1.1) Time is the crucial variable in compounding

• 'Approximately 99% of Buffett's wealth was accumulated after his 50th birthday and 97% came after his 65th birthday…let’s say by age 30, his net worth was, say, $25,000? And let's say he still went on to earn the extraordinary annual investment returns he's been able to generate — 22% annually — but quit investing and retired at 60 to play golf and spend time with his grandchildren? What would a rough estimate of his net worth be today? Not $80+ billion. $12 million (99.9% less than his actual net worth). Effectively all of Buffett's financial success can be tied to the financial base he built in his pubescent years and the longevity he maintained in his geriatric years.' (Morgan Housel & Yahoo Finance). See the charts below for visuals of how the effects of compounding led to explosive absolute growth for Buffett once given enough time.
• "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."

1.2) Volatility is part of the game

• Importantly, you don’t have to be extraordinary every year, it’s about lasting an extraordinary amount of time: "There's been three times since we acquired Berkshire that Berkshire has gone down 50%. Nothing was fundamentally wrong with the company at any time...Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a fly epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497."
• “All of Buffett's best value investing peers had exceptional records over long periods. And all underperformed the S&P 500 in 30-40% of years studied.” Said Buffett’s long time business partner Charlie Munger: “I think it's in the nature of long-term shareholding with the normal vicissitudes in worldly outcomes and in markets that the long-term holder has his quoted value of his stock go down by say 50 percent. In fact, you can argue that if you're not willing to react with equanimity to a market price decline of 50 percent 2 or 3 times a century, you're not fit to be a common shareholder and you deserve the mediocre result you are going to get - compared to the people who do have the temperament who can be more philosophical about these market fluctuations.”

1.3) Durability

• 'Once you accept that compounding is where the magic happens, and realize how critical time is to compounding, the most important question to answer as an investor is not, "How can I earn the highest returns?" It's, "What are the best returns I can sustain for the longest period of time?" Most people underestimate this because the effects are imperceptible at first and explosive later.' (Morgan Housel)

2.1) Protect the Downside

• According Buffett, margin of safety are the three most important words in investing. This means you buy at a discount and leave room for error, misjudgment, and bad luck. Buying only when you have a big margin of safety means you don’t lose much if you’re wrong. It means you never have to start over or take material steps back. "When you build a bridge, you insist it can carry 30,000 pounds, but you only drive 10,000 pound trucks across it. And the same idea works in investing."
• Buffett first looks for the probability of having catastrophe: “I would rather be 100 times too cautious than 1% too incautious — and that will continue as long as l'm around." Buffett followed an investing philosophy that stays away from the hot flashy investments and focuses on never losing big. “We probably leaned very much toward things where we felt we were certain to get a decent result, as opposed to where we were hopeful of getting a brilliant result.”

2.2) Rigid Filters

• “At Berkshire we have certain filters that have been developed. If in the course of an evaluation an idea hits a filter, then there is no way | will invest.” Buffett Biographer: “Typically, and this is not well understood, his way of thinking is that there are disqualifying features to an investment. So he rifles through and as soon as you hit one of those it's done. Doesn't like the CEO, forget it. Too much tail risk, forget it. Low-margin business, forget it. Many people would try to see whether a balance of other factors made up for these things. He doesn't analyze from A to Z; it's a time-waster.”
• "He only did his analysis after first identifying that catastrophic risk was off the table" (Saber Capital). He was not interested in putting capital at risk if there was any chance of cat risk. He didn't care about the potential upside if he perceived there to be a major reason that the business could fail. This is much different than how most investors think. Some investors are willing to take positions in stocks that have significant risk, but even greater upside. Buffett was not.

2.3) All that's left if the Upside

• "You only have to do a very few things right in your life so long as you don’t do too many things wrong"
• Buffett's key takeaway from ‘The Intelligent Investor’ was this: If you eliminate the downside, then all that remains is the upside. After that, the key is to keep emotions in check and be patient. It really is that simple.

3.1) Emotional Discipline > IQ

• Buffett and Munger underlined that temperament is far more important than IQ. “The results are prodigious, because we have a temperamental advantage” (Charlie Munger). “You have to be willing to have the discipline to say, ‘I’m not going to do something I don’t understand.’ When I look at our managers, I’m not trying to look at the guy who wakes up at night and says ‘E = MC 2’ or something. I am looking for people that function very, very well.”
• “Markets fall fast. Wealth builds slow. Most people can’t handle either.” (Motley Fool)

