Writing a blog posts about Oprah Winfrey is intimidating since she is such an influential and inspiring person. Including a short biography to start this post seems almost pointless since I can’t imagine anyone reading this who does not know her story. It is possible that not everyone knows everything about her abilities as a businessperson and investor, but even that seems unlikely. The Oprah Show, O magazine, Oprah Radio, Harpo Productions and Oprah’s Book Club are just a few of her many successes. As just one example, Oprah’s recent successful investment in Weight Watchers has been well chronicled in the press. CNN writes: “Oprah Winfrey first bought Weight Watchers stock in October 2015 for $43.5 million. Her investment in Weight Watchers is now worth more than $400 million.”
- “Books were my pass to personal freedom. I learned to read at age three and soon discovered that there was a whole world to be conquered that went beyond our farm in Mississippi.”
Few people demonstrate the power of reading better than Oprah. Her journey from a child living in poverty in rural Mississippi to where she is now, was powered by reading. Charlie Munger describes the importance of reading in this way: “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero.” Munger is using the word “wise” in a very specific sense. Oprah is most definitely wise. An interesting question that follows from that is: Why is Oprah so wise? What are the attributes which enable her wisdom? One important attribute of wisdom is the ability to know what you do not know. People who are unable to determine when something exceeds their circle of competence are not wise. Another important attribute of wisdom is understanding the importance of consistently “avoiding stupidity” instead of trying to be the “smartest person in the room.” Another aspect of wisdom is the ability of the person to think broadly and to use many mental models in thinking about an issue or solving a problem. I can’t convey all the points Munger makes in a short blurb on this blog post, but I can say that you should read the Munger essay on “Worldly Wisdom” linked to in the End Notes. .
2. “What material success does is provide you with the ability to concentrate on other things that really matter. And that is being able to make a difference not only in your own life but in other people’s lives.”
The best part of having the “material success” that Oprah is talking about is having great choices in life. The worst thing about having no cash or wealth is having few and mostly lousy choices in your life. As an extreme example, homeless person living on the street with no money has a terrible set of choices every day. Chris Rock this same point simply: “Wealth is not about having a lot of money; it’s about having a lot of options.”
Having a cushion of cash is wise. People of modest means shop at dollar stores because they need to preserve optionality by maintaining a cash cushion. Even very rich people can find themselves having little or no cash even though they are wealthy on paper. That lack of cash can result in unpleasant outcomes for the otherwise wealthy person, like a forced sale of assets at an unattractive price. There are many wealthy people who learned this lesson the hard way when liquidity dried up in 2002 and 2008.
Having too much cash is also unwise. Warren Buffett once explained this tip a group of business school students in this way:
“The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Most of you don’t look like you are overburdened with cash anyway. Cash is going to become worth less over time. But good businesses are going to become worth more over time.”
What amount of cash is “just right” in a portfolio? In a 2013 paper Vanguard argues:
“Each investor will have unique cash requirements, and the amount of cash to keep on hand will depend on a number of factors, such as liquidity needs, dependability of employment or other income sources, and level of financial conservativeness. The investor should first identify his or her specific needs by assessing major expenses and when those will come due, and then determine what assets are available to meet those needs. Separately, investors should keep a certain amount of cash for emergencies—typically 3 to 36 months’ worth of living expenses.”
Having at least three months expenses in cash seems like a minimum to me and six months even wiser. But you need to make your own determination based on your individual risk profile, which is unique.
3. “I never took a business course. I run this company based on instinct.”
There are many successful business people who have never taken a single business class. They learn on the job, from watching others and by reading. People often ask me whether they should major in business as an undergraduate or obtain an MBA. Like everything in life, there are trade offs involved in that decision. If you major in business, you are not majoring in engineering unless you are ambitious enough to be a double major. If you get an MBA degree in business, you are not getting a masters in computer science. Yes, you can get two different master’s degrees, but you see my point about opportunity cost I hope. Doing something like going to graduate school has opportunity cost in terms of lost income and on the job experience. One fact that is clear from the example of Oprah and others is that taking business classes is not required to be successful in business. A business school education has been helpful for many people. If circumstances prevent someone from taking business classes for whatever reason, achieving business success is still possible.
