Following the post about the new Warren Buffett documentary, I thought I’d share some thoughts on the most useful things I’ve learned over the years reading about Warren Buffett. Most people would think that this is a list about his investing acumen but this goes beyond that. This is more like a First Principles list and if you never deviate from these first principles, then you will most likely arrive at the same methods that he does.

1 . Be rational

Ok, it’s no secret that Buffett has an extremely quick mind when it comes to numbers and that’s helpful when doing calculations to weigh odds. But it wouldn’t help if he was counting the wrong things.

That’s where his hyper-rational mind comes in. In Becoming Warren Buffett, there was a part where Buffett describes why he switched to a Democrat. And the reason he gave was that it didn’t make sense to him that the country was essentially not giving the same kind of rights to Blacks or Women as that essentially stifled the growth of the economy by shutting out the human capital that was left in these two demographics.

While also unconventional, Buffett and his first wife, Susan Buffett, lived apart for a fair bit of their lives because he knew that she wasn’t happy living in a town like Omaha. Warren Buffett also famously said that he wasn’t going to leave a lot of money behind for his descendants because of the dangers of raising ‘trust-fund kids’.

Buffett is not cutting his children out of his fortune because they are wastrels or wantons or refuse to go into the family business — the traditional reasons rich parents withhold money. Says he: ”My kids are going , to carve out their own place in this world, and they know I’m for them whatever they want to do.” But he believes that setting up his heirs with ”a lifetime supply of food stamps just because they came out of the right womb” can be ”harmful” for them and is ”an antisocial act.” To him the perfect amount to leave children is ”enough money so that they would feel they could do anything, but not so much that they could do nothing.” For a college graduate, Buffett reckons ”a few hundred thousand dollars” sounds about right.

Fortune Magazine, September 1986

But the biggest testament to his rationality is the fact that he still refuses to pay a dividend to shareholders because he knows that he can still compound money at a faster rate than if he were to pay a dividend and this would ultimately be more beneficial to shareholders.

2 . Simple ideas are more effective

Early in the documentary, Buffett shows a framed picture of the front page news from Black Friday, 1987. He also detailed his rule for deciding how much to spend on McDonald’s breakfast each day. If you read his annual letters to shareholders, you’ll find many more simple aphorisms and anecdotes that convey exactly the idea he wants to bring across.

My favourite one has to be the one on how to decide if you should do something that may be damaging to one’s reputation.

We can’t be perfect but we can try to be. As I’ve said in these memos for more than 25 years: “We can afford to lose money — even a lot of money. But we can’t afford to lose reputation — even a shred of reputation.”

We must continue to measure every act against not only what is legal but also what we would be happy to have written about on the front page of a national newspaper in an article written by an unfriendly but intelligent reporter.

– 2010 Berkshire Hathaway Annual Letter

Aside from his thoughts on business, Buffett lives very simply too. Him living in the same house that he bought all those decades ago and subsisting on a diet of cherry coke and burgers is the stuff of legends. How many people do you know behave differently once they come into wealth?

3. Be willing to face up to your weaknesses and work on them

Buffett’s performance hasn’t been without its downs. Berkshire bought into Salomon Brothers right before the bond trading scandal almost brought the whole place down. In fact, if not for Buffett, it may well have. More recently in 2011, Buffett had a star hire, David Sokol embroiled in an insider trading scandal. Buffett has been quick to admit his mistakes where they happen.

What I find more amazing is that even when Buffett was younger, he was quick to recognise that he needed to fix some weaknesses. This resulted in him enrolling in a Dale Carnegie course on public speaking where he has described it as ‘not learning how to speak without his knees shaking but rather to learn how to speak while his knees are shaking’.

Now, I’m not saying that Warren Buffett has had the best life and that I would like to emulate every single aspect of his life but by and large, I think whatever he’s done and continues to do, is going to be worth keeping track of and learning from.