People look at the Berkshire Hathaway empire today and they see hundreds of billions of dollars they see the massive acquisitions the compounding returns and the headlines in the financial newspapers when they look at my life they are almost always searching for the big move they wanna know about that one single day where I made a brilliant high stakes trade that made me a billionaire they want the Hollywood movie version of wealth They imagine a room full of people screaming at computer screens pulling off a secret master plan at the exact right second to beat the
market but let me tell you a secret that most people simply do not want to hear the Hollywood version of wealth is a complete biological illusion real wealth is not built in a single day of brilliant action real wealth is incredibly almost painfully boring if you want to understand how financial empires are actually built And how they are destroyed you have to look at the physics of nature when people think about a house collapsing they usually think about a Hurricane they picture a massive violent storm coming in from the ocean and blowing the roof off
in 10 seconds in the financial world the Hurricane is a massive stock market crash a terrible real estate investment or a risky bet on a startup that goes to absolute zero in the financial world The Hurricane is a massive stock market crash a terrible real estate investment or a risky bet on a startup that goes to absolute zero everyone is terrified of the Hurricane but hurricanes are incredibly rare the thing that actually destroys most houses in this country is completely invisible it is the termites termites do not make any noise they do not announce their
arrival they just sit in the dark chewing on the wooden foundation of a house 24 hours a day seven days a week one tiny microscopic bite at a time for years you do not even know they are there the house looks perfectly fine from the outside but inside the structural integrity is being slowly devoured and then one day the entire structure silently collapses under its own weight your daily habits are the termites of your financial life most people are poor not because they got hit by a massive Financial Hurricane but because they have 1,000 negative
termites chewing away at their capital and their cognitive focus every single day the expensive daily coffee you do not need the three hours spent mindlessly scrolling on social media the constant burning need to buy new things just to impress neighbors who do not even care about you these tiny actions seem completely harmless In the moment they feel like nothing but compounded over 10 20 or 30 years they will guarantee a life of absolute financial slavery but here is the beautiful part about this universal law you can use this exact same physical momentum to build an
empire you can breed positive termites you can adopt tiny invisible habits that quietly build the foundation of an impenetrable fortress over the last 70 years I did not make thousands of brilliant macroeconomic predictions I did not invent a new technology I simply practiced a few tiny habits every single day these habits were not exciting they did not make me look cool or sophisticated in fact most people on Wall Street thought my habits were incredibly strange and hopelessly outdated but I did them on Monday and I did them on Tuesday and I did them every single
day for decades and eventually those tiny boring Invisible habits compounded into a mountain of wealth that no economic crisis can ever take away today I am going to share five of those tiny habits with you I must warn you before we begin when you hear these habits your fragile human ego is going to immediately reject them your brain is going to tell you that these actions are far too small to possibly make a difference your brain will demand a more complex exciting and risky strategy You must ignore that primitive voice if you are ready to
stop looking for the magic lottery ticket if you are ready to stop waiting for the big move and start building your foundation pay very close attention let us begin with the first tiny habit habit No. 1 I call this the physical manifestation of cognitive humility or simply the too hard pile let us talk about the human ego specifically the ego of highly intelligent people when you go through the traditional education system And you graduate from a top university you are trained to solve incredibly difficult problems you are explicitly rewarded for complexity if you write a
simple easy to read essay in college you get a mediocre grade but if you write a deeply complex philosophical essay using massive words and intricate theories you get the highest grade in the class this system completely conditions your brain it trains you to associate complexity with success and to associate simplicity with stupidity so these brilliant young men and women graduate They go to Wall Street or they go to Silicon Valley and they apply this exact same academic logic to the real game of wealth they look at a simple boring business a business that makes bricks
or sells chewing gum or manufactures carpet and their ego immediately rejects it they think this is far too easy this is completely beneath my massive intellect I need a challenge so they go looking for highly theoretical biotechnology companies they look for complex Financial derivatives that require advanced calculus just to read the prospectus they are deliberately looking for 7 foot fences to jump over simply to prove to themselves and to their colleagues that they are capable of jumping but here is the absolute unbending truth of capitalism the market does not care about your academic degree the
market does not award you bonus points for a high degree of difficulty a dollar earned from a simple boring totally predictable business Spends exactly the same as a dollar earned from a highly complex revolutionary technology company on my desk in Omaha Nebraska I have a physical tray it is a simple wooden box and it is labeled too hard every single morning I receive dozens of investment proposals annual reports and business pitches from all over the world I sit at my desk I pick up the first document and I start reading If I cannot completely understand
exactly how this business makes money who their actual competitors are and what the industry will look like in 10 years within the first three minutes of reading I stop I do not call a team of Wall Street analysts to explain it to me I do not build a complex financial spreadsheet to try and figure it out I do not agonize over what I might be missing I simply take the document and I drop it into the two hard pile and then I completely forget about it forever I move on to the next piece of paper
I ruthlessly almost violently filter out complexity Charlie Munger and I have made billions of dollars simply by looking for 1 foot fences that we can easily step over rather than trying to train ourselves to jump over the 7 foot fences this tiny habit the physical act of tossing a piece of paper into a tray is a massive psychological superpower it protects you from your own arrogant ego it forces you to operate strictly within what we call Your circle of competence knowing the exact boundary of your circle is infinitely more important than the size of the
