Top 10 Rules for Success From World's Richest Investors

Some of the richest investors on the planet didn't just stumble into success. They learned how money really works.

I really had read every book in the Omaha Public Library that was on the stock market. By 11? By 11, I'll guarantee you. And some of them twice.

Kept learning when others stopped.

The other great secret is that we're good at lifelong learning.

And mastered the basics most people ignore.

If you're going to have and run a business, if you don't understand accounting, you You're already behind the eight ball.

They understood inflation when others fell behind.

Inflation isn't a problem until it's a problem.

Made smart decisions with their money.

You don't need to make 100% a year to have a fortune. You just need to invest at an attractive return, 10%, 15% over a long period of time. Your money grows very significantly and started before they felt ready.

Saving 15% of your paycheck each week, that's the from investors who challenge the status quo.

For a new company to exist, it not only has to, like, you know, come in and go into business and bring a product to market, but it has to bring a product to market that's so much better than what already exists that it punches through the sort of status quo.

To those who turn innovation into real businesses.

You don't just want innovation. You also want it to translate into good businesses.

And built the skills to win at a high level.

I think people skills tend to be highly underestimated.

Today, we're breaking down the top 10 rules for success from the world's richest investors. Featuring powerful lessons on investing, thinking differently, and playing the long game. If you wanna build real wealth, think bigger, and take control of your future, this video is for you. Need motivation?

Watch a top 10 with Believe Nation.

If you've been here before, drop a hashtag #believe in the comments below so I can feature you here in a future video. And if you're new, welcome to Believe Nation, the only channel that helps you believe in yourself daily, one video at a time. Okay, let's kick it off with rule number 1, study stocks with Warren Buffett.

You made your first investment when you were 11 years old?

In 1942, 80 years ago, I took $114.75, every penny I'd saved, and I bought 3 shares of City Service preferred. And City Service was a pretty well-known name now and then. In fact, in 1920, CitiService, I think, was the 4th largest company in the United States in terms of number of shareholders. It was a big company. And so it had a preferred stock that was selling at $38 that had started skipping the dividends during the Depression. So it accumulated dividends on it of $60 or $70. And of course, it was par value of $100 too, and it was selling at $38. And at breakfast one morning, I followed all the stocks every day, but then I made my plunge and I had roughly this amount of money. So I bought 3. I don't remember this precisely, but I think I told my dad in the morning, "Now let's move, Dad." Pop, I called him. But I said, "Let's move, Pop." [Speaker:WARREN BUFFETT] But you felt the thrill of it then. Oh, I've been reading about it and following it, the whole market. I really had read every book in the Yonkers Public Library that was on the stock market. By 11? By 11, I'll guarantee you. And some of them twice. I started out reading the ones in my dad's office and I just loved to read.

Rule number 2 is always keep learning with Charlie Munger.

The other great secret is that We're good at lifelong learning. Warren is so much better in some ways in his 70s and 80s than he was younger that it's almost awesome. If you keep learning all the time, you have a huge advantage. And we both just like it. And we have a wonderful group of friends, really wonderful. From whom we can learn a lot.

Rule number 3 is study the basics with Mark Cuban.

If you're going to have and run a business, if you don't understand accounting, you're already behind the 8-ball. Can't you hire a guy that's, that But then they still have to communicate to you, right? I mean, there's people that don't understand the concept of, you know, the difference between profits and cash. You know, oh, your accountant might tell you you're profitable, but your cash is going down, you know, not understanding the breakdown. And when you don't— Do you think you need college to learn that? Yeah, I think you do, right? Because it may not— for some people, look, if you're so self-motivated that you can take an online course in accounting and teach yourself everything, you're way ahead of the game anyways, but most people aren't. And I'm not saying you have to go to Indiana, I'm not saying go to an expensive school. I don't care if you go to a community college and take accounting and spend $99 for the class. Just, you know, spending the money forces you to be more obligated to do it, but accounting, finance, to a lesser extent marketing, sales if the school offers that, these are all the, that's the language of business. And so while it's possible to teach yourself these things, and while it's possible to hire them, When you're starting your own company, you don't want to have to spend money hiring an accountant, right? You're already probably going to have to hire a lawyer to set up your— well, let me take that back. If you've gone through all these classes, you probably don't have to hire a lawyer to incorporate, right? You can probably figure it out yourself. And so, your cost of opening up a business drops, but even more important than all that, that's the blocking and tackling, that's the language of business. The thing I learned at Indiana that was more important than anything else, I learned how to learn. And learning became far more important to me because the one certainty in business is that it's always going to be changing. If you're not always learning, to this minute, if I'm not continuously learning, if I'm not just absorbing as much as I can absorb, someone else is going to kick my ass.

