The 9 Key Lessons from The Warren Buffett Way
Plus the Ultimate Overiding Lesson
If you’re a subscriber, you’re likely familiar with Warren Buffett and his investment methodology, so feel free to skim or skip this post.
If you’re new to Buffett, I’ll distill key lessons from “The Warren Buffett Way” to help you understand his approach to investing.
Additionally, since discovering that I could link Readwise with Notion to create a searchable repository of my notes and highlights, I’ve been rereading my favorite books to expand my note library. “The Warren Buffett Way” was my recent reread.
Lesson 1: You’re Buying a Business, Not a Stock Ticker
The foundation of Buffett’s approach is deceptively simple. When you buy a stock, you’re buying ownership in a real business.
“Buffett believes the investor and the businessperson should look at the company in the same way, because they essentially want the same thing. The businessperson wants to buy the entire company; the investor wants to buy portions of the company. Both will profit from the growth of intrinsic value of the business they own.”
This mindset shift is transformative.
It moves you away from obsessing over daily price movements and toward evaluating the fundamental quality and prospects of the underlying enterprise. Ask yourself: Would I be comfortable owning this entire business? If not, why would I want to own even a small piece of it?
Lesson 2: Temperament Trumps Intelligence
One of the most underappreciated aspects of successful investing is temperament. You don’t need to be a genius to invest well, but you do need emotional discipline.
“Without question, temperament and investment tenets are inextricably connected. One does not work without the other.”
The market will constantly test your resolve. Understanding that a stock represents a business is one thing; having the fortitude to hold through volatility is quite another.
“The gap between knowing the stock you own is a business and having the emotional wherewithal to withstand the short-term push and pull of the stock market was, for many, too wide. I came to understand there was a big difference between knowing the path and walking the path.”
Develop the temperament to be greedy when others are fearful, and fearful when others are greedy. This psychological edge may be your greatest competitive advantage.
Lesson 3: Fear Is Your Friend (When It’s Someone Else’s Fear)
Market panics create opportunities for disciplined investors. Buffett’s advice during the 2008 financial crisis remains timeless:
“During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted.”
Most investors become emotional about money.
Their loss aversion causes them to sell quality businesses at irrational prices during market downturns. Your ability to control your own fear while others panic gives you a significant edge.
Lesson 4: Be Process-Oriented, Not Product-Oriented
Sports psychology offers a useful framework for investors.
“Sports psychologists divide athletes into two groups: product-oriented or process-oriented. The product-oriented athletes, as you might guess, are singularly focused on winning. They can think of nothing else. By contrast, the process-oriented athletes see their sport on a much broader scale. They find rewards in the activity itself, what some refer to as ‘for the love of the game.’”
Investors who focus exclusively on beating the market or achieving specific returns often make poor decisions.
Instead, focus on executing a sound investment process: thorough analysis, disciplined valuation, appropriate position sizing, and patient holding periods. The returns will follow from the process.
Lesson 5: Study the Masters, Then Apply Their Wisdom
Buffett himself openly acknowledges that his approach is built on the shoulders of others, particularly Benjamin Graham and Philip Fisher.
“So I don’t think I have any original ideas. Certainly, I talk about reading Graham. I’ve read Phil Fisher. So I’ve gotten a lot of ideas myself from reading. You can learn a lot from other people. In fact, I think if you learn basically from other people, you don’t have to get too many ideas on your own. You can just apply the best of what you see.”
You don’t need to reinvent investing. Study proven approaches, understand the principles behind them, and apply them consistently to your own portfolio.
Lesson 6: Investing Is Art Appreciation, Not a Mathematical Formula
While numbers matter, investing requires more than quantitative analysis.
“The decision to purchase a company is very much like an art appreciation class. An investor examines the qualities that classify all great works of business art: the products and services a company provides and its competitive position, the financial returns it generates, and management that decides how to allocate capital. Investing—true investing—is an exploration of the art forms of a business.”
This holistic evaluation goes beyond spreadsheets. It requires understanding competitive dynamics, assessing management quality, and recognizing durable competitive advantages.
“No one can fully understand a company simply by tallying a few accounting factors, passing comments, or flighty opinions.”
Lesson 7: Keep Costs Low and Turnover Lower
One of the simplest yet most powerful lessons is to minimize costs and portfolio turnover.
“Investors who avoid high and unnecessary costs and simply sit for an extended period with a collection of large, conservatively financed American businesses will almost certainly do well.”
Every transaction cost, every management fee, every tax consequence from short-term trading acts as a drag on your returns.
A concentrated portfolio of high-quality businesses held for years or decades allows compounding to work its magic.
Lesson 8: Think Long-Term in a Short-Term World
Modern markets encourage short-term thinking, but wealth is built over years and decades, not days and weeks. Keynes’s classic observation about the stock market being a voting machine in the short run but a weighing machine in the long run is the encapsulation of this idea.
Keynes also distinguished between speculation (”forecasting the psychology of the market”) and genuine investment (”forecasting the prospective yield of assets over their life”). True investors focus on the latter, evaluating businesses based on their long-term cash-generating ability rather than near-term price movements.
Lesson 9: Have the Courage to Be Unconventional
Another insight from Keynes has greatly shaped Warren Buffett’s approach to investing.
“Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”
Following the herd feels safe, but it rarely leads to exceptional results. If your analysis tells you the market is wrong about a particular business, have the conviction to act on that insight, even if it means standing alone for a while.
Putting It All Together
How to Invest Like Warren Buffett, according to Robert Hagerstrom.
1. Adopt the Right Mindset
Think of yourself as a business owner, not a stock trader.
Every investment should be evaluated as if you’re buying the entire business.
2. Develop Your Temperament
Work consciously on emotional discipline.
Recognize that investing is fundamentally a psychological game. Practice remaining calm during volatility.
Learn to view market panics as opportunities rather than threats. Remember that personal fear is your enemy, while widespread fear creates bargain purchases.
3. Focus on Quality
Seek businesses with durable competitive advantages, strong financial returns, excellent management, and products or services you understand.
Like appreciating art, learn to recognize the distinguishing characteristics of truly great businesses.
4. Build a Process, Not a System for Picking Winners
Develop a repeatable investment process: thorough research, conservative valuation, appropriate position sizing, and patient holding periods. Find satisfaction in executing this process well, not just in returns.
The process-oriented investor will ultimately outperform the product-oriented one.
5. Be Patient and Think Long-Term
Construct a concentrated portfolio of your best ideas, then sit on them.
Minimize turnover.
Allow compounding to work over years and decades. Ignore short-term price fluctuations and focus on long-term business fundamentals.
6. Learn Continuously
Study the great investors.
Read widely.
As Buffett demonstrates, you don’t need original ideas. You need to understand and apply the best ideas that already exist.
Maintain intellectual humility and always look for ways to improve your process.
7. Keep It Simple and Low-Cost
Avoid unnecessary complexity and costs.
A collection of conservatively financed, high-quality businesses held for the long term is a formula that has worked for decades and will continue to work.
The Ultimate Lesson
The ultimate lesson from “The Warren Buffett Way” is that successful investing is not about being the smartest person in the room or having access to secret information. It’s about applying time-tested principles with discipline and patience.
The beauty of Buffett’s approach is its accessibility. You don’t need a PhD in finance or a Bloomberg terminal. You need sound judgment, emotional discipline, a long-term perspective, and the willingness to do thorough research. These are learnable skills, not innate talents.