circle itself most people are absolutely terrified of looking stupid if you ask them a complicated question about a new technology or a new financial trend they will pretend to know the answer they will use jargon to cover up their ignorance but true wealth is built by the people who have the psychological strength to look someone dead in the eye and say I do not understand this this is too hard for me I am going to pass so here is your application for habit No. 1 you must build your own 2 hard pile today when someone
pitches you a new cryptocurrency that you cannot explain to a five year old child put it in the 2 hard pile when a friend asks you to invest in a complicated real estate syndication with a 50 page legal contract put it in the too hard pile when you are faced with a career decision that has too many unpredictable moving parts Put it in the too hard pile do not feel ashamed do not feel inadequate your ultimate wealth will not be defined by the complex puzzles you manage to solve it will be defined entirely by the
disastrous mistakes you actively avoid embrace the simple step over the 1 foot fence habit No. 2 I call this the Invisible Compounding Machine or the 500 page rule look at the modern world look at the average investor today they are absolutely addicted to noise They sit in front of three computer screens watching red and green numbers flash by at the speed of light they refresh their social media feeds every five minutes desperately looking for the latest rumor they watch financial television networks where men in expensive suits scream about an impending global crisis they call this
doing research they believe that because they are consuming a massive mountain of data Every single day they are gaining knowledge they are completely wrong they are not gaining knowledge they are burning their cognitive bandwidth on cheap dopamine they are confusing motion with progress let me explain a concept called the half life of information most of the information you consume on the internet has a half life of about 24 hours um a news headline today will be completely irrelevant by tomorrow afternoon A hot stock tip on a message board will be utterly worthless by next week
if you feed your brain temporary information your wealth will be temporary but there is another type of information information that has a half life of centuries human psychology business history the fundamental laws of supply and demand if you feed your brain permanent knowledge your wealth will become permanent when people visit my office in Omaha They are always shocked by what they do not see there are no computer screens flashing real time stock prices there is no television screaming the Daily News it is incredibly quiet my office is essentially a library my tiny habit the single
habit that built the intellectual foundation of Berkshire Hathaway is painfully boring to most people I sit in a quiet room and I read 500 pages every single day I read annual reports of companies I have never invested in I read biographies of men and women who died 100 years ago I read deep dense business history I am not looking for a quick tip on what the market will do next Tuesday I am looking to understand exactly how the machinery of the world actually operates people fundamentally misunderstand how reading works they think reading is like taking
a test in high school they think you read a fact you memorize it and you immediately use it to make money the next day But true knowledge does not work like that true knowledge is a slow silent compounding mechanism when you sit down and read a boring 80 page financial report on a carpet manufacturing company today it will probably not help you make a single dollar tomorrow you will put the report away and you will think you wasted your time but 10 years from now a completely different opportunity will appear in front of you and
because you read that boring report a decade ago Your brain will subconsciously recognize a pattern it will connect a dot that nobody else in the room can even see that is how you build an intellectual mote you build it quietly one page at a time over a period of decades most people simply do not have the patience for this they want a magic pill they want to listen to a 10 minute audio summary and suddenly become a financial genius but intensity is an illusion consistency is the only thing that actually Moves the needle while the
traders in New York are sweating panicking and trading frantically based on the morning news cycle I am sitting quietly in my leather chair reading a book about the fall of the Roman Empire so here is your application for habit No. 2 you must violently disconnect yourself from the modern noise machine stop checking your investment portfolio every two hours stop reading the endless stream of financial news take that exact same amount of anxious energy And redirect it toward permanent knowledge I want you to dedicate one hour every single day to reading something that is completely disconnected
from the current news cycle read a biography of a great industrialist read a book on human behavioral psychology do this quietly do not tell anyone you are doing it do not post about it on the internet just sit in the silence and feed the compounding machine in your mind in five years you will look around the room And you will realize that you are operating on a completely different intellectual plane than everyone else you will see the matrix while they are still fighting over the noise habit No. 3 I call this the mastery of the
empty room or the absolute refusal of action bias look at the modern professional today they are terrified of silence they are absolutely terrified of sitting perfectly still If you put an average person in an empty room with nothing to do within three minutes they will reach into their pocket and pull out their cellular phone they demand constant stimulation they need to feel connected in the world of behavioral psychology this is known as action bias when human beings feel anxious uncertain or bored their primitive brain screams at them to do something anything if a stock portfolio
drops by 5% The amateur investor feels a sudden surge of adrenaline their action bias kicks in they feel an overwhelming biological urge to sell a stock buy a different stock or fundamentally change their entire financial strategy they truly believe that motion will somehow save them the entire corporate world is built on this illusion of motion if you sit at your desk in a corporate office and just stare out the window thinking deeply about a complex problem Your manager will walk by and assume you were being lazy they will demand that you type on a keyboard
or send an email or speak loudly in a meeting society constantly rewards the appearance of effort it rarely rewards the actual generation of profound value Wall Street absolutely loves action bias the entire global financial system is meticulously designed to make you feel like you need to be doing something every single day the brokers The trading platforms and the financial television anchors they do not make money when you sit perfectly still they make money when you move they get rich on your transaction fees your taxes and your panic while your capital slowly bleeds to death my