Rule number 4 is understand inflation with Ray Dalio.

When there was the position that interest rates got a lot below the inflation rate, you're losing buying power. There's no good reason to own that. And there's a change in psychology because before there was, I own bonds, The bonds go up in value as interest rates go down. So I'm getting a price appreciation even though I'm getting, you know, let's say a low interest rate, but inflation isn't a problem until it's a problem. Then when it's a problem because they print so much money and they put it out, then inflation goes up. And a light bulb goes off. That light bulb used to be, okay, how much am I earning? Okay, I'm not earning much, but it's okay. The price of the bond or whatever's gone up, but anyway, I'm holding it and it's safe. And then people realize it's not safe because I'm losing money to inflation. So now you have the central bank wanting to rectify that imbalance by, you know, real interest rates were -1.7%, meaning that inflation was chipping away at your buying power. Yes. If I look at inflation index bonds as an indicator or other indicators, I'm losing percentage points to inflation by holding that bond. And then when they— and people realize that, well, you don't want to do that. And then the other side of it was you want to buy and borrow and buy stuff because, you know, money's free. So companies borrow and buy stuff and individuals borrow and buy houses because interest-only loans on the houses. I mean, like, okay, I can buy a house, I can buy an apartment. And so, but that creates the imbalance where it's terrible to be a lender and a creditor, and it's good to be a borrower and do that. So that imbalance takes place, it produces inflation. And then when it produces inflation and so on, and then you say, "I don't wanna own these things anymore." And then, and also the Federal Reserve says, "I better fight inflation." They change things. And so by raising interest rates to levels in which it goes from -1.7% in inflation index bonds to +1.7%, and it makes it, and it raises the short-term interest rates, you know, real interest rates much higher. Then lo and behold, all the people who did all those things get hurt. Okay? They borrowed, they bought the bonds, they bought all of those things and all of those debt instruments. And also companies, look at the companies that are affected because yields got so low. Tech companies and others, those who have a dream, I'm going— they don't have to necessarily make profits. They're selling a dream and the money's got to be invested. And so you see all of that change radically when those— that tightening of monetary policy.

Also, if you want to take real action after this video, I made a free worksheet just for you. It covers the top lessons from today, gives you space to write your biggest takeaways, and helps you build a simple action plan. It's 100% free. Just click the link in the description below to go grab it. I'll see you there. Rule number 5 is invest wisely with Bill Ackman.

How do you be a successful investor? Now, I'm assuming that you're not going to go into the business of investing. I'm assuming that you're going to be a doctor or a lawyer, you're going to pursue your passion, but you're going to have some money that you're going to save over time. And I'm going to give you my advice on the topic. It's not necessarily definitive advice, but it's what the advice I would give my sister, my grandmother, on what she should do if she were in the same position. I'd avoid investing in startup businesses where the prospects are not very well known. Because again, you don't need to make 100% a year to have a fortune. You just need to invest at an attractive return, 10, 15%. Over a long period of time, your money grows very significantly. So how do you avoid the riskiest investments?

