The Warren Buffet #1 Rule – Never Lose Money

I would be described as on the more conservative side when it comes to business and financial decisions. My investments have always has had reliable long term growth goals. Get rich quick pitches have never worked on me. I believe in luck but I don’t trust it, I like to make my own luck as much as possible. I could never clearly describe why I thought the way I did until I heard Warren Buffet summarizing his investment philosophy is one simple rule.

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“Rule No. 1 is Never lose money. Rule No. 2 is Don’t forget rule number one.”

While I like this rule as it is I also like to boil down its essence even more. Don’t Lose. It is elegant in its simplicity. His advice is not “Always Win.”  Buffet doesn’t get upset when a stock soars up and he didn’t buy it because it didn’t look promising to him. To charge into every day and interaction with a must win mentality will at best leave you disliked and at worst unemployed and broke. This is a call to pick your battles and only fight the ones you can win. Once I heard this philosophy of investing it crystallized my history of action, or more specially, inaction.

Whenever I look to other companies or opportunities I always look for stability. God forbid I make a move and the opportunity crumbles beneath me after I have left the safety net of the previous one. I like opportunities that present themselves as having greater potential for success than failure, because if I lose it’s not worth the risk I just took. If I put in effort for little to no return then that is wasted effort that could have been spent on a more worthy cause.

Often people are shaken from possibly following this creed due to the inability to not take action. Don’t back a cause in business if it looks like it has a lot of potential to lose, but that doesn’t mean you have to support another rival cause either. A wait and see approach, in moderation, can lead to the best outcomes. Waiting for more supporting data or for more time to pass for more rational decisions to be made can have huge opportunities.

Now the issue that comes to mind with this is there are riskier opportunities that can come along with huge upsides, which I have seen and considered. But I for the most part pass. While blazing a trail may lead to financial and career success it can also lead to money and time sink holes. What is the more likely of outcomes historically? For every Bill Gates or Steve Jobs how many others have lost it all? This is not to say I wouldn’t embrace a situation where there was a solid team in place with a good product idea but risky options should be weighed very heavily about the possible, if not probable, failure. Remember even if it is a good idea there is the ever present risk of luck. There are no such things as sure bets.

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Now if you do want to take a little bit of a risk with your money that great! Nobody got rich by putting everything they can into their savings account. Buffet is certainly not saying to not take chances with your money. The point is if you do make sure it is the right long term decision. Do your homework. Make sure the company can be viable for years if not decades. Making sure the right people are involved is even more important. Buffet believes if you have a good financial decision with a great company the bumps that come with time shouldn’t shake you. You can be confident in your decision. You should be confident in all your decisions, if you are not you are probably making too risky of a decision.

The best and most likely chance of financial and business success is in playing the long game. It’s a series of good decisions over a long time, not one great one overnight. Respect your money and your time; otherwise you won’t have much of either.

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