partner Charlie and I have a completely different approach we believe that in the game of wealth doing absolutely nothing is often the most brilliant and profitable action you can possibly take My tiny habit is incredibly simple but it is psychologically agonizing for most people I spend a massive portion of my week sitting in a quiet room looking at the ceiling or looking at a blank piece of yellow paper there is no computer on my desk there is no telephone ringing there is no complex financial spreadsheet I am just sitting and thinking I do not force
a deal just to keep myself busy I am perfectly comfortable holding tens of billions of dollars in cash Doing absolutely nothing for years at a time the media will often mock me they will write articles saying that I have lost my touch they will say the new economy has passed me by but I do not let the impatience of the crowd dictate my timeline I like to think of myself as a patient crocodile in the river a crocodile does not swim around frantically chasing every tiny fish that passes by if it did that it would
exhaust itself and quickly starve to death Instead the crocodile sits in the MUD it barely breathes it remains absolutely motionless sometimes for weeks or even months it conserves all of its terrifying energy it is waiting for a massive fat zebra to walk into the water and when that perfect high probability moment finally arrives the crocodile strikes with overwhelming speed and absolute conviction this is exactly how you must treat your capital and your career You do not need to make 20 financial decisions a year you do not need to constantly pivot your business model you do
not need to jump from one trending side hustle to another just because your neighbors are doing it if you cannot sit alone in a room with your own thoughts you will never be able to hold a great investment through a terrifying market crash your anxiety will force you to act and your premature action will completely destroy your wealth So here is your assignment for habit No. 3 I want you to practice the art of intentional stillness this week I want you to find an empty room leave your phone outside turn off the music take a
blank piece of paper and a pen I want you to sit in that chair for 30 minutes and do absolutely nothing your brain will beg you to leave the room it will tell you that you are wasting precious time it will manufacture fake emergencies to get you to stand up you must sit through the panic you must train your biological hardware To be comfortable with absolute stillness if you can master the empty room you will immunize yourself against the frantic wealth destroying anxiety of the crowd you will become the crocodile habit No. 4 I call
this the daily ritual of capital respect or the McDonald's breakfast test look at what happens when an average person gets a promotion at work the moment their paycheck increases their lifestyle immediately inflates to consume the new income They buy a larger house they lease a luxury German automobile they start wearing expensive watches and eating at high end restaurants they call this enjoying the fruits of their labor they genuinely believe that they are upgrading their life but let me tell you what they are actually doing they are voluntarily walking into a prison cell and locking the
door behind them they are forging a set of golden handcuffs they are trading their ultimate financial freedom For a temporary fleeting sense of social superiority think about the immense psychological burden of owning expensive things when you buy a massive house you do not just pay the mortgage you pay with your cognitive focus you have to worry about the roof leaking the lawn being perfectly manicured and the property taxes doubling when you buy a luxury car you stress about someone scratching the paint in a parking lot Your possessions slowly begin to possess you they drain your
energy in the financial world we call this lifestyle creep it is the silent killer of wealth it guarantees that no matter how much money you make you will always remain a slave to your monthly expenses you will never be able to walk away from a toxic job because you need the paycheck to fund the illusion of wealth you have built for your neighbors my approach is entirely different I have a tiny almost comical Daily habit that protects me from this disease every morning on on my five minute drive to the office I stop at the
McDonald's drive through I tell my wife how much exact change to put in the cup holder of my car when the stock market is down and I am feeling a bit poor I spend exactly two dollars and sixty one cents on two sausage patties when the market is up and I am feeling prosperous I might splurge and spend three dollars and seventeen cents on a bacon Egg and cheese biscuit people hear the story and they laugh they think it is a cute eccentricity of an old billionaire they think I am simply being cheap but it
has absolutely nothing to do with being cheap it has everything to do with a profound almost religious respect for capital when you truly understand the mathematics of compound interest your entire world view changes you realize that a single dollar is not just a piece of paper It is a soldier every dollar you save is a tiny soldier that you can send out into the battlefield of the economy these soldiers work for you 24 hours a day they never sleep they never complain and they recruit more soldiers to join your army every time you spend $10
on a luxury coffee you do not need you are not just wasting $10 you are actively murdering the hundred dollars that coffee would have become in 20 years you are stealing from your own future freedom I still live in the exact same house I bought in 1958 for $31,500 I do not need a massive mansion with 50 bedrooms a massive house does not make me a better investor it just requires more maintenance more mental energy and more unnecessary decisions my tiny habit of eating a 3 dollar breakfast is a daily psychological reset it reminds me
every single morning that I am the master of my money and my money is not the master of me it keeps my ego completely in check it reminds me that the goal is not to look rich But to actually be wealthy so here's your assignment for habit No. 4 you must ruthlessly freeze your lifestyle the next time you get a raise or a bonus or your business has a highly profitable month I want you to do absolutely nothing do not buy a new car do not upgrade your wardrobe do not go on a luxury vacation
take 100% of that new surplus money and immediately convert it into permanent capital buy an asset let your neighbors think you are struggling Let your friends wonder why you are not driving a newer car if you can suppress your ego and maintain a peasant lifestyle while your income skyrockets you will build an impenetrable fortress of wealth faster than you ever thought possible you will buy your ultimate freedom habit No. 5 I call this the nightly audit of the inner scorecard or the absolute rejection of external validation look at how the vast majority of human beings