I would—

my advice would be to invest in the public securities, invest in listed companies, companies that trade on the stock market. Why? Because those businesses tend to be more established. They have to meet certain hurdles before they go public. The stocks are liquid, so you can change your mind if you want to sell. If you invest in a private lemonade stand, it's hard to find someone to take you out of that investment unless that business becomes fabulously profitable. So that's piece of advice number 1: invest in public companies. Number 2, you want to invest in businesses that you can understand. What I mean by that is there are lots of businesses that you come in, that you deal with in the course of your day in your personal life, whether it's a retail store that you know because you like shopping there, or it's a product, your iPad, or that you know, you think is a great product. But you have to understand how the company makes money. If the business is just too complicated, you don't understand how they make money, even if they've had a great track record, I would avoid it. A lot of people thought Enron was an incredible business because it appeared to have a good track record, but very few people understood how they made money. It was good to avoid it. Another very important criteria is you want to invest at a reasonable price. It could be a fabulous business that's done very well over a long period of time, but if you pay too much for it, you're not going to earn a very good return. The last bit is that you want to invest in a business that you could theoretically own forever. If the stock market were to close for 10 years, you wouldn't be unhappy. What do I mean by that? Now again, if you're going to compound your money at a 10 or 15% return over a 43-year period of time, You really want a business that you can own forever. You don't want to constantly have to be shifting from one business to the next. And what are businesses that you can own forever? Well, there are very few that sort of meet that standard. Maybe a good example is Coca-Cola, right? What's good about Coca-Cola is it's a relatively easy business to understand. You understand how Coke makes money, right? They sell a formula or syrup to bottlers and to retail establishments, and they make a profit every time they serve a Coca-Cola. Drunk a lot of Coca-Cola for a very long period of time. The world's population is growing. They sell in almost every country in the world. And each year people drink a little bit more Coca-Cola. So it's a pretty easy business to understand. And it's also a business that I think is unlikely to be competed away as a result of technology or some other new product. It's been around long enough. People have grown used to the taste. Parents give it to their children. and you can expect that it'll be around a long period of time.

Rule number 6 is punch through the status quo with Marc Andreessen.

So the general criteria for a successful high-tech startup, in my view, there's, you see different sort of rules of thumb from different people, but the 3 big things you always come back to are, is there a big market? And by the way, that comes in 2 parts. Is there a big existing market that you think you can go after and sort of displace incumbents, or is it, or do you believe there will be a new market that will be big? So big market. Is there a fundamental technology or economic change that causes allows you to basically justify having a new company. And that's really important. So, you know, and the way I always think about that is, is there a 10x change happening in the technology landscape? Is something 10x faster or 10x cheaper or 10x better? And if it's not 10x, we view as both VCs and entrepreneurs, we really have to ask ourselves, like, is it really worth doing? Because it's really hard. I mean, it's really hard to start new companies. Talking about macro theory, new companies generally shouldn't exist. Existing companies are usually pretty good at what they do. And so for a new company to exist, it not only has to like, you know, come in and go into business and bring a product to market, but it has to bring a product to market that's so much better than what already exists that it punches through the sort of status quo. And, you know, most customers in most markets are pretty happy buying from the current suppliers, and so there has to be a real kind of edge on the thing. And we look for that in either a technology change, usually a technology change or an economic change, which are often the same thing. And then the third is team. Is the team outstanding, and if you think about this as an entrepreneur, it becomes a question of the founding team. Some companies are solo founders and they can work, but generally, most of us, like myself, who are human beings, are mortal. You want to have a founding team of complementary skill sets, and so you want to have at least one super strong technologist, quite possibly more than one. Some of the best startups are actually more than one founding technologist, and then it often helps to have somebody who's like a product, whoever is a market or salesperson or has a sort of really good understanding of business on the team certainly helps a lot. And so we sort of look at market, product, and team. And the reality is you need all three. I would say interestingly, if you're going to compromise as an investor, if we're going to compromise on one of those, it would actually be the product. And the reason I say that is because a great market is a lot easier to make up for with iterative product execution than a poor market, because the problem with a poor market, a small market, is even if you do a great job on the product, they're just there just aren't that many customers, it's hard to ever get big.

Rule number 7 is translate innovation into business with Peter Thiel.

I always think you want to instantiate it more in companies than things, or, you know, if you ask sort of like, where is innovation happening? You know, it, in our society, and it doesn't have to be this way, but it's, It's mostly in a certain subset of relatively small companies. We have these relatively small teams of people that are really pushing the envelope. And that's sort of what I find inspiring about venture capital. And then obviously, you don't just want innovation. You also want it to translate into good businesses. But that's where it happens.

