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Warren Buffett, Steve Jobs, and Bill Gates have all attributed their success to one factor. In fact, this one trait is behind the success of all people that have massively better than average person. Read on to find out what the trait is and how you can put it into practice in your own life and investing.
The most important factor for success
According to Alice Schroeder, in 1991 when Bill Gates' dad asked Buffett and Gates what the most important factor for their success was, they both gave the same answer, "focus."
Gates' focus was illustrated in Walter Isaacson's new book The Innovators, as well as Gates' fellow Microsoft co-founder Paul Allen:
One trait that differentiated the two was focus. Allen's mind would flit between many ideas and passions, but Gates was a serial obsessor.
"Where I was curious to study everything in sight, Bill would focus on one task at a time with total discipline," said Allen. "You could see it when he programmed. He would sit with a marker clenched in his mouth, tapping his feet and rocking; impervious to distraction."
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Steve Jobs was the same way; he was relentlessly focused on attacking problems searching for the best answer. Apple's founding marketing philosophy had three main tenets the second of which is focus:
In order to do a good job of those things we decide to do we must eliminate all of the unimportant opportunities.
Focus was key for Buffett as well, Schroeder writes: "He ruled out paying attention to almost anything but businessart, literature, science, travel, architectureso that he could focus on his passion."
Why is this so important?
In life and investing, you need to be relentlessly focused on your goals if you want to have better than average results.
To stick out from the crowd, you need to do something better than everyone else. There's no standard definition of what "better" is though. McDonald's does low prices and quick drive through service while Chipotle does massive burritos with a great service culture. They both have been wildly successful as they focus on doing one thing well.
What gets companies and people into trouble is when they try and do too much, leading to mediocrity.
McDonalds has been suffering lately as its menu has grown to accommodate so many different items that is has gotten unwieldy, leading to a confusing menu and longer wait times.
Apple was a disaster with 350 different products before Jobs came back in 1998. He refocused the business around the customer experience, simplifying Apple's focus to just 10 products. Everyone knows the rest of the story.
Like success in life and business, to be successful in investing, you need focus and time if you want to do better than average. As Warren Buffett has explained,
"Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant."
Just getting to average performance is hard enough. While by definition, the average investor cannot do better than average, the average investor would do nearly 80% better if he or she simply earned the average market return. Most investors would be better off in index funds.
The first key part to be successful is to learn the mistakes that hold people back and avoid them. For investors these include being too active, overconfident, loss-averse, taking on debt to invest, and making rash decisions based on daily market movements, among others.
The second part is to know what your goals are and have a process where you constantly learn, think independently, and quickly try and figure out when you are wrong. You need to go put in the effort so that you can evaluate a selection of businesses and build a circle of competence, that is a set of businesses and industries that you can understand and can independently evaluate. Only then will you be able to select businesses whose values are misjudged by the market, providing an opportunity for you to profit. To get to that point, Buffett suggests:
Read 500 pages like this [annual reports, trade journals, etc.] every day. That's how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.
Most people don't do this. The key is to realize the limits of your knowledge, you can't know and be good at everything. For this reason, most people shouldn't try and invest in stocks to beat the market since they can't put in the time and focus.
However, by learning about investing and how to evaluate businesses you build knowledge that will help you understand your job better, your industry better, and everyday life better. As Buffett has said,
"I am a better investor because I am a businessman and I am a better businessman because I am an investor."
Investing is a lifelong journey, not a sprint. If you are willing to put in the time and focus, a commitment to learning how to invest will pay dividends for the rest of your life.
The article Warren Buffett and Bill Gates Agree - This Factor Was Most Important for their Success originally appeared on Fool.com.
Dan Dzombak can be found on Twitter @DanDzombak, on his Facebook page DanDzombak, or on his blog where he writes about investing, happiness, the secret to success in life, what is success in life, the best business books of all time, the NY Lottery, and the Fortune 500. He has no position in any stocks mentioned. The Motley Fool recommends Apple, Chipotle Mexican Grill, and McDonald's. The Motley Fool owns shares of Apple, Chipotle Mexican Grill, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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