operate In the modern world they are completely and utterly obsessed with what other people think of them they choose their university degrees based on what will impress their parents they buy their clothes and their cars based on what will impress their co workers they go into massive crippling credit card debt to finance luxury vacations simply so they can post photographs on the internet to impress total strangers in psychology We call this living by the outer scorecard it is a pathetic and exhausting way to live when you live by the outer scorecard your entire self worth
is strictly dependent on the applause of the crowd and the crowd is incredibly fickle if the crowd stops clapping you feel completely worthless this psychological weakness destroys more wealth than any stock market crash in human history when people make catastrophic financial decisions Because their fragile ego cannot handle looking poor they refuse to downsize their massive house when they lose their job because they are terrified of what the neighbors will whisper about them they hold on to losing investments for years because they are simply too proud to admit to their friends that they were wrong they
burn their own capital just to keep up a fake performance my partner Charlie and I realized very early on That if we wanted to build a massive compounding machine we had to completely detach ourselves from the opinions of society so I developed a tiny psychological habit a mental audit that I perform in my quiet room every single night before I go to sleep I close my eyes and I ask myself a very simple question if the world was never gonna find out about the decisions I made today Would I still be happy with them if
the world thought I was a complete fool for buying a specific business but I knew the mathematics were absolutely correct would I still buy it if the answer is no I know that my ego has taken control of the steering wheel I know I am playing for the crowd you must develop what I call an inner scorecard an inner scorecard means that you hold yourself to a standard that is infinitely higher than what the world expects of you You do the right thing when absolutely nobody is watching you save your money quietly you read your
books quietly you build your empire in total silence let us look at the late 1990s as a perfect example the entire world was going absolutely insane over internet stocks companies that had zero revenue and zero profits were suddenly worth billions of dollars overnight every single day financial reporters would come on the television And call me an old Dinosaur they said Warren Buffett has completely lost his touch they said the internet has changed the fundamental laws of physics and economics and my boring value investing approach is dead if I had been living by the outer scorecard
psychological pressure would have destroyed me I would have felt the overwhelming need to please the crowd to protect my reputation and to buy those worthless internet stocks just to stop the daily criticism But I did not care what the television anchors said I knew that a business without cash flow is a mathematical illusion I stayed in Omaha I held my cash and I let the entire world laugh at me two years later the bubble violently burst trillions of dollars of wealth evaporated into thin air the so called geniuses who laughed at me lost their houses
their marriages and their careers I survived and Berkshire Hathaway thrived because I was playing an entirely different game I was playing by the inner scorecard When you stop caring about the applause of the crowd something magical happens you become completely immune to the manipulation of society you stop buying things you do not need you stop feeling anxious about where you stand in the fake social hierarchy your mind becomes incredibly clear incredibly sharp and absolutely terrifying to your competitors so here is your assignment for habit No. 5 Tonight when you lay in your bed I want
you to perform a brutal audit of your own life look at the car sitting in your driveway look at the expensive clothes in your closet look at the career path you have chosen ask yourself if you were the last human being on earth and there was absolutely nobody left to impress would you still want those things if the answer is no you are living a lie you are burning your ultimate asset your time and your capital to fuel a fake reality you must destroy the outer scorecard today you must stop performing for the crowd And
start building for yourself we have talked about the Hurricane and the termites we have talked about the two hard pile the the the 500 page reading habit the mastery of the empty room the daily ritual of capital respect and the nightly audit of your inner scorecard if you look closely at these five habits you will notice something profound none of them require a massive intellect none of them require a wealthy family A secret connection or a degree from a prestigious Ivy League university they simply require relentless discipline they require the psychological strength to be absolutely
bored while everyone else is frantically seeking entertainment I have lived on this earth for over 90 years I have watched thousands of brilliant high energy people fail spectacularly and I have watched thousands of average quiet people build incredible generational wealth The difference between the two groups is never a single heroic action the difference is the silent accumulation of tiny choices the modern world is completely obsessed with the illusion of the big move people are waiting for the perfect stock market crash to invest they are waiting for the perfect startup idea to launch they are waiting
for a wealthy mentor to hand them a golden ticket while they are waiting for the Hurricane the clock is relentlessly ticking Their capital is being eaten by inflation their cognitive focus is being completely destroyed by the noise of their cellular phones they are paralyzed by complexity and they are blinded by the outer scorecard they are losing the game because they refuse to play the long game do not be like the crowd you must become the architect of your own foundation you must embrace the absolute boredom of consistency tomorrow morning when you wake up do not
try to change your entire life in 24 hours That is a recipe for immediate failure do not try to read 500 pages on your very first day just pick one tiny habit throw one complicated idea into the too hard pile sit in an empty room for 10 minutes without your phone or skip the expensive luxury coffee and invest that $5 into a permanent compounding machine do it once and do it again the next day and the day after that let the termites of positive compounding go to work for you let them chew through the obstacles
in your path 24 hours a day year after year decade after decade eventually the compounding effect will take over your tiny habits will create a gravitational pull so massive that wealth and ultimate freedom will simply have no choice but to flow in your direction the game of wealth is not a sprint for the smartest person in the room it is a Marathon for the most disciplined person in the room stop waiting for the magic lottery tickets Stop waiting for the big move take control of the tiny habits that's all thanks for watching people look at