While many successful business people may not have had a formal business education, they are all highly educated about their business. It is true that some people who run a very important business have a more limited range of skills and knowledge than some other executives or founders, but they are inevitably very street smart and dedicated to what they do. These self-educated business people know everything about their industry, business and their employees. The tend to stay within their circle of competence very well. If their business is meat packing, they know it inside and out. The may not know much philosophy or computer science, but they know meat and meat distribution cold.
When it is more likely that a business education will be helpful to a student? If the person wants a job and is deemed by the person doing the hiring not to be qualified, then maybe a degree in business will get the on the desired path. I know some entrepreneurs and investors who prefer that the people they hire not have an MBA. Some entrepreneurs and investors do like to hire people with an MBA. There is no simple answer that applies to every person. But thinking in terms of opportunity cost about that decision is wise.
4. “You have to know the business, but you also have to know what’s at the heart of the business, and that’s the people.”
The people associated with a business will determine its success more than any other factor. These people include employees but also contractors, suppliers and customers. Selecting them wisely is essential. Some investors like Don Valentine argue that the market is more important than the people involved since you can always change the people. My view is most similar to investors like Pitch Johnson that people are paramount. Changing the people involved in a business is highly unpleasant. Why would anyone want to do that? Great people are not easy to find. As an example, Buffett and Munger always want the managers to be in place before they buy a business. In any event, life is too short to work with people who are not the very best people you can find.
5. “Your job is not always going to fulfill you. There will be some days that you just might be bored, other days you might not feel like going to work at all — go anyway.” “Your job is not who you are, it’s just what you’re doing on the way to who you will become.”
Work is called “work” and not “fun” for a reason. Every minute of every day will not be a joy for everyone. This is an annoying fact of life for some people. Sometimes a young person will come to me and complain about their manager. What I have found over the years is that managers often change and that this is especially true if they are bad managers. People who are willing to take on the hard and difficult jobs inevitably advance faster and are assigned better more fulfilling jobs. Some people do have unrealistic expectations about how quickly they will advance in their career. Charlie Munger tells a story about people approaching him for advice about how to get rich but who say that they want to do so much faster than he did. Just as getting rich slowly is the most likely outcome, so progressing your career slowly. Being pleased if you happen to experience rapid career success is a better approach than being miserable if it does not happen.
6. “Every remedial chore, every boss who takes credit for your ideas — that is going to happen — look for the lessons because the lessons are always there. And the number one lesson I can offer you where your work is concerned is this: Become so skilled, so vigilant, so flat-out fantastic at what you do that your talent cannot be dismissed.”
The best way to make something happen, particularly in a very large organization, is to let other people take the credit. It also helps if you are willing to do hard and unpleasant work since it increases the probability you will get the high quality and more enjoyable work. Oprah is saying that if you also put your focus on being skilled and talented, good things will inevitably happen. Michael Mauboussin says that in any probabilistic activity the right approach is to focus on having a sound process. His advice applies to a career as well as a process like investing. It is wise to focus on having a sound process, to be patient in waiting for the right opportunities and opportunistic and aggressive when the time is right.
7. “Lots of people want to ride with you in the limo, but what you want is someone who will take the bus with you when the limo breaks down.”
Sometimes you will be involved in a business or other endeavor that will go through a rough period and one or more people that were being counted on to help will bail out. As an example, I have a friend who was on the board of a small bank along with a very prominent business person. When the bank had some struggles during the great financial crisis in 2008 this business person immediately resigned from the board. The test of a person’s character is not how they behave when times are easy or profitable. People who are willing to work hard to solve problems when things get rough are the type of people you will benefit from associating with.
8. “Real integrity is doing the right thing, knowing that nobody’s going to know if you did it or not.”