3.2) Independent Thinking

• “I read annual reports, but I don’t read anyone’s opinion about what’s going to happen next week, or next month, or next year.” Buffet consistently focused on the intrinsic value of a business ('in the long term the market is a weighing machine') over the prevailing market sentiment ('in the short term the market is a voting machine). Buffett sticks to his investment principles year after year, regardless of the prevailing environment. Buffett has "the willingness to be lonely, the willingness to take a position that others don't think is too bright, an inner conviction that a lot of people do not have." (Michael Lipper). 
• One of Warren Buffett's most-famous catchphrases: "Investors should be fearful when others are greedy and greedy when others are fearful...To be a successful investor you must divorce yourself from the fears and greed of the people around you, although it is almost impossible. The herd mentality causes all these IQs to become paralyzed. How can people who are bright, who work hard, who have their own money in the business, how can they get such a bad result? … If you had to pick one thing that did it more than anything else, it’s the mindless imitation of one’s peers. You need to divorce your mind from the crowd.“

3.3) Don't make the one-moment-mistake

• Buffett wrote that Tom Murphy (former CEO of ABC) taught him an "indispensable" lesson about the importance of recognizing and controlling your emotions. "He said, 'Warren, you can always tell someone to go to hell tomorrow,'" Buffett recalled. "It was one of the best pieces of advice I have ever received."
• “The big things are not just what you do, but what you don’t do…It takes 20 years to build a reputation and 5 minutes to ruin it. If you think about that, you’ll do things differently.”

4.1) Patience is critical

• "Munger subscribes to “Barron’s“, which is a weekly magazine related to the stock market of the Wall Street Journal in the United States. He has read this magazine for nearly 50 years. Of course, the main purpose is to discover investment opportunities. In the entire 50 years, how many opportunities has he discovered? One! There is only one, and this opportunity was only discovered after more than 30 years of watching it. 20 years after that, he never found a second opportunity. But this does not affect his continuous reading, I know he still reads every issue. He has extreme patience and can do nothing, but when he really discovered this opportunity, he dared to make all the heavy bets, and this investment has made him a lot of money. This is a must-have for a good investor, you must have extreme patience. When the opportunity does not come, you just study hard, but when the opportunity comes, you have a strong determination and ability to act." (Investor Li Lu on Charlie Munger, an example of Munger and Buffett's uncommon discipline to wait for the right opportunity).
• "The stock market serves as a relocation center at which money is moved from the active to the patient."

4.2) Direction > volatility

• Between fast growth or a more certain growth, Buffett will always choose the latter. One example: Buffett bought $11M in shares of the Washington Post Company in 1973. By 2008, his stake had grown by more than 10,000% and was worth $1.4B. But in the first years of owning it, Washington Post's stock price fell by 20% and stayed at that level for three years.
• "There's been three times since we acquired Berkshire that Berkshire has gone down 50%. Nothing was fundamentally wrong with the company at any time."

4.3) Wait for your pitch

• “He doesn't invest—take a swing of the bat—unless the opportunity appears unbelievably good." (Bill Gates). “The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot. If people are yelling, 'Swing, you bum', ignore them. You don't have to swing at everything - you can wait for your pitch. I call investing the greatest business in the world … because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it...We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely" (Buffett)
• "In 50 years I found one investment opportunity in Barron's, out of which I made about $80 million with almost no risk. I took the $80 million and gave it to Li Lu, who turned it into $500 million. So I have made $500 million out of reading Barron's for 50 years and following one idea." (Charlie Munger on the above Barron's story from Li Lu).

5.1) Act quickly and boldly when appropriate

• "I will say something about life. My great grandfather said over and over again to his grandchildren including my mother that real opportunities that come to you are few. Most people just get a few times when they can make a huge difference by seizing a huge activity. And he said, when you find one, my dear grandchildren, you can clearly recognize it, seize it boldly and don't do it small. My great grandfather's rule to you: Assume that your really major opportunities in life are going to be few, and when you get a lollapalooza, for God sakes, don't hang by like a timid little rabbit. Don't hang back. There aren't that many of the really big good ones. If you take the whole history of Berkshire Hathaway, if you take out the 20 best transactions, our record is a joke. Our 20 best transactions over 40 some years, that's one every two years and we work at it all the time." (Charlie Munger)

5.2) Act to address problems immediately and at their root

• “One of the things you will find, which is interesting and people don’t think of it enough, with most businesses and with most individuals, life tends to snap you at your weakest link. So it isn’t the strongest link you’re looking for. It isn’t even the average strength of the chain. It’s the weakest link that causes the problem. When a problem exists, whether in personnel or in business operations, the time to act is now.”
• “Should you find yourself in a chronically leaking ship, energy devoted to changing vessels is likely to be a more efficient use of time than energy devoted to patching leaks.”