the Berkshire Hathaway empire today and they see hundreds of billions of dollars they see the massive acquisitions the compounding returns and the headlines in the financial newspapers when they look at my life they are almost always searching for the big move they wanna know about that one single day where I made a brilliant High stakes trade that made me a billionaire they want the Hollywood movie version of wealth they imagine a room full of people screaming at computer screens pulling off a secret master plan at the exact right second to beat the market but let
me tell you a secret that most people simply do not want to hear the Hollywood version of wealth is a complete biological illusion real wealth is not built in a single day of brilliant action real wealth is incredibly Almost painfully boring if you want to understand how financial empires are actually built and how they are destroyed you have to look at the physics of nature when people think about a house collapsing they usually think about a Hurricane they picture a massive violent storm coming in from the ocean and blowing the roof off in 10 seconds
in the financial world the Hurricane is a massive stock market crash a terrible real estate investment Or a risky bet on a startup that goes to absolute zero in the financial world the Hurricane is a massive stock market crash a terrible real estate investment or a risky bet on a startup that goes to absolute zero everyone is terrified of the Hurricane but hurricanes are incredibly rare the thing that actually destroys most houses in this country is completely invisible it is the termites termites do not make any noise they do not announce their arrival They just
sit in the dark chewing on the wooden foundation of a house 24 hours a day seven days a week one tiny microscopic bite at a time for years you do not even know they are there the house looks perfectly fine from the outside but inside the structural integrity is being slowly devoured and then one day the entire structure silently collapses under its own weight your daily habits are the termites of your financial life Most people are poor not because they got hit by a massive financial Hurricane but because they have 1,000 negative termites chewing away
at their capital and their cognitive focus every single day the expensive daily coffee you do not need the three hours spent mindlessly scrolling on social media the constant burning need to buy new things just to impress neighbors Who do not even care about you these tiny actions seem completely harmless in the moment they feel like nothing but compounded over 10 20 or 30 years they will guarantee a life of absolute financial slavery but here is the beautiful part about this universal law you can use this exact same physical momentum to build an empire you can
breed positive termites you can adopt tiny invisible habits that quietly Build the foundation of an impenetrable fortress over the last 70 years I did not make thousands of brilliant macroeconomic predictions I did not invent a new technology I simply practiced a few tiny habits every single day these habits were not exciting they did not make me look cool or sophisticated in fact most people on Wall Street thought my habits were incredibly strange and hopelessly outdated but I did them on Monday and I did them on Tuesday and I did them every single day for decades
And eventually those tiny boring invisible habits compounded into a mountain of wealth that no economic crisis can ever take away today I am going to share five of those tiny habits with you I must warn you before we begin when you hear these habits your fragile human ego is going to immediately reject them your brain is going to tell you that these actions are far too small to possibly make a difference Your brain will demand a more complex exciting and risky strategy you must ignore that primitive voice if you are ready to stop looking for
the magic lottery ticket if you are ready to stop waiting for the big move and start building your foundation pay very close attention let us begin with the first tiny habit habit No. 1 I call this the physical manifestation of cognitive humility or simply the too hard pile let us talk about the human ego Specifically the ego of highly intelligent people when you go through the traditional education system and you graduate from a top university you are trained to solve incredibly difficult problems you are explicitly rewarded for complexity if you write a simple easy to
read essay in college you get a mediocre grade but if you write a deeply complex philosophical essay using massive words and intricate theories you get the highest grade in the class this system completely conditions your brain it trains you to associate complexity with success And to associate simplicity with stupidity so these brilliant young men and women graduate they go to Wall Street or they go to Silicon Valley and they apply this exact same academic logic to the real game of wealth they look at a simple boring business a business that makes bricks or sells chewing
gum or manufactures carpet and their ego immediately rejects it they think this is far too easy this is completely beneath my massive intellect I need a challenge so They go looking for highly theoretical biotechnology companies they look for complex financial derivatives that require advanced calculus just to read the prospectus they are deliberately looking for 7 foot fences to jump over simply to prove to themselves and to their colleagues that they are capable of jumping but here is the absolute unbending truth of capitalism the market does not care about your academic degree the market does not
award you bonus points for a high degree of difficulty A dollar earned from a simple boring totally predictable business spends exactly the same as a dollar earned from a highly complex revolutionary technology company on my desk in Omaha Nebraska I have a physical tray it is a simple wooden box and it is labeled too hard every single morning I receive dozens of investment proposals annual reports and business pitches from all over the world I sit at my desk I pick up the first document and I start reading if I cannot completely understand exactly how this
business makes money who their actual competitors are and what the industry will look like in 10 years within the first three minutes of reading I stop I do not call a team of Wall Street analysts to explain it to me I do not build a complex financial spreadsheet to try and figure it out I do not agonize over what I might be missing I simply take the document And I drop it into the two hard pile and then I completely forget about it forever I move on to the next piece of paper I ruthlessly almost
violently filter out complexity Charlie Munger and I have made billions of dollars simply by looking for 1 foot fences that we can easily step over rather than trying to train ourselves to jump over the 7 foot fences this tiny habit the physical act of tossing a piece of paper into a tray is a massive psychological superpower It protects you from your own arrogant ego it forces you to operate strictly within what we call your circle of competence knowing the exact boundary of your circle is infinitely more important than the size of the circle itself most
