How to Follow Warren Buffett: Work Smarter, Not Harder

Making to-do lists is a waste of time, and investors would be a lot better off streamlining their day-to-day activities. Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio) made these comments at the 2013 Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) annual meeting of investors.

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At the meeting, one shareholder asked the Oracle of Omaha if he could share some of the methods he used to prioritize essential decisions and tasks. Buffett had once remarked that one of the best ways to set out what you want to achieve in life is to write down the 25 most important things to you, eliminate 20 and concentrate on the top five. The shareholder wanted to know if Berkshire's CEO used this approach in his day-to-day life.

Buffett responded by saying that both he and Munger "live very simple lives... We know what we do enjoy and we now have the option of doing it." The Oracle of Omaha then declared, "I've never made lists. I can't recall making a list in my life, but maybe I'll start."

He then handed the microphone over to Munger, who remarked:

"We didn't know, when we started out, this modern psychological evidence to the effect that you shouldn't make a lot of important decisions when you're tired and that making a lot of difficult decisions is tiring."

Instead of making a lot of important decisions, Munger went on to explain, both he and Buffett live, to a certain extent, on autopilot:

"And what happens, of course, is that both Warren and I live entirely on autopilot, in terms of the ordinary decisions in life, which is totally habitual, so we don't work — waste — any decision making industry — I mean energy — on that stuff, and we're ingesting caffeine and sugar. And, it turns out, under the modern evidence, this is an ideal way to sit where Warren sits."

Some might say that this suggests Buffett does not have much structure in his life. And maybe he doesn't in the conventional sense. We know the Oracle of Omaha keeps a bed in his office for naps whenever he gets tired. He also claims to eat and drink whatever he wants.

This leaves time to concentrate on the critical decisions in life, and it has helped Buffett avoid becoming overworked or tired. This has undoubtedly helped Buffett make better decisions. As Munger went on to add in 2013:

"I cannot remember an important decision that Warren has made when he was tired...
He sleeps soundly, and he doesn't waste time thinking about what he's going to eat. As you say, he just eats what he's always eaten."

We can learn quite a bit from this approach. Making rigorous checklists and spending hours deliberating over what to eat and drink every day can be a waste of time. This time could be better employed in finding the answers to tough investment questions or completing extra work.

Many people don't have the luxury of being able to sleep at work, so this might not be applicable to all readers. Still, it's essential to acknowledge the benefits of being well-rested when making decisions. Buffett naps at work to reduce fatigue, and he also limits his working hours. He could arrive at the office at 7 a.m. every day, but he doesn't. It is well documented that the Oracle of Omaha arrives after the market has opened.

Buffett is a hard worker, but he works effectively. Rather than working for 12 hours a day, all evidence points to the fact that he tries to be as productive as possible in the shortest possible time. To put it another way, Buffett doesn't work harder; he works smarter. Investors may be able to benefit from following the same approach.

Disclosure: The author owns shares in Berkshire Hathaway

Read more here:

• Peter Lynch: The Perils of Market Timing
• Peter Lynch: The Average Investor's Edge
• 3 Important Investing Lessons From Peter Lynch

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