. “I told them you can spend 110% of what you earn once, and then you use it. You’re underwater for the rest of your life.”
Buffett does not neglect to emphasize the second point. Buffett says certain types of loans, such as mortgages, can make sense in some situations, but generally you want to avoid going into debt.
“After a certain point, if you get into a hole or something, it’s hard to dig,” he says. “It’s not impossible, and I trust people to do it. But do it the easy way.”
Of course, if you don’t work hard and focus on your personal development, you won’t be one of the top earners among your peers, Buffett says. He recalls his long-time partner Charlie Munger’s habit of “selling himself” during the most productive time of the day; He spent an hour every morning focusing solely on improving his mind and the rest of his working hours selling to customers.
“It’s not crazy,” Buffett says. “Your future is your future, and you can’t wait for anyone else to do it.”
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