people are absolutely terrified of looking stupid if you ask them a complicated question about a new technology or a new financial trend they will pretend to know the answer they will use jargon to cover up their ignorance but true wealth is built by the people who Have the psychological strength to look someone dead in the eye and say I do not understand this this is too hard for me I am going to pass so here is your application for habit No. 1 you must build your own 2 hard pile today when someone pitches you a
new cryptocurrency that you cannot explain to a five year old child put it in the 2 hard pile when a friend asks you to invest in a complicated real estate syndication with a 50 page legal contract put it in the too hard pile When you are faced with a career decision that has too many unpredictable moving parts put it in the too hard pile do not feel ashamed do not feel inadequate your ultimate wealth will not be defined by the complex puzzles you manage to solve it will be defined entirely by the disastrous mistakes you
actively avoid embrace the simple step over the 1 foot fence habit No. 2 I call this the Invisible Compounding Machine or the 500 page rule look at the modern world Look at the average investor today they are absolutely addicted to noise they sit in front of three computer screens watching red and green numbers flash by at the speed of light they refresh their social media feeds every five minutes desperately looking for the latest rumor they watch financial television networks where men in expensive suits scream about an impending global crisis they call this doing research They
believe that because they are consuming a massive mountain of data every single day they are gaining knowledge they are completely wrong they are not gaining knowledge they are burning their cognitive bandwidth on cheap dopamine they are confusing motion with progress let me explain a concept called the half life of information most of the information you consume on the internet has a half life of about 24 hours Um a news headline today will be completely irrelevant by tomorrow afternoon a hot stock tip on a message board will be utterly worthless by next week if you feed
your brain temporary information your wealth will be temporary but there is another type of information information that has a half life of centuries human psychology business history the fundamental laws of supply and demand if you feed your brain permanent knowledge Your wealth will become permanent when people visit my office in Omaha they are always shocked by what they do not see there are no computer screens flashing real time stock prices there is no television screaming the Daily News it is incredibly quiet my office is essentially a library my tiny habit the single habit that built
the intellectual foundation of Berkshire Hathaway is painfully boring to most people I sit in a quiet room And I read 500 pages every single day I read annual reports of companies I have never invested in I read biographies of men and women who died 100 years ago I read deep dense business history I am not looking for a quick tip on what the market will do next Tuesday I am looking to understand exactly how the machinery of the world actually operates people fundamentally misunderstand how reading works they think reading is like taking a test in
high school they think you read a fact You memorize it and you immediately use it to make money the next day but true knowledge does not work like that true knowledge is a slow silent compounding mechanism when you sit down and read a boring 80 page financial report on a carpet manufacturing company today it will probably not help you make a single dollar tomorrow you will put the report away and you will think you wasted your time but 10 years from now a completely different opportunity Will appear in front of you and because you read
that boring report a decade ago your brain will subconsciously recognize a pattern it will connect a dot that nobody else in the room can even see that is how you build an intellectual mote you build it quietly one page at a time over a period of decades most people simply do not have the patience for this they want a magic pill they want to listen to a 10 minute audio summary and suddenly become a financial genius But intensity is an illusion consistency is the only thing that actually moves the needle while the traders in New
York are sweating panicking and trading frantically based on the morning news cycle I am sitting quietly in my leather chair reading a book about the fall of the Roman Empire so here is your application for habit No. 2 you must violently disconnect yourself from the modern noise machine stop checking your investment portfolio every two hours Stop reading the endless stream of financial news take that exact same amount of anxious energy and redirect it toward permanent knowledge I want you to dedicate one hour every single day to reading something that is completely disconnected from the current
news cycle read a biography of a great industrialist read a book on human behavioral psychology do this quietly do not tell anyone you are doing it do not post about it on the internet just sit in the silence And feed the compounding machine in your mind in five years you will look around the room and you will realize that you are operating on a completely different intellectual plane than everyone else you will see the matrix while they are still fighting over the noise habit No. 3 I call this the mastery of the empty room or
the absolute refusal of action bias look at the modern professional today they are terrified of silence They are absolutely terrified of sitting perfectly still if you put an average person in an empty room with nothing to do within three minutes they will reach into their pocket and pull out their cellular phone they demand constant stimulation they need to feel connected in the world of behavioral psychology this is known as action bias when human beings feel anxious uncertain or bored Their primitive brain screams at them to do something anything if a stock portfolio drops by 5%
the amateur investor feels a sudden surge of adrenaline their action bias kicks in they feel an overwhelming biological urge to sell a stock buy a different stock or fundamentally change their entire financial strategy they truly believe that motion will somehow save them the entire corporate world is built on this illusion of motion if you sit at your desk in a corporate office And just stare out the window thinking deeply about a complex problem your manager will walk by and assume you were being lazy they will demand that you type on a keyboard or send an
email or speak loudly in a meeting society constantly rewards the appearance of effort it rarely rewards the actual generation of profound value Wall Street absolutely loves action bias the entire global financial system is meticulously designed To make you feel like you need to be doing something every single day the brokers the trading platforms and the financial television anchors they do not make money when you sit perfectly still they make money when you move they get rich on your transaction fees your taxes and your panic while your capital slowly bleeds to death my partner Charlie and