5.3) Good decisions > frequent decisions

• Buffett attributes his company's extraordinary success to "a dozen truly good decisions" - just one every 5 years or so throughout his 58 years of running the firm.

• “You’re not going to get more than 20 investment ideas in a lifetime. I’m not going to get more than 20 great ideas. You’re going to get five, or three, or seven. And you can get rich off five, or three, or seven. But what you can’t get rich doing is trying to get one every day. And the important thing is that you recognize them when you see them, and that you do something about them.”

6.1) Necessity of Intense Interest for Greatness

• "Being successful at almost anything means having a passion for it. If you see somebody with even reasonable intelligence and a terrific passion for what they do, things are gonna happen...Intensity is the price of excellence”
• “When you are with Warren, you can tell how much he loves his work. When he explains stuff, it's never “Hey, I'm smart about this, I'm going to impress you." It's more like "This is so interesting…” (Bill Gates)

6.2) Do the work you love (“tap dance to work”)

• “When you go out in the world, look for the job that you would take if you didn't need a job…don't postpone that. Never give up searching for the job that you are passionate about. In the world of business, the people who are most successful are those who are doing what they love."
• Warren Buffett is famously quoted as saying he 'tap dances to work' - "There comes a time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don’t like because you think it will look good on your resume. Isn’t that a little like saving up sex for your old age?…You ought to have a good time all the time as you go along. If you say ‘I’m taking this job – I don’t really like this job but in three years it will lead to this,’ forget it. Find one you like right now.”

7.1) Consistent Focus - the daily life of a $100 billion dollar man

• Drive to work
• Read newspapers, business/industry magazines, investment-related newsletters
• Read Berkshire company/subsidiary business stats and reports
• Read about potential investments
• Investment-related calls (and on occasion trades)
• Dinner at home
• Play some bridge and have a coke
• Read the news and continue reviewing potential investments

7.2) Focus means saying no to most things

• “The difference between successful people and really successful people is that really successful people say no to almost everything.”

8.1) “Take a simple idea and take it very seriously (Munger)”

• "Our ideas are so simple that people keep asking us for mysteries when all we have are the most elementary ideas...People underestimate the importance of a few simple big ideas" (Charlie Munger)

8.2) Invert: consistently avoid the dumb thing

• “It is remarkable how much long-term advantage people like [Warren Buffett and myself] have gotten by trying to be consistently not stupid, instead of trying to be very intelligent." (Charlie Munger)
• “I was describing something we were doing at my company…and I said we're trying to be smart about it. Buffett interrupted me. He said, "Charlie and I always take the reverse view. We say to ourselves, 'What's the dumb thing you could do here?'" And I kind of smiled, and he said, "No, I'm dead serious. We try to think about what's the dumb thing that would put us in harm's way. And is this too hard?"

8.3) Wait for the no-brainers

• "Our investments continue to be few in number and simple in concept…Investors should remember that their scorecard is not computed using Olympic-diving methods: Degree-of-difficulty doesn't count. I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over."
• "If something is too hard, we move onto something else. What could be simpler than that?" Berkshire’s tens of billions have come from simply "waiting for the no-brainers" (Charlie Munger). 

9.1) Great Teachers (whether for years or a just a conversation)

• Buffett read 'Security Analysis' by Benjamin Graham and David Dodd when he was at Columbia University studying with both its authors. "Together, the book and the men changed my life," he wrote. Buffett then worked for Benjamin Graham for two or more years early in his career and was profoundly influenced by Graham's way of looking at things.
• One Saturday, Buffett boarded a train to Washington DC to visit GEICO. He asked the guard if there was anyone who could explain the business to him and was led to GEICO's financial vice president. Buffett: “I just kept asking questions about insurance and GEICO. He didn't go to lunch that day-he just sat there and talked to me for four hours like I was the most important person in the world. When he opened that door to me, he opened the door to the insurance world." When Buffett returned, he sold three quarters of his personal account to buy GEICO shares (perhaps the most important investment of his life).

9.2) Great Partners

• Later in Buffett’s life, he partnered with Charlie Munger who had reservations about Graham's theories from the very beginning. Gradually, Munger's thinking had an enormous influence over Buffett. Warren Buffett: “Charlie Munger said I was all wrong and I should think more about qualitative factors, and he was right…Charlie's most important architectural feat was the design of today's Berkshire. The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderiul prices, instead, buy wonderful businesses at fair prices."

9.3) Great Network

• While Buffett undoubtedly generated his own ideas, he frequently discussed stocks with friends. “His network of business pals like Stanback, Knapp, Brandt, Cowin, Schloss, Ruane, Gottesman, Munger...people who worked their own ideas and fed ideas to him." The Snowball