Rule number 8 is start investing with Kevin O'Leary.

A lot of people say that making your first $100,000 is the hardest.

What would you say to people who want to go out and make their first $100,000? What's the best path to do that right now? Saving 15% of your paycheck each week. That's the key. That is really the key. My mother did it back in the '50s, and when she died, she kept that account secret from both of her husbands. She was married twice. And I got called by the executor and said, you got to come down here. I'm the older brother. And I said, "What for? We're a middle-class family." He said, "No, no, no. Your mother has created an immense amount of wealth here. You've got to come down and see what she did." So she bought 50% telco bonds. Back then they were yielding between 6% and 7%, and 50% was in S&P stocks that paid dividends. She kept that portfolio for 32 years. So it just grew geometrically over time. It was really remarkable. And I learned that way, and that's sort of the way I invest. She never made sure that she had no more than 5% in any one stock and no more than 20% in any one sector like energy or technology, whatever. So she had a lot of diversification. So if you really want to make $100,000 and do it relatively quickly, you basically save 15% of your paycheck and put it into an index in the market. Sometimes it goes up, sometimes it goes down, but over time you generally make 6 to 8%. That compounds. Within 7 years, you'll get to your $100,000.

Rule number 9 is learn people skills with Ben Horowitz.

In the world of entrepreneurship, the big skills are kind of programming skills and people skills. Like, those are the big two. And I think people skills tend to be highly underestimated in terms of kind of just ability to run a company and so forth. And what I mean by people skills skills is the ability to understand other people's motivation and other people's motivations who you're talking to and then who you're also not talking to and how they're going to think about something and where they're coming from and relate to that in a way that gets you to the right conclusion about how you build an organization or build a company or, you know, make a deal or any of these kinds of things is incredibly valuable. And that's what I would say most of the kind of good entrepreneurs end up lacking more than the technical skills that we see now. Like being like a boss-level engineer, like that's extremely valuable. I'm not discounting that, but that's really the other big, big skill.

And rule number 10, the last one before a very special bonus clip, is shoot for something large with Reid Hoffman.

It's the same amount of blood, sweat, and tears when you start a company, whether or not it's kind of a, you know, kind of a fixed vertical market or whether or not it's something really, really large. And the difference is that, you know, you might as well shoot for something large because you can still end up with something smaller, but aiming for something large is really important. And part of the reason why this is kind of a rule of entrepreneurship, and maybe this is the kind of thing that this Everyone in this room is like, yeah, yeah, we already know this, we're living it, I hope, is because if you don't start out aiming for the big game, you almost never can get there. It's got to be the kind of the how do I have kind of global impact? Like I think all high-impact companies are basically have to think globally in nature. Stage these days because of the way that the market ecosystem is going. And so you go, okay, how do I, how do I play onto that stage? And, you know, part of that in terms of a pioneer parallel is, again, how do I go somewhere that is substantial and unique?

What holds a firm together? It's the excitement of being on a team that's changing the world around you. Go towards what excites you. When you go into the office, it should be interesting, it should be fun, it should be like, these are great people to work with, these are interesting problems to work on, I love what I accomplish at the end of the day. Work with people with whom you respect and who will push you to be better. Collaboration and debate that goes with people working together is such a powerful thing.

Powerful force of competitive advantage.

People need to aggressively advocate for themselves. Do not be shy in asking for bigger roles. Do not be shy about asking for a promotion. People who have the best careers, they manage their career as part of their mindset. There's no team in the world stronger than we are. I learn something every day. I grow here every day, and that's a pretty special place to be.

And congratulations, you're one video closer to who you're meant to be.

Believe.

To learn the 5 habits every successful investor must develop, check the video right there next to me. I think you'll love it. Continue to believe, and I'll see you there.

That was a dumb strategy, right?

But I tripled my money.

I tripled my money because I got lucky.

If you buy a farm, you know, you go up and look, you know, every couple weeks to see how far the corn is up.