I have a completely different approach we believe that in the game of wealth Doing absolutely nothing is often the most brilliant and profitable action you can possibly take my tiny habit is incredibly simple but it is psychologically agonizing for most people I spend a massive portion of my week sitting in a quiet room looking at the ceiling or looking at a blank piece of yellow paper there is no computer on my desk there is no telephone ringing there is no complex financial spreadsheet I am just sitting and thinking I do not force a deal just
to keep myself busy I am perfectly comfortable holding tens of billions of dollars in cash doing absolutely nothing for years at a time the media will often mock me they will write articles saying that I have lost my touch they will say the new economy has passed me by but I do not let the impatience of the crowd dictate my timeline I like to think of myself as a patient crocodile in the river a crocodile does not swim around frantically chasing every tiny fish that passes by If it did that it would exhaust itself and
quickly starve to death instead the crocodile sits in the MUD it barely breathes it remains absolutely motionless sometimes for weeks or even months it conserves all of its terrifying energy it is waiting for a massive fat zebra to walk into the water and when that perfect high probability moment finally arrives the crocodile strikes with overwhelming speed and absolute conviction This is exactly how you must treat your capital and your career you do not need to make 20 financial decisions a year you do not need to constantly pivot your business model you do not need to
jump from one trending side hustle to another just because your neighbors are doing it if you cannot sit alone in a room with your own thoughts you will never be able to hold a great investment through a terrifying market crash your anxiety will force you to act And your premature action will completely destroy your wealth so here is your assignment for habit No. 3 I want you to practice the art of intentional stillness this week I want you to find an empty room leave your phone outside turn off the music take a blank piece of
paper and a pen I want you to sit in that chair for 30 minutes and do absolutely nothing your brain will beg you to leave the room it will tell you that you are wasting precious time it will manufacture fake emergencies To get you to stand up you must sit through the panic you must train your biological hardware to be comfortable with absolute stillness if you can master the empty room you will immunize yourself against the frantic wealth destroying anxiety of the crowd you will become the crocodile habit No. 4 I call this the daily
ritual of capital respect or the McDonald's breakfast test look at what happens when an average person gets a promotion at work the moment their paycheck increases Their lifestyle immediately inflates to consume the new income they buy a larger house they lease a luxury German automobile they start wearing expensive watches and eating at high end restaurants they call this enjoying the fruits of their labor they genuinely believe that they are upgrading their life but let me tell you what they are actually doing they are voluntarily walking into a prison cell and locking the door behind them
They are forging a set of golden handcuffs they are trading their ultimate financial freedom for a temporary fleeting sense of social superiority think about the immense psychological burden of owning expensive things when you buy a massive house you do not just pay the mortgage you pay with your cognitive focus you have to worry about the roof leaking the lawn being perfectly manicured and the property taxes doubling when you buy a luxury car You stress about someone scratching the paint in a parking lot your possessions slowly begin to possess you they drain your energy in the
financial world we call this lifestyle creep it is the silent killer of wealth it guarantees that no matter how much money you make you will always remain a slave to your monthly expenses you will never be able to walk away from a toxic job because you need the paycheck to fund the illusion of wealth you have built for your neighbors My approach is entirely different I have a tiny almost comical daily habit that protects me from this disease every morning on on my five minute drive to the office I stop at the McDonald's drive through
I tell my wife how much exact change to put in the cup holder of my car when the stock market is down and I am feeling a bit poor I spend exactly two dollars and sixty one cents on two sausage patties when the market is up and I am feeling prosperous I might splurge and spend three dollars and seventeen cents on a bacon egg and cheese biscuit people hear the story and they laugh they think it is a cute eccentricity of an old billionaire they think I am simply being cheap but it has absolutely nothing
to do with being cheap it has everything to do with a profound almost religious respect for capital when you truly understand the mathematics of compound interest your entire world view changes You realize that a single dollar is not just a piece of paper it is a soldier every dollar you save is a tiny soldier that you can send out into the battlefield of the economy these soldiers work for you 24 hours a day they never sleep they never complain and they recruit more soldiers to join your army every time you spend $10 on a luxury
coffee you do not need you are not just wasting $10 you are actively murdering the hundred dollars that coffee would have Become in 20 years you are stealing from your own future freedom I still live in the exact same house I bought in 1958 for $31,500 I do not need a massive mansion with 50 bedrooms a massive house does not make me a better investor it just requires more maintenance more mental energy and more unnecessary decisions my tiny habit of eating a 3 dollar breakfast is a daily psychological reset it reminds me every single morning
that I am the master of my money and my money is not the master of me It keeps my ego completely in check it reminds me that the goal is not to look rich but to actually be wealthy so here's your assignment for habit No. 4 you must ruthlessly freeze your lifestyle the next time you get a raise or a bonus or your business has a highly profitable month I want you to do absolutely nothing do not buy a new car do not upgrade your wardrobe do not go on a luxury vacation take 100% of
that new surplus money and immediately convert it into permanent capital Buy an asset let your neighbors think you are struggling let your friends wonder why you are not driving a newer car if you can suppress your ego and maintain a peasant lifestyle while your income skyrockets you will build an impenetrable fortress of wealth faster than you ever thought possible you will buy your ultimate freedom habit No. 5 I call this the nightly audit of the inner scorecard Or the absolute rejection of external validation look at how the vast majority of human beings operate in the
