“I’m very suspect of the person who is very good at one business—it also could be a good athlete or a good entertainer—who starts thinking they should tell the world how to behave on everything. For us to think that just because we made a lot of money, we’re going to be better at giving advice on every subject—well, that’s just crazy.”
This goes back to Warren’s investment theory of only investing in companies that he understands, that are within his circle of competence. He won’t invest outside his circle of competence, and he won’t give advice outside his circle of competence. It might just be his secret for always appearing brilliant—just stay with what you know. It also goes to the obnoxious folly of the rich assuming that money makes you intelligent on all things.
Mrs. B. died richer than most of the Harvard-educated kings of Wall Street, and she couldn’t read and write. But she did know everything in the world about how to make a profit by buying and selling furniture. In fact, it was cheaper to buy furniture from her in Omaha and have it sent to my home in San Francisco than it was to shop locally. When I asked her how she could make money selling so cheap, she said that the secret was in the buying. If she got it at a low enough price, she could sell it at a lower price than her competitors and still keep her margins. How did she always get the low price? Her competitors bought on credit and paid full price; she paid cash, bought large quantities, and always got a big discount. She also owned her own building so she didn’t have to pay rent, which kept her costs even lower. And, yes, she really couldn’t read or write, but, boy, she could sure count money.
The lesson here is stick with what you know and you will never look stupid, and you may even end up superrich, even if you can’t read or write.