Warren Buffet believes: “In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And, if they don’t have the first, the other two will kill you.” Mary Kay Ash agrees: “Honesty is the cornerstone of all success. Without honesty, confidence and ability to perform shall cease to exist.” How do you find people with integrity? Watching what they do rather than what they say is perhaps the best way so find this quality. You should also realize that you will make mistakes about a person’s integrity and that you will need to correct them when they happen. Oprah’s point about integrity is not only applicable to people, but also in a similar way to the culture of an organization. The culture of a business helps people know what to do when no one is around to answer questions. The best business cultures foster and reflect integrity.
9. “Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you will never, ever have enough.””I still have my feet on the ground, I just wear better shoes.”
Envy and jealousy have no upside. Nothing good comes from these emotions. If you are able to remove them from your life, you will be more thankful for what you have. By not wasting energy on these negative emotions you will also, as Oprah says, end up having more. She is also saying that by concentrating on what you do not have rather than what you have you almost surely will be unnecessary unhappy. The attitude of the Stoics is helpful in dealing with this problem. The philosopher Seneca once wrote: “For many people, the acquisition of wealth does not end their troubles, it only changes them. Wealth is the slave of a wise person. The master of a fool.” Nassim Taleb’s has said on this topic:
“Seneca was about being long options. He wanted to keep the upside and not be hurt by the downside. That’s it. It’s just how to set up his method. Seneca was the wealthiest man in the world. He had 500 desks, on which he wrote his letters talking about how good it was to be poor. And people found inconsistency. But they didn’t realize what Seneca said. He was not against wealth. And he proved effectively that a philosopher can have wealth and be a philosopher…. He wanted the upside of wealth without its downside.”
10. “The reason I’ve been able to be so financially successful is my focus has never, ever for one minute been money.” “What I know is, is that if you do work that you love, and the work fulfills you, the rest will come.” “I had no idea that being your authentic self could make me as rich as I’ve become. If I had, I’d have done it a lot earlier.” “You know you are on the road to success if you would do your job and not get paid for it.”
Oprah is a master at creating a personal brand based on authenticity. Who has created a more authentic brand better over her lifetime? The transparency enabled by the internet means that as each day passes the ability of businesses to create a fake brand with advertising is less possible. One can argue that Oprah benefited from the trend, but it seems more likely that she is also part of the cause of this phenomenon. She has changed the way people expect a celebrity to act. Consumers today more than ever want authentic brands and are more concerned with the product than how many times they have heard someone shouting about it on paid media. People respect celebrities who believe in the brands they promote. As just one example, Oprah’s involvement in Weight Watchers wasn’t just an investment of her capital but of her brand.
11. “The big secret in life is that there is no big secret. Whatever your goal, you can get there if you’re willing to work.”
If life could be reduced to formulas and secrets, everyone would be happy and wealthy. The difference between what makes you “happy” and what is “rewarding” is huge. For example, many things in life will not make you happy, but are rewarding. There are trade offs involved in almost everything. Work is not only profitable but can be enjoyable in itself. I am lucky that I enjoy my work so much, but that I do so is not accidental. Loads of luck was involved in may case, but the work I have done had made a difference too.
12. “Life is never dull.” “I don’t believe in failure. It’s not failure if you enjoyed the process.”
If your life is dull you are not paying sufficient attention. Interesting aspects of life are everywhere, if you know how to find them. Not only does “shit happen” but it usually does so in novel and unpredictable ways. If you look at the surprises as opportunities to grow and profit, the world never gets uninteresting. Yes, some people have very incredibly hard lives and terrible life choices and I have been incredibly lucky. But even given that, life is too short to be unhappy and bored. When all else fails, I suggest laughing at your own jokes like I do. If you give me a metal pot and a wooden spoon I can amuse myself all day long.
Everyone makes mistakes. If you think you don’t make mistakes, you are fooling yourself. This will happen sometimes since denial is not a just river in Egypt. The only people who do not make mistakes are, well, dead. By identifying your mistakes and rubbing your nose in them you can learn. This applies to your life and to a business. My blog post on mistakes is here:
Munger: Worldly Wisdom