modern world they are completely and utterly obsessed with what other people think of them they choose their university degrees based on what will impress their parents they buy their clothes and their cars based on what will impress their co workers they go into massive crippling credit card debt to finance luxury vacations simply so they can post photographs on the internet To impress total strangers in psychology we call this living by the outer scorecard it is a pathetic and exhausting way to live when you live by the outer scorecard your entire self worth is strictly dependent
on the applause of the crowd and the crowd is incredibly fickle if the crowd stops clapping you feel completely worthless this psychological weakness destroys more wealth than any Stock market crash in human history when people make catastrophic financial decisions because their fragile ego cannot handle looking poor they refuse to downsize their massive house when they lose their job because they are terrified of what the neighbors will whisper about them they hold on to losing investments for years because they are simply too proud to admit to their friends that they were wrong they burn their own
capital just to keep up a fake performance My partner Charlie and I realized very early on that if we wanted to build a massive compounding machine we had to completely detach ourselves from the opinions of society so I developed a tiny psychological habit a mental audit that I perform in my quiet room every single night before I go to sleep I close my eyes and I ask myself a very simple question if the world was never gonna Find out about the decisions I made today would I still be happy with them if the world thought
I was a complete fool for buying a specific business but I knew the mathematics were absolutely correct would I still buy it if the answer is no I know that my ego has taken control of the steering wheel I know I am playing for the crowd you must develop what I call an inner scorecard an inner scorecard means that you hold yourself To a standard that is infinitely higher than what the world expects of you you do the right thing when absolutely nobody is watching you save your money quietly you read your books quietly you
build your empire in total silence let us look at the late 1990s as a perfect example the entire world was going absolutely insane over internet stocks companies that had zero revenue and zero profits were suddenly worth billions of dollars overnight Every single day financial reporters would come on the television and call me an old Dinosaur they said Warren Buffett has completely lost his touch they said the internet has changed the fundamental laws of physics and economics and my boring value investing approach is dead if I had been living by the outer scorecard psychological pressure would
have destroyed me I would have felt the overwhelming need to please the crowd to protect my reputation And to buy those worthless internet stocks just to stop the daily criticism but I did not care what the television anchors said I knew that a business without cash flow is a mathematical illusion I stayed in Omaha I held my cash and I let the entire world laugh at me two years later the bubble violently burst trillions of dollars of wealth evaporated into thin air the so called geniuses who laughed at me lost their houses their marriages and
their careers I survived and Berkshire Hathaway thrived Because I was playing an entirely different game I was playing by the inner scorecard when you stop caring about the applause of the crowd something magical happens you become completely immune to the manipulation of society you stop buying things you do not need you stop feeling anxious about where you stand in the fake social hierarchy your mind becomes incredibly clear incredibly sharp and absolutely terrifying to your competitors So here is your assignment for habit No. 5 Tonight when you lay in your bed I want you to perform
a brutal audit of your own life look at the car sitting in your driveway look at the expensive clothes in your closet look at the career path you have chosen ask yourself if you were the last human being on earth and there was absolutely nobody left to impress would you still want those things if the answer is no you are living a lie you are burning your ultimate asset your time and your capital to fuel a fake reality You must destroy the outer scorecard today you must stop performing for the crowd and start building for
yourself we have talked about the Hurricane and the termites we have talked about the two hard pile the the the 500 page reading habit the mastery of the empty room the daily ritual of capital respect and the nightly audit of your inner scorecard if you look closely at these five habits you will notice something profound None of them require a massive intellect none of them require a wealthy family a secret connection or a degree from a prestigious Ivy League university they simply require relentless discipline they require the psychological strength to be absolutely bored while everyone
else is frantically seeking entertainment I have lived on this earth for over 90 years I have watched thousands of brilliant high energy people fail spectacularly And I have watched thousands of average quiet people build incredible generational wealth the difference between the two groups is never a single heroic action the difference is the silent accumulation of tiny choices the modern world is completely obsessed with the illusion of the big move people are waiting for the perfect stock market crash to invest they are waiting for the perfect startup idea to launch they are waiting for a wealthy
mentor to hand them a golden ticket While they are waiting for the Hurricane the clock is relentlessly ticking their capital is being eaten by inflation their cognitive focus is being completely destroyed by the noise of their cellular phones they are paralyzed by complexity and they are blinded by the outer scorecard they are losing the game because they refuse to play the long game do not be like the crowd you must become the architect of your own foundation you must embrace the absolute boredom of consistency Tomorrow morning when you wake up do not try to change
your entire life in 24 hours that is a recipe for immediate failure do not try to read 500 pages on your very first day just pick one tiny habit throw one complicated idea into the too hard pile sit in an empty room for 10 minutes without your phone or skip the expensive luxury coffee and invest that $5 into a permanent compounding machine do it once and do it again the next day and the day after that let the termites of positive compounding Go to work for you let them chew through the obstacles in your path
24 hours a day year after year decade after decade eventually the compounding effect will take over your tiny habits will create a gravitational pull so massive that wealth and ultimate freedom will simply have no choice but to flow in your direction the game of wealth is not a sprint for the smartest person in the room it is a Marathon For the most disciplined person in the room stop waiting for the magic lottery tickets stop waiting for the big move take control of the tiny habits that's all thanks for watching
