Warren Buffett’s “secret sauce” for success has one key ingredient: time

Warren Buffett is one of the oldest investors both by age, already 93 years old, and by years of experience dedicated to investing professionally. He wears six decades at the helm of Berkshire Hathawaythe investment company he founded with Charlie Munger, who died in November 2023 at age 99

Buffett’s good sense of smell has elevated him to the top of the list of billionaires in Forbes with an estimated fortune of 135.4 billion dollars. That makes many of those who have the opportunity to speak with him ask him what his secret is to being successful. His answer: most of the work is done by time.

Not investing in a product, but in a business

The one known as the “Oracle of Omaha” is different from other investors due to his investment strategy based on invest in business models, with stable economic characteristics and reliable managers, more than in products. This philosophy, known as value investing, is based on holding high-performing stocks for the long term rather than trading based on short-term price fluctuations.

Warren has spent decades as one of the main investors in companies such as American Express, Coca Cola or Apple, and he does so not because he faithfully believes in the iPhones that the apple company launches every year, but because he trusts in the business vision of his managers.

Time does most of the work

According to Morgan Housel, author of the book ‘The Psychology of Money’, “All of Warren Buffett’s financial success can be linked to the financial foundation he built in his younger years and the longevity he has maintained.”

In an episode of Lewis Howes’ podcast The School of Greatness, financial popularizer Tony Robbins commented on the conversation he once had with Warren Buffett: “I asked Warren Buffett, What made you the richest man in the world? And he He smiled at me and said: ‘Three things: living in the United States for the great opportunities, having good genes to live a long time, and compound interest.'”

The veteran millionaire has never hidden that the basis of his fortune is compound interest. But the secret ingredient in that sauce has been time, causing your investments to grow exponentially for decades.

To simplify it to the extreme, compound interest consists of investing a certain amount of money, and reinvesting the interest that is generated. To give an example, imagine that you have a bank account in which they give you 10% interest each month. The first month you pay 10 euros and the following month the bank pays you the interest, so you already have 11 euros.

However, the following month, the interest is no longer calculated based on the initial 10 euros, but on the 11 euros (10 euros of capital + 1 euro of interest) that you have. Therefore, the next interest income will be 1.10 euros, adding up to a total of 12.1 euros, without even having touched the money.

Maintain this progression over Warren Buffett’s sixty-year career and you will understand why he is one of the few members of the $100 billion club. Only it’s a matter of time.

In Xataka | Warren Buffett just donated $3.5 billion of his immense fortune. To Bill Gates, obviously

Image | Gates Notes